diff --git a/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.html b/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.html
index af4eb182eec..d2f5cc38013 100644
--- a/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.html
+++ b/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.html
@@ -76,7 +76,7 @@
 
   <div *ngIf="filter.type !== 'trash'" class="tw-shrink-0">
     <vault-new-cipher-menu
-      [canCreateCipher]="true"
+      [canCreateCipher]="canCreateCipher"
       [canCreateFolder]="true"
       [canCreateSshKey]="true"
       [canCreateCollection]="canCreateCollections"
diff --git a/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.ts b/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.ts
index e7c14825fe2..0f1e5bc0238 100644
--- a/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.ts
+++ b/apps/web/src/app/vault/individual-vault/vault-header/vault-header.component.ts
@@ -228,6 +228,10 @@ export class VaultHeaderComponent {
     return this.collection.node.canDelete(organization);
   }
 
+  get canCreateCipher(): boolean {
+    return !this.activeOrganization?.isProviderUser || this.activeOrganization?.isMember;
+  }
+
   deleteCollection() {
     this.onDeleteCollection.emit();
   }
diff --git a/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.html b/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.html
index 268f5b912d1..d816b69bc58 100644
--- a/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.html
+++ b/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.html
@@ -4,12 +4,13 @@
       bitButton
       buttonType="primary"
       type="button"
-      [bitMenuTriggerFor]="addOptions"
+      [bitMenuTriggerFor]="isOnlyCollectionCreation() ? null : addOptions"
+      (click)="handleButtonClick()"
       id="newItemDropdown"
-      [appA11yTitle]="'new' | i18n"
+      [appA11yTitle]="getButtonLabel() | i18n"
     >
       <i class="bwi bwi-plus tw-me-2" aria-hidden="true"></i>
-      {{ "new" | i18n }}
+      {{ getButtonLabel() | i18n }}
     </button>
     <bit-menu #addOptions aria-labelledby="newItemDropdown">
       @for (item of cipherMenuItems$ | async; track item.type) {
diff --git a/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.ts b/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.ts
index 0a755a9cdb4..1a592809691 100644
--- a/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.ts
+++ b/libs/vault/src/components/new-cipher-menu/new-cipher-menu.component.ts
@@ -1,6 +1,7 @@
 import { CommonModule } from "@angular/common";
 import { Component, input, output } from "@angular/core";
-import { map, shareReplay } from "rxjs";
+import { toObservable } from "@angular/core/rxjs-interop";
+import { combineLatest, map, shareReplay } from "rxjs";
 
 import { JslibModule } from "@bitwarden/angular/jslib.module";
 import { CipherType } from "@bitwarden/common/vault/enums";
@@ -38,10 +39,18 @@ export class NewCipherMenuComponent {
   /**
    * Returns an observable that emits the cipher menu items, filtered by the restricted types.
    */
-  cipherMenuItems$ = this.restrictedItemTypesService.restricted$.pipe(
-    map((restrictedTypes) => {
+  cipherMenuItems$ = combineLatest([
+    this.restrictedItemTypesService.restricted$,
+    toObservable(this.canCreateCipher),
+    toObservable(this.canCreateSshKey),
+  ]).pipe(
+    map(([restrictedTypes, canCreateCipher, canCreateSshKey]) => {
+      // If user cannot create ciphers at all, return empty array
+      if (!canCreateCipher) {
+        return [];
+      }
       return CIPHER_MENU_ITEMS.filter((item) => {
-        if (!this.canCreateSshKey() && item.type === CipherType.SshKey) {
+        if (!canCreateSshKey && item.type === CipherType.SshKey) {
           return false;
         }
         return !restrictedTypes.some((restrictedType) => restrictedType.cipherType === item.type);
@@ -49,4 +58,40 @@ export class NewCipherMenuComponent {
     }),
     shareReplay({ bufferSize: 1, refCount: true }),
   );
+
+  /**
+   * Returns the appropriate button label based on what can be created.
+   * If only collections can be created (no ciphers or folders), show "New Collection".
+   * Otherwise, show "New".
+   */
+  protected getButtonLabel(): string {
+    const canCreateCipher = this.canCreateCipher();
+    const canCreateFolder = this.canCreateFolder();
+    const canCreateCollection = this.canCreateCollection();
+
+    // If only collections can be created, be specific
+    if (!canCreateCipher && !canCreateFolder && canCreateCollection) {
+      return "newCollection";
+    }
+
+    return "new";
+  }
+
+  /**
+   * Returns true if only collections can be created (no other options).
+   * When this is true, the button should directly create a collection instead of showing a dropdown.
+   */
+  protected isOnlyCollectionCreation(): boolean {
+    return !this.canCreateCipher() && !this.canCreateFolder() && this.canCreateCollection();
+  }
+
+  /**
+   * Handles the button click. If only collections can be created, directly emit the collection event.
+   * Otherwise, the menu trigger will handle opening the dropdown.
+   */
+  protected handleButtonClick(): void {
+    if (this.isOnlyCollectionCreation()) {
+      this.collectionAdded.emit();
+    }
+  }
 }