diff --git a/app/controllers/setup/course_details_controller.rb b/app/controllers/setup/course_details_controller.rb
index e46aa4c85..f710770d4 100644
--- a/app/controllers/setup/course_details_controller.rb
+++ b/app/controllers/setup/course_details_controller.rb
@@ -17,7 +17,7 @@ def new
   end
 
   def custom
-    authorize! :create, :custom_course
+    authorize! :create_custom_course, @organization
     print_setup_phases(2)
 
     @course = Course.new
@@ -30,6 +30,7 @@ def create
     authorize! :teach, @organization
 
     custom = params[:course][:course_template_id].blank?
+    authorize! :create_custom_course, @organization if custom
 
     create_params = custom ? course_params_for_create_custom : course_params_for_create_from_template
     input_name = create_params[:name]
diff --git a/app/models/ability.rb b/app/models/ability.rb
index 5342793c3..812fc015b 100644
--- a/app/models/ability.rb
+++ b/app/models/ability.rb
@@ -12,7 +12,6 @@ def initialize(user, auth_source: nil)
     if user.administrator?
       can :manage, :all
       can :create, Course
-      can :create, :custom_course
       cannot :refresh, Course
       can :refresh, Course, &:custom?
       can :view, :participants_list
@@ -73,6 +72,10 @@ def initialize(user, auth_source: nil)
         can? :teach, c.organization
       end
 
+      can :create_custom_course, Organization do |o|
+        o.teachers_can_create_custom_courses? && can?(:teach, o)
+      end
+
       can :refresh, Course do |c|
         (c.taught_by?(user) || c.assistant?(user)) &&
           c.custom? # user can only refresh his/her custom course.
diff --git a/app/views/course_templates/list_for_teachers.html.erb b/app/views/course_templates/list_for_teachers.html.erb
index 88f7988c6..49cf87bed 100644
--- a/app/views/course_templates/list_for_teachers.html.erb
+++ b/app/views/course_templates/list_for_teachers.html.erb
@@ -26,7 +26,7 @@
 
 <br/>
 
-<% if can? :create, :custom_course %>
+<% if can? :create_custom_course, @organization %>
 
   <h3>Create custom course</h3>
   <%= link_to 'Create New Custom Course', new_custom_setup_organization_course_path(@organization), class: "btn btn-sm btn-warning" %>
diff --git a/app/views/courses/index.html.erb b/app/views/courses/index.html.erb
index cabcee2b7..5f753f03a 100644
--- a/app/views/courses/index.html.erb
+++ b/app/views/courses/index.html.erb
@@ -32,7 +32,7 @@
   <%= link_to 'Create New Course', setup_organization_course_chooser_index_path(@organization), class: "btn btn-primary" %>
 <% end %>
 
-<% if can? :create, :custom_course %>
+<% if can? :create_custom_course, @organization %>
     <br><br>
     <%= link_to 'Create Custom Course', new_custom_setup_organization_course_path(@organization), class: "btn btn-sm btn-danger" %>
 <% end %>
diff --git a/app/views/setup/course_chooser/index.html.erb b/app/views/setup/course_chooser/index.html.erb
index 0306cd8d8..ab678e2a0 100644
--- a/app/views/setup/course_chooser/index.html.erb
+++ b/app/views/setup/course_chooser/index.html.erb
@@ -33,7 +33,7 @@
   </table>
   <br/>
 
