diff --git a/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.html b/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.html
index 61fc290f6fe..9188ba5ab96 100644
--- a/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.html
+++ b/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.html
@@ -124,7 +124,7 @@
         buttonType="primary"
         [disabled]="loading || dialogReadonly"
       >
-        {{ "save" | i18n }}
+        {{ buttonDisplayName | i18n }}
       </button>
       <button
         type="button"
diff --git a/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.ts b/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.ts
index 2dd1c1bc5b8..88746dc708b 100644
--- a/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.ts
+++ b/apps/web/src/app/admin-console/organizations/shared/components/collection-dialog/collection-dialog.component.ts
@@ -24,6 +24,8 @@ import {
   OrganizationUserUserMiniResponse,
   CollectionResponse,
   CollectionView,
+  CollectionService,
+  Collection,
 } from "@bitwarden/admin-console/common";
 import {
   getOrganizationById,
@@ -32,13 +34,17 @@ import {
 import { Organization } from "@bitwarden/common/admin-console/models/domain/organization";
 import { AccountService } from "@bitwarden/common/auth/abstractions/account.service";
 import { getUserId } from "@bitwarden/common/auth/services/account.service";
+import { FeatureFlag } from "@bitwarden/common/enums/feature-flag.enum";
+import { ConfigService } from "@bitwarden/common/platform/abstractions/config/config.service";
 import { I18nService } from "@bitwarden/common/platform/abstractions/i18n.service";
 import { PlatformUtilsService } from "@bitwarden/common/platform/abstractions/platform-utils.service";
 import { Utils } from "@bitwarden/common/platform/misc/utils";
 import { SelectModule, BitValidators, DialogService, ToastService } from "@bitwarden/components";
 
+import { openChangePlanDialog } from "../../../../../billing/organizations/change-plan-dialog.component";
 import { SharedModule } from "../../../../../shared";
 import { GroupApiService, GroupView } from "../../../core";
+import { freeOrgCollectionLimitValidator } from "../../validators/free-org-collection-limit.validator";
 import { PermissionMode } from "../access-selector/access-selector.component";
 import {
   AccessItemType,
@@ -55,6 +61,19 @@ export enum CollectionDialogTabType {
   Access = 1,
 }
 
+/**
+ * Enum representing button labels for the "Add New Collection" dialog.
+ *
+ * @readonly
+ * @enum {string}
+ */
+enum ButtonType {
+  /** Displayed when the user has reached the maximum number of collections allowed for the organization. */
+  Upgrade = "upgrade",
+  /** Displayed when the user can still add more collections within the allowed limit. */
+  Save = "save",
+}
+
 export interface CollectionDialogParams {
   collectionId?: string;
   organizationId: string;
@@ -78,6 +97,7 @@ export enum CollectionDialogAction {
   Saved = "saved",
   Canceled = "canceled",
   Deleted = "deleted",
+  Upgrade = "upgrade",
 }
 
 @Component({
@@ -107,6 +127,9 @@ export class CollectionDialogComponent implements OnInit, OnDestroy {
   protected PermissionMode = PermissionMode;
   protected showDeleteButton = false;
   protected showAddAccessWarning = false;
+  protected collections: Collection[];
+  protected buttonDisplayName: ButtonType = ButtonType.Save;
+  private orgExceedingCollectionLimit!: Organization;
 
   constructor(
     @Inject(DIALOG_DATA) private params: CollectionDialogParams,
@@ -122,6 +145,8 @@ export class CollectionDialogComponent implements OnInit, OnDestroy {
     private changeDetectorRef: ChangeDetectorRef,
     private accountService: AccountService,
     private toastService: ToastService,
+    private collectionService: CollectionService,
+    private configService: ConfigService,
   ) {
     this.tabIndex = params.initialTab ?? CollectionDialogTabType.Info;
   }
@@ -151,6 +176,23 @@ export class CollectionDialogComponent implements OnInit, OnDestroy {
       this.formGroup.patchValue({ selectedOrg: this.params.organizationId });
       await this.loadOrg(this.params.organizationId);
     }
+
+    const isBreadcrumbEventLogsEnabled = await firstValueFrom(
+      this.configService.getFeatureFlag$(FeatureFlag.PM12276_BreadcrumbEventLogs),
+    );
+
+    if (isBreadcrumbEventLogsEnabled) {
+      this.collections = await this.collectionService.getAll();
+      this.organizationSelected.setAsyncValidators(
+        freeOrgCollectionLimitValidator(this.organizations$, this.collections, this.i18nService),
+      );
+      this.formGroup.updateValueAndValidity();
+    }
+
+    this.organizationSelected.valueChanges.pipe(takeUntil(this.destroy$)).subscribe((_) => {
+      this.organizationSelected.markAsTouched();
+      this.formGroup.updateValueAndValidity();
+    });
   }
 
