diff --git a/doc/classes/EditorPlugin.xml b/doc/classes/EditorPlugin.xml
index 418b44e74bfb..3c0d3ec6beb3 100644
--- a/doc/classes/EditorPlugin.xml
+++ b/doc/classes/EditorPlugin.xml
@@ -406,6 +406,7 @@
 				When a given node or resource is selected, the base type will be instantiated (e.g. "Node3D", "Control", "Resource"), then the script will be loaded and set to this object.
 				You can use the virtual method [method _handles] to check if your custom object is being edited by checking the script or using the [code]is[/code] keyword.
 				During run-time, this will be a simple object with a script so this function does not need to be called then.
+				[b]Note:[/b] Custom types added this way are not true classes. They are just a helper to create a node with specific script.
 			</description>
 		</method>
 		<method name="add_debugger_plugin">
diff --git a/editor/create_dialog.cpp b/editor/create_dialog.cpp
index 8ccfda1145cf..2d70934c9c83 100644
--- a/editor/create_dialog.cpp
+++ b/editor/create_dialog.cpp
@@ -665,7 +665,7 @@ void CreateDialog::_save_and_update_favorite_list() {
 			for (int i = 0; i < favorite_list.size(); i++) {
 				String l = favorite_list[i];
 				String name = l.get_slicec(' ', 0);
-				if (!(ClassDB::class_exists(name) || ScriptServer::is_global_class(name))) {
+				if (!EditorNode::get_editor_data().is_type_recognized(name)) {
 					continue;
 				}
 				f->store_line(l);
@@ -692,7 +692,7 @@ void CreateDialog::_load_favorites_and_history() {
 			String l = f->get_line().strip_edges();
 			String name = l.get_slicec(' ', 0);
 
-			if ((ClassDB::class_exists(name) || ScriptServer::is_global_class(name)) && !_is_class_disabled_by_feature_profile(name)) {
+			if (EditorNode::get_editor_data().is_type_recognized(name) && !_is_class_disabled_by_feature_profile(name)) {
 				recent->add_item(l, EditorNode::get_singleton()->get_class_icon(name, icon_fallback));
 			}
 		}
diff --git a/editor/editor_data.cpp b/editor/editor_data.cpp
index 1febec2c0403..d1ea0f2814d1 100644
--- a/editor/editor_data.cpp
+++ b/editor/editor_data.cpp
@@ -509,6 +509,32 @@ Variant EditorData::instance_custom_type(const String &p_type, const String &p_i
 	return Variant();
 }
 
+const EditorData::CustomType *EditorData::get_custom_type_by_name(const String &p_type) const {
+	for (const KeyValue<String, Vector<CustomType>> &E : custom_types) {
+		for (const CustomType &F : E.value) {
+			if (F.name == p_type) {
+				return &F;
+			}
+		}
+	}
+	return nullptr;
+}
+
+const EditorData::CustomType *EditorData::get_custom_type_by_path(const String &p_path) const {
+	for (const KeyValue<String, Vector<CustomType>> &E : custom_types) {
+		for (const CustomType &F : E.value) {
+			if (F.script->get_path() == p_path) {
+				return &F;
+			}
+		}
+	}
+	return nullptr;
+}
+
+bool EditorData::is_type_recognized(const String &p_type) const {
+	return ClassDB::class_exists(p_type) || ScriptServer::is_global_class(p_type) || get_custom_type_by_name(p_type);
+}
+
 void EditorData::remove_custom_type(const String &p_type) {
 	for (KeyValue<String, Vector<CustomType>> &E : custom_types) {
 		for (int i = 0; i < E.value.size(); i++) {
diff --git a/editor/editor_data.h b/editor/editor_data.h
index 1da188c546c2..4f1740d4f073 100644
--- a/editor/editor_data.h
+++ b/editor/editor_data.h
@@ -184,6 +184,9 @@ class EditorData {
 	Variant instance_custom_type(const String &p_type, const String &p_inherits);
 	void remove_custom_type(const String &p_type);
 	const HashMap<String, Vector<CustomType>> &get_custom_types() const { return custom_types; }
+	const CustomType *get_custom_type_by_name(const String &p_name) const;
+	const CustomType *get_custom_type_by_path(const String &p_path) const;
+	bool is_type_recognized(const String &p_type) const;
 
 	void instantiate_object_properties(Object *p_object);
 
diff --git a/editor/editor_inspector.cpp b/editor/editor_inspector.cpp
index c1a7b1512118..b01d7bc8a7e1 100644
--- a/editor/editor_inspector.cpp
+++ b/editor/editor_inspector.cpp
@@ -2743,7 +2743,7 @@ void EditorInspector::update_tree() {
 			doc_name = p.name;
 
