diff --git a/src/library-authoring/create-library/CreateLibrary.test.tsx b/src/library-authoring/create-library/CreateLibrary.test.tsx
index cf323b1aca..d129cfed16 100644
--- a/src/library-authoring/create-library/CreateLibrary.test.tsx
+++ b/src/library-authoring/create-library/CreateLibrary.test.tsx
@@ -1,18 +1,21 @@
 import React from 'react';
-import MockAdapter from 'axios-mock-adapter';
-import { initializeMockApp } from '@edx/frontend-platform';
-import { getAuthenticatedHttpClient } from '@edx/frontend-platform/auth';
-import { IntlProvider } from '@edx/frontend-platform/i18n';
-import { AppProvider } from '@edx/frontend-platform/react';
-import { QueryClient, QueryClientProvider } from '@tanstack/react-query';
-import { fireEvent, render, waitFor } from '@testing-library/react';
+import type MockAdapter from 'axios-mock-adapter';
 import userEvent from '@testing-library/user-event';
 
-import initializeStore from '../../store';
+import {
+  act,
+  fireEvent,
+  initializeMocks,
+  render,
+  screen,
+  waitFor,
+} from '../../testUtils';
+import { studioHomeMock } from '../../studio-home/__mocks__';
+import { getStudioHomeApiUrl } from '../../studio-home/data/api';
+import { getApiWaffleFlagsUrl } from '../../data/api';
 import { CreateLibrary } from '.';
 import { getContentLibraryV2CreateApiUrl } from './data/api';
 
-let store;
 const mockNavigate = jest.fn();
 let axiosMock: MockAdapter;
 
@@ -29,66 +32,41 @@ jest.mock('../../generic/data/apiHooks', () => ({
   }),
 }));
 
-const queryClient = new QueryClient({
-  defaultOptions: {
-    queries: {
-      retry: false,
-    },
-  },
-});
-
-const RootWrapper = () => (
-  <AppProvider store={store}>
-    <IntlProvider locale="en" messages={{}}>
-      <QueryClientProvider client={queryClient}>
-        <CreateLibrary />
-      </QueryClientProvider>
-    </IntlProvider>
-  </AppProvider>
-);
-
 describe('<CreateLibrary />', () => {
   beforeEach(() => {
-    initializeMockApp({
-      authenticatedUser: {
-        userId: 3,
-        username: 'abc123',
-        administrator: true,
-        roles: [],
-      },
-    });
-    store = initializeStore();
-
-    axiosMock = new MockAdapter(getAuthenticatedHttpClient());
+    axiosMock = initializeMocks().axiosMock;
+    axiosMock
+      .onGet(getApiWaffleFlagsUrl(undefined))
+      .reply(200, {});
   });
 
   afterEach(() => {
     jest.clearAllMocks();
     axiosMock.restore();
-    queryClient.clear();
   });
 
   test('call api data with correct data', async () => {
+    axiosMock.onGet(getStudioHomeApiUrl()).reply(200, studioHomeMock);
     axiosMock.onPost(getContentLibraryV2CreateApiUrl()).reply(200, {
       id: 'library-id',
     });
 
-    const { getByRole } = render(<RootWrapper />);
+    render(<CreateLibrary />);
 
-    const titleInput = getByRole('textbox', { name: /library name/i });
+    const titleInput = await screen.findByRole('textbox', { name: /library name/i });
     userEvent.click(titleInput);
     userEvent.type(titleInput, 'Test Library Name');
 
-    const orgInput = getByRole('combobox', { name: /organization/i });
+    const orgInput = await screen.findByRole('combobox', { name: /organization/i });
     userEvent.click(orgInput);
     userEvent.type(orgInput, 'org1');
-    userEvent.tab();
+    act(() => userEvent.tab());
 
-    const slugInput = getByRole('textbox', { name: /library id/i });
+    const slugInput = await screen.findByRole('textbox', { name: /library id/i });
     userEvent.click(slugInput);
     userEvent.type(slugInput, 'test_library_slug');
 
-    fireEvent.click(getByRole('button', { name: /create/i }));
+    fireEvent.click(await screen.findByRole('button', { name: /create/i }));
     await waitFor(() => {
       expect(axiosMock.history.post.length).toBe(1);
       expect(axiosMock.history.post[0].data).toBe(
@@ -98,41 +76,115 @@ describe('<CreateLibrary />', () => {
     });
   });
 
