diff --git a/Changelog.md b/Changelog.md
index 2b22fa5b..d7bbd980 100644
--- a/Changelog.md
+++ b/Changelog.md
@@ -2,6 +2,7 @@
 
 ## 0.9.3 ()
 
+- Bug #682: `AsyncTimeout` did not stop execution (thanks @matt3o)
 - Bug #683: Typing wrongly suggested that `Transition` instances can be passed to `Machine.__init__` and/or `Machine.add_transition(s)` (thanks @antonio-antuan)
 - Bug #692: When adding an already constructed `NestedState`, FunctionWrapper was not properly initialized (thanks drpjm)
 - Typing should be more precise now
diff --git a/tests/test_async.py b/tests/test_async.py
index 03e25302..71346a81 100644
--- a/tests/test_async.py
+++ b/tests/test_async.py
@@ -1,9 +1,12 @@
+from asyncio import CancelledError
+
 from transitions.extensions.factory import AsyncGraphMachine, HierarchicalAsyncGraphMachine
+from transitions.extensions.states import add_state_features
 
 try:
     import asyncio
     from transitions.extensions.asyncio import AsyncMachine, HierarchicalAsyncMachine, AsyncEventData, \
-        AsyncTransition
+        AsyncTransition, AsyncTimeout
 
 except (ImportError, SyntaxError):
     asyncio = None  # type: ignore
@@ -342,9 +345,6 @@ async def run():
         asyncio.run(run())
 
     def test_async_timeout(self):
-        from transitions.extensions.states import add_state_features
-        from transitions.extensions.asyncio import AsyncTimeout
-
         timeout_called = MagicMock()
 
         @add_state_features(AsyncTimeout)
@@ -376,6 +376,72 @@ async def run():
 
         asyncio.run(run())
 
+    def test_timeout_cancel(self):
+        error_mock = MagicMock()
+        timout_mock = MagicMock()
+        long_op_mock = MagicMock()
+
+        @add_state_features(AsyncTimeout)
+        class TimeoutMachine(self.machine_cls):  # type: ignore
+            async def on_enter_B(self):
+                await asyncio.sleep(0.2)
+                long_op_mock()  # should never be called
+
+            async def handle_timeout(self):
+                timout_mock()
+                await self.to_A()
+
+        machine = TimeoutMachine(states=["A", {"name": "B", "timeout": 0.1, "on_timeout": "handle_timeout"}],
+                                 initial="A", on_exception=error_mock)
+
+        async def run():
+            await machine.to_B()
+            assert timout_mock.called
+            assert error_mock.call_count == 1  # should only be one CancelledError
+            assert not long_op_mock.called
+            assert machine.is_A()
+        asyncio.run(run())
+
+    def test_queued_timeout_cancel(self):
+        error_mock = MagicMock()
+        timout_mock = MagicMock()
+        long_op_mock = MagicMock()
+
+        @add_state_features(AsyncTimeout)
+        class TimeoutMachine(self.machine_cls):  # type: ignore
+            async def long_op(self, event_data):
+                await self.to_C()
+                await self.to_D()
+                await self.to_E()
+                await asyncio.sleep(1)
+                long_op_mock()
+
+            async def handle_timeout(self, event_data):
+                timout_mock()
+                raise TimeoutError()
+
+            async def handle_error(self, event_data):
+                if isinstance(event_data.error, CancelledError):
+                    if error_mock.called:
+                        raise RuntimeError()
+                    error_mock()
+                raise event_data.error
+
+        machine = TimeoutMachine(states=["A", "C", "D", "E",
+                                         {"name": "B", "timeout": 0.1, "on_timeout": "handle_timeout",
+                                          "on_enter": "long_op"}],
+                                 initial="A", queued=True, send_event=True, on_exception="handle_error")
+
+        async def run():
+            await machine.to_B()
+            assert timout_mock.called
+            assert error_mock.called
+            assert not long_op_mock.called
+            assert machine.is_B()
+            with self.assertRaises(RuntimeError):
+                await machine.to_B()
+        asyncio.run(run())
+
     def test_callback_order(self):
         finished = []
 
diff --git a/transitions/extensions/asyncio.py b/transitions/extensions/asyncio.py
index 161d419b..6155caf7 100644
--- a/transitions/extensions/asyncio.py
+++ b/transitions/extensions/asyncio.py
@@ -18,6 +18,7 @@
 import asyncio
 import contextvars
 import inspect
+import warnings
 from collections import deque
 from functools import partial, reduce
 import copy
@@ -116,7 +117,7 @@ async def execute(self, event_data):
 
         machine = event_data.machine
         # cancel running tasks since the transition will happen
-        await machine.switch_model_context(event_data.model)
+        await machine.cancel_running_transitions(event_data.model, event_data.event.name)
 