 			// Set the category icon.
-			if (!ClassDB::class_exists(type) && !ScriptServer::is_global_class(type) && p.hint_string.length() && FileAccess::exists(p.hint_string)) {
+			if (!EditorNode::get_editor_data().is_type_recognized(type) && p.hint_string.length() && FileAccess::exists(p.hint_string)) {
 				// If we have a category inside a script, search for the first script with a valid icon.
 				Ref<Script> script = ResourceLoader::load(p.hint_string, "Script");
 				StringName base_type;
@@ -2762,10 +2762,16 @@ void EditorInspector::update_tree() {
 				while (script.is_valid()) {
 					name = EditorNode::get_editor_data().script_class_get_name(script->get_path());
 					String icon_path = EditorNode::get_editor_data().script_class_get_icon_path(name);
-					if (name != StringName() && icon_path.length()) {
+					if (name != StringName() && !icon_path.is_empty()) {
 						category->icon = ResourceLoader::load(icon_path, "Texture");
 						break;
 					}
+
+					const EditorData::CustomType *ctype = EditorNode::get_editor_data().get_custom_type_by_path(script->get_path());
+					if (ctype) {
+						category->icon = ctype->icon;
+						break;
+					}
 					script = script->get_base_script();
 				}
 				if (category->icon.is_null() && has_theme_icon(base_type, SNAME("EditorIcons"))) {
diff --git a/editor/editor_node.cpp b/editor/editor_node.cpp
index 96b229b7ee5b..a2231f4601ad 100644
--- a/editor/editor_node.cpp
+++ b/editor/editor_node.cpp
@@ -4335,16 +4335,8 @@ Ref<Texture2D> EditorNode::get_class_icon(const String &p_class, const String &p
 		}
 	}
 
-	const HashMap<String, Vector<EditorData::CustomType>> &p_map = EditorNode::get_editor_data().get_custom_types();
-	for (const KeyValue<String, Vector<EditorData::CustomType>> &E : p_map) {
-		const Vector<EditorData::CustomType> &ct = E.value;
-		for (int i = 0; i < ct.size(); ++i) {
-			if (ct[i].name == p_class) {
-				if (ct[i].icon.is_valid()) {
-					return ct[i].icon;
-				}
-			}
-		}
+	if (const EditorData::CustomType *ctype = EditorNode::get_editor_data().get_custom_type_by_name(p_class)) {
+		return ctype->icon;
 	}
 
 	if (gui_base->has_theme_icon(p_class, SNAME("EditorIcons"))) {
diff --git a/editor/script_create_dialog.cpp b/editor/script_create_dialog.cpp
index 16ab441324a9..f57dfe482797 100644
--- a/editor/script_create_dialog.cpp
+++ b/editor/script_create_dialog.cpp
@@ -202,7 +202,7 @@ bool ScriptCreateDialog::_validate_parent(const String &p_string) {
 		}
 	}
 
-	return ClassDB::class_exists(p_string) || ScriptServer::is_global_class(p_string);
+	return EditorNode::get_editor_data().is_type_recognized(p_string);
 }
 
 bool ScriptCreateDialog::_validate_class(const String &p_string) {
@@ -372,7 +372,15 @@ void ScriptCreateDialog::_create_new() {
 
 	const ScriptLanguage::ScriptTemplate sinfo = _get_current_template();
 
-	scr = ScriptServer::get_language(language_menu->get_selected())->make_template(sinfo.content, cname_param, parent_name->get_text());
+	String parent_class = parent_name->get_text();
+	if (!ClassDB::class_exists(parent_class) && !ScriptServer::is_global_class(parent_class)) {
+		// If base is a custom type, replace with script path instead.
+		const EditorData::CustomType *type = EditorNode::get_editor_data().get_custom_type_by_name(parent_class);
+		ERR_FAIL_NULL(type);
+		parent_class = "\"" + type->script->get_path() + "\"";
+	}
+
+	scr = ScriptServer::get_language(language_menu->get_selected())->make_template(sinfo.content, cname_param, parent_class);
 
 	if (has_named_classes) {
 		String cname = class_name->get_text();