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Is there any method of removing the last played games section from Steam taskbar? I don't use it and it just keeps bugging me. Added screen and marked spot to show what I mean.

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Unfortunately not, there is no way to hide recently played games using any of the options available in Steam's settings page - there are options for everything except for recently played games for both the Steam tray icon right click menu and the Windows 7/8 jumplist.

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