diff --git a/apps/login/src/lib/server/loginname.test.ts b/apps/login/src/lib/server/loginname.test.ts
index cf6be82240..ca46d58ba2 100644
--- a/apps/login/src/lib/server/loginname.test.ts
+++ b/apps/login/src/lib/server/loginname.test.ts
@@ -120,6 +120,8 @@ describe("sendLoginname", () => {
     });
     // Default: org discovery returns empty result
     mockGetOrgsByDomain.mockResolvedValue({ result: [] });
+    // Default: no active identity providers
+    mockGetActiveIdentityProviders.mockResolvedValue({ identityProviders: [] });
   });
 
   afterEach(() => {
@@ -591,6 +593,121 @@ describe("sendLoginname", () => {
       expect(result).toEqual({ error: "errors.userNotFound" });
     });
 
+    test("should redirect to IDP when allowRegister: false, allowLocalAuthentication: true and discovered org has single active IDP", async () => {
+      mockGetLoginSettings.mockResolvedValue({
+        allowRegister: false,
+        allowLocalAuthentication: true,
+      });
+      mockGetActiveIdentityProviders.mockResolvedValue({
+        identityProviders: [{ id: "idp123", type: "OIDC", options: { isAutoCreation: true } }],
+      });
+      mockStartIdentityProviderFlow.mockResolvedValue({ url: "https://idp.example.com/auth" });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+        organization: "org123",
+      });
+
+      expect(result).toEqual({ redirect: "https://idp.example.com/auth" });
+    });
+
+    test("should redirect to IDP via domain discovery when allowRegister: false, allowLocalAuthentication: true", async () => {
+      mockGetLoginSettings
+        .mockResolvedValueOnce({
+          allowRegister: false,
+          allowLocalAuthentication: true,
+        })
+        .mockResolvedValueOnce({
+          allowDomainDiscovery: true,
+          allowRegister: false,
+          allowLocalAuthentication: true,
+        });
+
+      mockGetOrgsByDomain.mockResolvedValue({
+        result: [{ id: "discovered-org-789", name: "Company Org" }],
+      });
+
+      mockGetActiveIdentityProviders.mockResolvedValue({
+        identityProviders: [{ id: "idp456", type: "OIDC", options: { isAutoCreation: true } }],
+      });
+      mockStartIdentityProviderFlow.mockResolvedValue({ url: "https://company-idp.example.com/auth" });
+
+      const result = await sendLoginname({
+        loginName: "user@company.com",
+        requestId: "req123",
+      });
+
+      expect(result).toEqual({ redirect: "https://company-idp.example.com/auth" });
+
+      expect(mockGetOrgsByDomain).toHaveBeenCalledWith({
+        serviceConfig: { baseUrl: "https://api.example.com" },
+        domain: "company.com",
+      });
+
+      expect(mockGetActiveIdentityProviders).toHaveBeenCalledWith({
+        serviceConfig: { baseUrl: "https://api.example.com" },
+        orgId: "discovered-org-789",
+      });
+    });
+
+    test("should redirect to IDP when allowRegister: true, allowLocalAuthentication: true and discovered org has single active IDP", async () => {
+      mockGetLoginSettings
+        .mockResolvedValueOnce({
+          allowRegister: true,
+          allowLocalAuthentication: true,
+          ignoreUnknownUsernames: false,
+        })
+        .mockResolvedValueOnce({
+          allowDomainDiscovery: true,
+          allowRegister: true,
+          allowLocalAuthentication: true,
+          ignoreUnknownUsernames: false,
+        });
+
+      mockGetOrgsByDomain.mockResolvedValue({
+        result: [{ id: "discovered-org-101", name: "Example Org" }],
+      });
+
+      mockGetActiveIdentityProviders.mockResolvedValue({
+        identityProviders: [{ id: "idp789", type: "OIDC", options: { isAutoCreation: true } }],
+      });
+      mockStartIdentityProviderFlow.mockResolvedValue({ url: "https://example-idp.example.com/auth" });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+        requestId: "req123",
+      });
+
+      expect(result).toEqual({ redirect: "https://example-idp.example.com/auth" });
+    });
+
+    test("should return error when allowRegister: false, allowLocalAuthentication: true, discovered org but no active IDP", async () => {
+      mockGetLoginSettings
+        .mockResolvedValueOnce({
+          allowRegister: false,
+          allowLocalAuthentication: true,
+        })
+        .mockResolvedValueOnce({
+          allowDomainDiscovery: true,
+          allowRegister: false,
+          allowLocalAuthentication: true,
+        });
+
+      mockGetOrgsByDomain.mockResolvedValue({
+        result: [{ id: "discovered-org-empty", name: "No IDP Org" }],
+      });
+
+      mockGetActiveIdentityProviders.mockResolvedValue({
+        identityProviders: [],
+      });
+
+      const result = await sendLoginname({
+        loginName: "user@noidp.com",
+      });
+
+      expect(result).toEqual({ error: "errors.userNotFound" });
+    });
+
     test("should discover organization from domain suffix when user not found without org context", async () => {
       // Mock login settings for instance level (no org context)
       mockGetLoginSettings
diff --git a/apps/login/src/lib/server/loginname.ts b/apps/login/src/lib/server/loginname.ts
index 622c6333e2..4031cc4d11 100644
--- a/apps/login/src/lib/server/loginname.ts
+++ b/apps/login/src/lib/server/loginname.ts
@@ -545,18 +545,29 @@ export async function sendLoginname(command: SendLoginnameCommand) {
       logger.debug("No single org found for discovery");
     }
   }
+  // When a user is not found, try to redirect to an external IdP if:
+  // - local authentication is disabled, OR
+  // - domain discovery resolved an organization (regardless of allowRegister)
+  // Registration policy (allowRegister) controls local account creation only
+  // and must not prevent authentication via an external IdP.
+  // Fixes: https://github.com/zitadel/zitadel/issues/12021
+  // Fixes: https://github.com/zitadel/zitadel/issues/12023
 
-  // user not found, check if IDPs are available when local auth is not allowed
-  if (!effectiveLoginSettings?.allowLocalAuthentication) {
-    logger.debug("redirecting to IDP (register allowed, password not allowed)");
+  if ((!effectiveLoginSettings?.allowLocalAuthentication || discoveredOrganization) && !command.ignoreUnknownUsernames) {
     const resp = await redirectUserToIDP(undefined, discoveredOrganization);
     if (resp) {
+      logger.debug("Redirecting to IDP", { organization: discoveredOrganization });
       return resp;
     }
-    logger.debug("IDP redirect failed, returning user not found");
 
-    return preventUserEnumeration(discoveredOrganization);
-  } else if (effectiveLoginSettings?.allowRegister && effectiveLoginSettings?.allowLocalAuthentication) {
+    // If local auth is disabled, there is no fallback — return error
+    if (!effectiveLoginSettings?.allowLocalAuthentication) {
+      logger.debug("IDP redirect failed and local auth not allowed, returning user not found");
+      return preventUserEnumeration(discoveredOrganization);
+    }
+  }
+
+  if (effectiveLoginSettings?.allowRegister && effectiveLoginSettings?.allowLocalAuthentication) {
     logger.debug("register and password both allowed");
     // do not register user if ignoreUnknownUsernames is set
     if (discoveredOrganization && !effectiveLoginSettings?.ignoreUnknownUsernames) {