diff --git a/erpnext/stock/doctype/stock_settings/stock_settings.py b/erpnext/stock/doctype/stock_settings/stock_settings.py
index 6e1d02c128..d35711868f 100644
--- a/erpnext/stock/doctype/stock_settings/stock_settings.py
+++ b/erpnext/stock/doctype/stock_settings/stock_settings.py
@@ -55,7 +55,7 @@ class StockSettings(Document):
 		self.cant_change_valuation_method()
 		self.validate_clean_description_html()
 		self.validate_pending_reposts()
-		self.cant_disable_stock_reservation()
+		self.validate_stock_reservation()
 
 	def validate_warehouses(self):
 		warehouse_fields = ["default_warehouse", "sample_retention_warehouse"]
@@ -100,23 +100,64 @@ class StockSettings(Document):
 		if self.stock_frozen_upto:
 			check_pending_reposting(self.stock_frozen_upto)
 
-	def cant_disable_stock_reservation(self):
-		"""Raises an exception if user tries to disable Stock Reservation and there are existing Stock Reservation Entries."""
+	def validate_stock_reservation(self):
+		"""Raises an exception if the user tries to enable/disable `Stock Reservation` with `Negative Stock` or `Open Stock Reservation Entries`."""
 
-		if not self.enable_stock_reservation:
-			db_enable_stock_reservation = frappe.db.get_single_value(
-				"Stock Settings", "enable_stock_reservation"
-			)
+		db_allow_negative_stock = frappe.db.get_single_value("Stock Settings", "allow_negative_stock")
+		db_enable_stock_reservation = frappe.db.get_single_value(
+			"Stock Settings", "enable_stock_reservation"
+		)
 
-			if db_enable_stock_reservation and frappe.db.exists(
-				"Stock Reservation Entry", {"docstatus": 1, "status": ["!=", "Delivered"]}
-			):
+		# Change in value of `Allow Negative Stock`
+		if db_allow_negative_stock != self.allow_negative_stock:
+
+			# Disable -> Enable: Don't allow if `Stock Reservation` is enabled
+			if self.allow_negative_stock and self.enable_stock_reservation:
 				frappe.throw(
-					_("As there are existing {0}, you can not change the value of {1}.").format(
-						frappe.bold("Stock Reservation Entries"), frappe.bold("Enable Stock Reservation")
+					_("As {0} is enabled, you can not enable {1}.").format(
+						frappe.bold("Stock Reservation"), frappe.bold("Allow Negative Stock")
 					)
 				)
 
+		# Change in value of `Enable Stock Reservation`
+		if db_enable_stock_reservation != self.enable_stock_reservation:
+
+			# Disable -> Enable
+			if self.enable_stock_reservation:
+
+				# Don't allow if `Allow Negative Stock` is enabled
+				if self.allow_negative_stock:
+					frappe.throw(
+						_("As {0} is enabled, you can not enable {1}.").format(
+							frappe.bold("Allow Negative Stock"), frappe.bold("Stock Reservation")
+						)
+					)
+
+				else:
+					# Don't allow if there are negative stock
+					has_negative_stock = frappe.db.exists("Bin", {"actual_qty": ["<", 0]})
+
+					if has_negative_stock:
+						frappe.throw(
+							_("As there are negative stock, you can not enable {0}.").format(
+								frappe.bold("Stock Reservation")
+							)
+						)
+
+			# Enable -> Disable
+			else:
+				# Don't allow if there are open Stock Reservation Entries
+				has_reserved_stock = frappe.db.exists(
+					"Stock Reservation Entry", {"docstatus": 1, "status": ["!=", "Delivered"]}
+				)
+
+				if has_reserved_stock:
+					frappe.throw(
+						_("As there are reserved stock, you cannot disable {0}.").format(
+							frappe.bold("Stock Reservation")
+						)
+					)
+
 	def on_update(self):
 		self.toggle_warehouse_field_for_inter_warehouse_transfer()