   async loadOrg(orgId: string) {
@@ -263,6 +305,10 @@ export class CollectionDialogComponent implements OnInit, OnDestroy {
       });
   }
 
+  get organizationSelected() {
+    return this.formGroup.controls.selectedOrg;
+  }
+
   protected get collectionId() {
     return this.params.collectionId;
   }
@@ -287,6 +333,12 @@ export class CollectionDialogComponent implements OnInit, OnDestroy {
 
     this.formGroup.markAllAsTouched();
 
+    if (this.buttonDisplayName == ButtonType.Upgrade) {
+      this.close(CollectionDialogAction.Upgrade);
+      this.changePlan(this.orgExceedingCollectionLimit);
+      return;
+    }
+
     if (this.formGroup.invalid) {
       const accessTabError = this.formGroup.controls.access.hasError("managePermissionRequired");
 
@@ -369,6 +421,16 @@ export class CollectionDialogComponent implements OnInit, OnDestroy {
     this.destroy$.complete();
   }
 
+  private changePlan(org: Organization) {
+    openChangePlanDialog(this.dialogService, {
+      data: {
+        organizationId: org.id,
+        subscription: null,
+        productTierType: org.productTierType,
+      },
+    });
+  }
+
   private handleAddAccessWarning(): boolean {
     if (
       !this.organization?.allowAdminAccessToAllCollectionItems &&
diff --git a/apps/web/src/app/admin-console/organizations/shared/validators/free-org-collection-limit.validator.spec.ts b/apps/web/src/app/admin-console/organizations/shared/validators/free-org-collection-limit.validator.spec.ts
new file mode 100644
index 00000000000..120a58d6b1a
--- /dev/null
+++ b/apps/web/src/app/admin-console/organizations/shared/validators/free-org-collection-limit.validator.spec.ts
@@ -0,0 +1,78 @@
+import { AbstractControl, FormControl, ValidationErrors } from "@angular/forms";
+import { lastValueFrom, Observable, of } from "rxjs";
+
+import { Collection } from "@bitwarden/admin-console/common";
+import { Organization } from "@bitwarden/common/admin-console/models/domain/organization";
+import { I18nService } from "@bitwarden/common/platform/abstractions/i18n.service";
+
+import { freeOrgCollectionLimitValidator } from "./free-org-collection-limit.validator";
+
+describe("freeOrgCollectionLimitValidator", () => {
+  let i18nService: I18nService;
+
+  beforeEach(() => {
+    i18nService = {
+      t: (key: string) => key,
+    } as any;
+  });
+
+  it("returns null if organization is not found", async () => {
+    const orgs: Organization[] = [];
+    const validator = freeOrgCollectionLimitValidator(of(orgs), [], i18nService);
+    const control = new FormControl("org-id");
+
+    const result: Observable<ValidationErrors> = validator(control) as Observable<ValidationErrors>;
+
+    const value = await lastValueFrom(result);
+    expect(value).toBeNull();
+  });
+
+  it("returns null if control is not an instance of FormControl", async () => {
+    const validator = freeOrgCollectionLimitValidator(of([]), [], i18nService);
+    const control = {} as AbstractControl;
+
+    const result: Observable<ValidationErrors | null> = validator(
+      control,
+    ) as Observable<ValidationErrors>;
+
+    const value = await lastValueFrom(result);
+    expect(value).toBeNull();
+  });
+
+  it("returns null if control is not provided", async () => {
+    const validator = freeOrgCollectionLimitValidator(of([]), [], i18nService);
+
+    const result: Observable<ValidationErrors | null> = validator(
