Android Studio strange code sub-windows after upgrade to Arctic Fox (2020.3.1)

Just stumbled upon the same thing (strange windows upon attempting to refactor some code after updating to Arctic Fox). After a lot of searching around the options/menus/internet this fixed it for me:

Navigate to:

File > Settings… > Editor > Code Editing

under

Refactorings > Specify refactoring options:

select

In modal dialogs

Press OK.

Fingers crossed refactoring works.

🤞

Further step: Restart Android Studio

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