+  test('cannot create new org unless allowed', async () => {
+    axiosMock.onGet(getStudioHomeApiUrl()).reply(200, studioHomeMock);
+    axiosMock.onPost(getContentLibraryV2CreateApiUrl()).reply(200, {
+      id: 'library-id',
+    });
+
+    render(<CreateLibrary />);
+
+    const titleInput = await screen.findByRole('textbox', { name: /library name/i });
+    userEvent.click(titleInput);
+    userEvent.type(titleInput, 'Test Library Name');
+
+    // We cannot create a new org, and so we're restricted to the allowed list
+    const orgOptions = screen.getByTestId('autosuggest-iconbutton');
+    userEvent.click(orgOptions);
+    expect(screen.getByText('org1')).toBeInTheDocument();
+    ['org2', 'org3', 'org4', 'org5'].forEach((org) => expect(screen.queryByText(org)).not.toBeInTheDocument());
+
+    const orgInput = await screen.findByRole('combobox', { name: /organization/i });
+    userEvent.click(orgInput);
+    userEvent.type(orgInput, 'NewOrg');
+    act(() => userEvent.tab());
+
+    const slugInput = await screen.findByRole('textbox', { name: /library id/i });
+    userEvent.click(slugInput);
+    userEvent.type(slugInput, 'test_library_slug');
+
+    fireEvent.click(await screen.findByRole('button', { name: /create/i }));
+    await waitFor(() => {
+      expect(axiosMock.history.post.length).toBe(0);
+    });
+    expect(await screen.findByText('Required field.')).toBeInTheDocument();
+  });
+
+  test('can create new org if allowed', async () => {
+    axiosMock.onGet(getStudioHomeApiUrl()).reply(200, {
+      ...studioHomeMock,
+      allow_to_create_new_org: true,
+    });
+    axiosMock.onPost(getContentLibraryV2CreateApiUrl()).reply(200, {
+      id: 'library-id',
+    });
+
+    render(<CreateLibrary />);
+
+    const titleInput = await screen.findByRole('textbox', { name: /library name/i });
+    userEvent.click(titleInput);
+    userEvent.type(titleInput, 'Test Library Name');
+
+    // We can create a new org, so we're also allowed to use any existing org
+    const orgOptions = screen.getByTestId('autosuggest-iconbutton');
+    userEvent.click(orgOptions);
+    ['org1', 'org2', 'org3', 'org4', 'org5'].forEach((org) => expect(screen.queryByText(org)).toBeInTheDocument());
+
+    const orgInput = await screen.findByRole('combobox', { name: /organization/i });
+    userEvent.click(orgInput);
+    userEvent.type(orgInput, 'NewOrg');
+    act(() => userEvent.tab());
+
+    const slugInput = await screen.findByRole('textbox', { name: /library id/i });
+    userEvent.click(slugInput);
+    userEvent.type(slugInput, 'test_library_slug');
+
+    fireEvent.click(await screen.findByRole('button', { name: /create/i }));
+    await waitFor(() => {
+      expect(axiosMock.history.post.length).toBe(1);
+      expect(axiosMock.history.post[0].data).toBe(
+        '{"description":"","title":"Test Library Name","org":"NewOrg","slug":"test_library_slug"}',
+      );
+      expect(mockNavigate).toHaveBeenCalledWith('/library/library-id');
+    });
+  });
+
   test('show api error', async () => {
+    axiosMock.onGet(getStudioHomeApiUrl()).reply(200, studioHomeMock);
     axiosMock.onPost(getContentLibraryV2CreateApiUrl()).reply(400, {
       field: 'Error message',
     });
-    const { getByRole, getByTestId } = render(<RootWrapper />);
+    render(<CreateLibrary />);
 
-    const titleInput = getByRole('textbox', { name: /library name/i });
+    const titleInput = await screen.findByRole('textbox', { name: /library name/i });
     userEvent.click(titleInput);
     userEvent.type(titleInput, 'Test Library Name');
 
-    const orgInput = getByTestId('autosuggest-textbox-input');
+    const orgInput = await screen.findByTestId('autosuggest-textbox-input');
     userEvent.click(orgInput);
     userEvent.type(orgInput, 'org1');
-    userEvent.tab();
+    act(() => userEvent.tab());
 
-    const slugInput = getByRole('textbox', { name: /library id/i });
+    const slugInput = await screen.findByRole('textbox', { name: /library id/i });
     userEvent.click(slugInput);
     userEvent.type(slugInput, 'test_library_slug');
 