+      undefined as any,
+    ) as Observable<ValidationErrors>;
+
+    const value = await lastValueFrom(result);
+    expect(value).toBeNull();
+  });
+
+  it("returns null if organization has not reached collection limit (Observable)", async () => {
+    const org = { id: "org-id", maxCollections: 2 } as Organization;
+    const collections = [{ organizationId: "org-id" } as Collection];
+    const validator = freeOrgCollectionLimitValidator(of([org]), collections, i18nService);
+    const control = new FormControl("org-id");
+
+    const result$ = validator(control) as Observable<ValidationErrors | null>;
+
+    const value = await lastValueFrom(result$);
+    expect(value).toBeNull();
+  });
+
+  it("returns error if organization has reached collection limit (Observable)", async () => {
+    const org = { id: "org-id", maxCollections: 1 } as Organization;
+    const collections = [{ organizationId: "org-id" } as Collection];
+    const validator = freeOrgCollectionLimitValidator(of([org]), collections, i18nService);
+    const control = new FormControl("org-id");
+
+    const result$ = validator(control) as Observable<ValidationErrors | null>;
+
+    const value = await lastValueFrom(result$);
+    expect(value).toEqual({
+      cannotCreateCollections: { message: "cannotCreateCollection" },
+    });
+  });
+});
diff --git a/apps/web/src/app/admin-console/organizations/shared/validators/free-org-collection-limit.validator.ts b/apps/web/src/app/admin-console/organizations/shared/validators/free-org-collection-limit.validator.ts
new file mode 100644
index 00000000000..75919d31c1a
--- /dev/null
+++ b/apps/web/src/app/admin-console/organizations/shared/validators/free-org-collection-limit.validator.ts
@@ -0,0 +1,44 @@
+import { AbstractControl, AsyncValidatorFn, FormControl, ValidationErrors } from "@angular/forms";
+import { map, Observable, of } from "rxjs";
+
+import { Collection } from "@bitwarden/admin-console/common";
+import { Organization } from "@bitwarden/common/admin-console/models/domain/organization";
+import { I18nService } from "@bitwarden/common/platform/abstractions/i18n.service";
+
+export function freeOrgCollectionLimitValidator(
+  orgs: Observable<Organization[]>,
+  collections: Collection[],
+  i18nService: I18nService,
+): AsyncValidatorFn {
+  return (control: AbstractControl): Observable<ValidationErrors | null> => {
+    if (!(control instanceof FormControl)) {
+      return of(null);
+    }
+
+    const orgId = control.value;
+
+    if (!orgId) {
+      return of(null);
+    }
+
+    return orgs.pipe(
+      map((organizations) => organizations.find((org) => org.id === orgId)),
+      map((org) => {
+        if (!org) {
+          return null;
+        }
+
+        const orgCollections = collections.filter((c) => c.organizationId === org.id);
+        const hasReachedLimit = org.maxCollections === orgCollections.length;
+
+        if (hasReachedLimit) {
+          return {
+            cannotCreateCollections: { message: i18nService.t("cannotCreateCollection") },
+          };
+        }
+
+        return null;
+      }),
+    );
+  };
+}
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 000feeaf337..489f42649f9 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
@@ -9,14 +9,28 @@ import {
   OnInit,
   Output,
 } from "@angular/core";
+import { Router } from "@angular/router";
+import { firstValueFrom } from "rxjs";
 