         await event_data.machine.callbacks(event_data.machine.before_state_change, event_data)
         await event_data.machine.callbacks(self.before, event_data)
@@ -189,7 +190,8 @@ async def _trigger(self, event_data):
             if self._is_valid_source(event_data.state):
                 await self._process(event_data)
         except BaseException as err:  # pylint: disable=broad-except; Exception will be handled elsewhere
-            _LOGGER.error("%sException was raised while processing the trigger: %s", self.machine.name, err)
+            _LOGGER.error("%sException was raised while processing the trigger '%s': %s",
+                          self.machine.name, event_data.event.name, repr(err))
             event_data.error = err
             if self.machine.on_exception:
                 await self.machine.callbacks(self.machine.on_exception, event_data)
@@ -374,18 +376,24 @@ async def await_all(callables):
         return await asyncio.gather(*[func() for func in callables])
 
     async def switch_model_context(self, model):
+        warnings.warn("Please replace 'AsyncMachine.switch_model_context' with "
+                      "'AsyncMachine.cancel_running_transitions'.", category=DeprecationWarning)
+        await self.cancel_running_transitions(model)
+
+    async def cancel_running_transitions(self, model, msg=None):
         """
         This method is called by an `AsyncTransition` when all conditional tests have passed
         and the transition will happen. This requires already running tasks to be cancelled.
         Args:
             model (object): The currently processed model
+            msg (str): Optional message to pass to a running task's cancel request
         """
         for running_task in self.async_tasks.get(id(model), []):
             if self.current_context.get() == running_task or running_task in self.protected_tasks:
                 continue
             if running_task.done() is False:
                 _LOGGER.debug("Cancel running tasks...")
-                running_task.cancel()
+                running_task.cancel(msg)
 
     async def process_context(self, func, model):
         """
@@ -399,7 +407,7 @@ async def process_context(self, func, model):
             bool: returns the success state of the triggered event
         """
         if self.current_context.get() is None:
-            self.current_context.set(asyncio.current_task())
+            token = self.current_context.set(asyncio.current_task())
             if id(model) in self.async_tasks:
                 self.async_tasks[id(model)].append(asyncio.current_task())
             else:
@@ -410,6 +418,7 @@ async def process_context(self, func, model):
                 res = False
             finally:
                 self.async_tasks[id(model)].remove(asyncio.current_task())
+                self.current_context.reset(token)
                 if len(self.async_tasks[id(model)]) == 0:
                     del self.async_tasks[id(model)]
         else:
@@ -677,12 +686,30 @@ async def _timeout():
                 await asyncio.shield(self._process_timeout(event_data))
             except asyncio.CancelledError:
                 pass
-
-        return asyncio.ensure_future(_timeout())
+        return asyncio.create_task(_timeout())
 
     async def _process_timeout(self, event_data):
         _LOGGER.debug("%sTimeout state %s. Processing callbacks...", event_data.machine.name, self.name)
-        await event_data.machine.callbacks(self.on_timeout, event_data)
+        event_data = AsyncEventData(event_data.state, AsyncEvent("timeout", event_data.machine),
+                                    event_data.machine, event_data.model, args=tuple(), kwargs={})
+        token = AsyncMachine.current_context.set(None)
+        try:
+            await event_data.machine.callbacks(self.on_timeout, event_data)
+        except BaseException as err:
+            _LOGGER.warning("%sException raised while processing timeout!",
+                            event_data.machine.name)
+            event_data.error = err
+            try:
+                if event_data.machine.on_exception:
+                    await event_data.machine.callbacks(event_data.machine.on_exception, event_data)
+                else:
+                    raise
+            except BaseException as err2:
+                _LOGGER.error("%sHandling timeout exception '%s' caused another exception: %s. "
+                              "Cancel running transitions...", event_data.machine.name, repr(err), repr(err2))
+                await event_data.machine.cancel_running_transitions(event_data.model, "timeout")
+        finally:
+            AsyncMachine.current_context.reset(token)
         _LOGGER.info("%sTimeout state %s processed.", event_data.machine.name, self.name)
 
     @property
diff --git a/transitions/extensions/asyncio.pyi b/transitions/extensions/asyncio.pyi
index 34b32476..00b3c972 100644
--- a/transitions/extensions/asyncio.pyi
+++ b/transitions/extensions/asyncio.pyi
@@ -112,6 +112,7 @@ class AsyncMachine(Machine):
     async def callback(self, func: AsyncCallback, event_data: AsyncEventData) -> None: ...  # type: ignore[override]
     @staticmethod
     async def await_all(callables: List[AsyncCallbackFunc]) -> List[Optional[bool]]: ...
+    async def cancel_running_transitions(self, model: object, msg: Optional[str] = ...) -> None: ...
     async def switch_model_context(self, model: object) -> None: ...
     def get_state(self, state: Union[str, Enum]) -> AsyncState: ...
     async def process_context(self, func: Callable[[], Awaitable[None]], model: object) -> bool: ...