-    fireEvent.click(getByRole('button', { name: /create/i }));
-    await waitFor(() => {
+    fireEvent.click(await screen.findByRole('button', { name: /create/i }));
+    await waitFor(async () => {
       expect(axiosMock.history.post.length).toBe(1);
       expect(axiosMock.history.post[0].data).toBe(
         '{"description":"","title":"Test Library Name","org":"org1","slug":"test_library_slug"}',
       );
       expect(mockNavigate).not.toHaveBeenCalled();
-      expect(getByRole('alert')).toHaveTextContent('Request failed with status code 400');
-      expect(getByRole('alert')).toHaveTextContent('{"field":"Error message"}');
+      expect(await screen.findByRole('alert')).toHaveTextContent('Request failed with status code 400');
+      expect(await screen.findByRole('alert')).toHaveTextContent('{"field":"Error message"}');
     });
   });
 
   test('cancel creating library navigates to libraries page', async () => {
-    const { getByRole } = render(<RootWrapper />);
+    render(<CreateLibrary />);
 
-    fireEvent.click(getByRole('button', { name: /cancel/i }));
+    fireEvent.click(await screen.findByRole('button', { name: /cancel/i }));
     await waitFor(() => {
       expect(mockNavigate).toHaveBeenCalledWith('/libraries');
     });
diff --git a/src/library-authoring/create-library/CreateLibrary.tsx b/src/library-authoring/create-library/CreateLibrary.tsx
index 1731984ec5..c4f3695c7e 100644
--- a/src/library-authoring/create-library/CreateLibrary.tsx
+++ b/src/library-authoring/create-library/CreateLibrary.tsx
@@ -19,6 +19,7 @@ import FormikErrorFeedback from '../../generic/FormikErrorFeedback';
 import AlertError from '../../generic/alert-error';
 import { useOrganizationListData } from '../../generic/data/apiHooks';
 import SubHeader from '../../generic/sub-header/SubHeader';
+import { useStudioHome } from '../../studio-home/hooks';
 import { useCreateLibraryV2 } from './data/apiHooks';
 import messages from './messages';
 
@@ -38,10 +39,23 @@ const CreateLibrary = () => {
   } = useCreateLibraryV2();
 
   const {
-    data: organizationListData,
+    data: allOrganizations,
     isLoading: isOrganizationListLoading,
   } = useOrganizationListData();
 
+  const {
+    studioHomeData: {
+      allowedOrganizationsForLibraries,
+      allowToCreateNewOrg,
+    },
+  } = useStudioHome();
+
+  const organizations = (
+    allowToCreateNewOrg
+      ? allOrganizations
+      : allowedOrganizationsForLibraries
+  ) || [];
+
   const handleOnClickCancel = () => {
     navigate('/libraries');
   };
@@ -100,12 +114,17 @@ const CreateLibrary = () => {
                 <Form.Autosuggest
                   name="org"
                   isLoading={isOrganizationListLoading}
-                  onChange={(event) => formikProps.setFieldValue('org', event.selectionId)}
+                  onChange={(event) => formikProps.setFieldValue(
+                    'org',
+                    allowToCreateNewOrg
+                      ? (event.selectionId || event.userProvidedText)
+                      : event.selectionId,
+                  )}
                   placeholder={intl.formatMessage(messages.orgPlaceholder)}
                 >
-                  {organizationListData ? organizationListData.map((org) => (
+                  {organizations.map((org) => (
                     <Form.AutosuggestOption key={org} id={org}>{org}</Form.AutosuggestOption>
-                  )) : []}
+                  ))}
                 </Form.Autosuggest>
                 <FormikErrorFeedback name="org">
                   <Form.Text>{intl.formatMessage(messages.orgHelp)}</Form.Text>
diff --git a/src/studio-home/__mocks__/studioHomeMock.js b/src/studio-home/__mocks__/studioHomeMock.js
index dcd313c511..cc135f259a 100644
--- a/src/studio-home/__mocks__/studioHomeMock.js
+++ b/src/studio-home/__mocks__/studioHomeMock.js
@@ -76,4 +76,5 @@ module.exports = {
   platformName: 'Your Platform Name Here',
   userIsActive: true,
   allowToCreateNewOrg: false,
+  allowedOrganizationsForLibraries: ['org1'],
 };