-import { Unassigned, CollectionView } from "@bitwarden/admin-console/common";
+import {
+  Unassigned,
+  CollectionView,
+  CollectionAdminService,
+} from "@bitwarden/admin-console/common";
 import { JslibModule } from "@bitwarden/angular/jslib.module";
 import { Organization } from "@bitwarden/common/admin-console/models/domain/organization";
+import { ProductTierType } from "@bitwarden/common/billing/enums";
+import { FeatureFlag } from "@bitwarden/common/enums/feature-flag.enum";
+import { ConfigService } from "@bitwarden/common/platform/abstractions/config/config.service";
 import { I18nService } from "@bitwarden/common/platform/abstractions/i18n.service";
 import { CipherType } from "@bitwarden/common/vault/enums";
 import { TreeNode } from "@bitwarden/common/vault/models/domain/tree-node";
-import { BreadcrumbsModule, MenuModule } from "@bitwarden/components";
+import {
+  BreadcrumbsModule,
+  DialogService,
+  MenuModule,
+  SimpleDialogOptions,
+} from "@bitwarden/components";
 
 import { CollectionDialogTabType } from "../../../admin-console/organizations/shared/components/collection-dialog";
 import { HeaderModule } from "../../../layouts/header/header.module";
@@ -81,7 +95,13 @@ export class VaultHeaderComponent implements OnInit {
   /** Emits an event when the delete collection button is clicked in the header */
   @Output() onDeleteCollection = new EventEmitter<void>();
 
-  constructor(private i18nService: I18nService) {}
+  constructor(
+    private i18nService: I18nService,
+    private collectionAdminService: CollectionAdminService,
+    private dialogService: DialogService,
+    private router: Router,
+    private configService: ConfigService,
+  ) {}
 
   async ngOnInit() {}
 
@@ -199,6 +219,56 @@ export class VaultHeaderComponent implements OnInit {
   }
 
   async addCollection(): Promise<void> {
+    const organization = this.organizations?.find(
+      (org) => org.productTierType === ProductTierType.Free,
+    );
+    const isBreadcrumbEventLogsEnabled = await firstValueFrom(
+      this.configService.getFeatureFlag$(FeatureFlag.PM12276_BreadcrumbEventLogs),
+    );
+    if (
+      this.organizations.length == 1 &&
+      organization.productTierType === ProductTierType.Free &&
+      isBreadcrumbEventLogsEnabled
+    ) {
+      const collections = await this.collectionAdminService.getAll(organization.id);
+      if (collections.length === organization.maxCollections) {
+        await this.showFreeOrgUpgradeDialog(organization);
+        return;
+      }
+    }
     this.onAddCollection.emit();
   }
+
+  private async showFreeOrgUpgradeDialog(organization: Organization): Promise<void> {
+    const orgUpgradeSimpleDialogOpts: SimpleDialogOptions = {
+      title: this.i18nService.t("upgradeOrganization"),
+      content: this.i18nService.t(
+        organization.canEditSubscription
+          ? "freeOrgMaxCollectionReachedManageBilling"
+          : "freeOrgMaxCollectionReachedNoManageBilling",
+        organization.maxCollections,
+      ),
+      type: "primary",
+    };
+
+    if (organization.canEditSubscription) {
+      orgUpgradeSimpleDialogOpts.acceptButtonText = this.i18nService.t("upgrade");
+    } else {
+      orgUpgradeSimpleDialogOpts.acceptButtonText = this.i18nService.t("ok");
+      orgUpgradeSimpleDialogOpts.cancelButtonText = null; // hide secondary btn
+    }
+
+    const simpleDialog = this.dialogService.openSimpleDialogRef(orgUpgradeSimpleDialogOpts);
+    const result: boolean | undefined = await firstValueFrom(simpleDialog.closed);
+
+    if (!result) {
+      return;
+    }
+
+    if (organization.canEditSubscription) {
+      await this.router.navigate(["/organizations", organization.id, "billing", "subscription"], {
+        queryParams: { upgrade: true },
+      });
+    }
+  }
 }
diff --git a/apps/web/src/locales/en/messages.json b/apps/web/src/locales/en/messages.json
index 22d2869b4b5..0a5ede50462 100644
--- a/apps/web/src/locales/en/messages.json
+++ b/apps/web/src/locales/en/messages.json
@@ -10608,5 +10608,8 @@
   },
   "upgradeEventLogMessage":{
     "message" : "These events are examples only and do not reflect real events within your Bitwarden organization."
+  },
+  "cannotCreateCollection": {
+    "message": "Free organizations may have up to 2 collections. Upgrade to a paid plan to add more collections."
   }
 }