-  <% if can? :create, :custom_course %>
+  <% if can? :create_custom_course, @organization %>
       <h3>Create custom course (advanced mode)</h3>
       <%= link_to 'Create New Custom Course', new_custom_setup_organization_course_path(@organization), class: "btn btn-danger" %>
   <% end %>
diff --git a/db/migrate/20261026120000_add_teachers_can_create_custom_courses_to_organizations.rb b/db/migrate/20261026120000_add_teachers_can_create_custom_courses_to_organizations.rb
new file mode 100644
index 000000000..1b8771653
--- /dev/null
+++ b/db/migrate/20261026120000_add_teachers_can_create_custom_courses_to_organizations.rb
@@ -0,0 +1,5 @@
+class AddTeachersCanCreateCustomCoursesToOrganizations < ActiveRecord::Migration[7.1]
+  def change
+    add_column :organizations, :teachers_can_create_custom_courses, :boolean, default: false, null: false
+  end
+end
diff --git a/db/schema.rb b/db/schema.rb
index 9d62cab13..59701d81b 100644
--- a/db/schema.rb
+++ b/db/schema.rb
@@ -10,7 +10,7 @@
 #
 # It's strongly recommended that you check this file into your version control system.
 
-ActiveRecord::Schema[7.1].define(version: 2026_09_17_120000) do
+ActiveRecord::Schema[7.1].define(version: 2026_10_26_120000) do
   # These are extensions that must be enabled in order to support this database
   enable_extension "plpgsql"
 
@@ -361,6 +361,7 @@
     t.text "website"
     t.boolean "pinned", default: false, null: false
     t.string "whitelisted_ips", array: true
+    t.boolean "teachers_can_create_custom_courses", default: false, null: false
     t.index ["creator_id"], name: "index_organizations_on_creator_id"
   end
 
diff --git a/spec/controllers/setup/course_details_controller_spec.rb b/spec/controllers/setup/course_details_controller_spec.rb
index 4a89200cb..d71914005 100644
--- a/spec/controllers/setup/course_details_controller_spec.rb
+++ b/spec/controllers/setup/course_details_controller_spec.rb
@@ -78,7 +78,7 @@
 
       describe 'with invalid parameters' do
         it 'should not create a course' do
-          post :create, params: { organization_id: @organization.slug, course: { name: 's p a c e s', title: 'New Course', source_url: @repo_path } }
+          post :create, params: { organization_id: @organization.slug, course: { name: 's p a c e s', title: 'New Course', course_template_id: @ct.id } }
           expect(response).to render_template(:new)
           expect(assigns(:course).name).to eq('s p a c e s')
         end
@@ -191,6 +191,26 @@
       end
     end
 
+    describe 'when creating custom course' do
+      it 'denies access when the organization does not allow teachers to create custom courses' do
+        get :custom, params: { organization_id: @organization.slug }
+        expect(response.code.to_i).to eq(403)
+        expect do
+          post :create, params: { organization_id: @organization.slug, course: { name: 'NewCourse', title: 'New Course', source_url: @repo_path } }
+        end.not_to change { Course.count }
+        expect(response.code.to_i).to eq(403)
+      end
+
+      it 'creates the course when the organization allows teachers to create custom courses' do
+        @organization.update!(teachers_can_create_custom_courses: true)
+        get :custom, params: { organization_id: @organization.slug }
+        expect(response).to render_template(:new)
+        expect do
+          post :create, params: { organization_id: @organization.slug, course: { name: 'NewCourse', title: 'New Course', source_url: @repo_path } }
+        end.to change { Course.count }.by(1)
+      end
+    end
+
     ## TODO: Tests for the rest of the actions, when they are properly implemented
   end
 
@@ -200,6 +220,13 @@
     end
 
     describe 'when creating custom course' do
+      it 'shows the custom course form even if the organization does not allow teachers to create custom courses' do
+        expect(@organization.teachers_can_create_custom_courses).to be false
+        get :custom, params: { organization_id: @organization.slug }
+        expect(response).to render_template(:new)
+        expect(assigns(:custom)).to be true
+      end
+
       it 'should create the course' do
         init_session
         expect do
@@ -231,6 +258,12 @@
       expect(response.code.to_i).to eq(403)
       ## TODO: Rest of the actions
     end
+
+    it 'should not allow creating custom courses even if teachers are allowed to' do
+      @organization.update!(teachers_can_create_custom_courses: true)
+      get :custom, params: { organization_id: @organization.slug }
+      expect(response.code.to_i).to eq(403)
+    end
   end
 
   def init_session