The latest Microsoft 365 update 81990 has brought a dropdown menu next to modern document libraries to switch between document libraries in a SharePoint Online site or OneDrive. When you click on the dropdown, you’ll get a menu with a list of document libraries to choose from the site. This enables users to switch between other document libraries on the site quickly.
Next to any modern document library, you’ll see a little icon (Library icon) with a dropdown of all other document libraries on the site. Please note this dropdown lists only document libraries (No other library type like Picture Library, Style Library, Site Assets, Wiki Page Library, etc., will be listed.)
There are no configurations or PowerShell ways to enable or disable the document library dropdown as of today.