diff --git a/changelog.d/10881.bugfix b/changelog.d/10881.bugfix
new file mode 100644
index 000000000000..0a8905cc46ed
--- /dev/null
+++ b/changelog.d/10881.bugfix
@@ -0,0 +1 @@
+Fix application service users being subject to MAU blocking if MAU had been reached, even if configured not to be blocked.
diff --git a/synapse/api/auth_blocking.py b/synapse/api/auth_blocking.py
index a3b95f4de0e4..08fe160c98ec 100644
--- a/synapse/api/auth_blocking.py
+++ b/synapse/api/auth_blocking.py
@@ -81,7 +81,7 @@ async def check_auth_blocking(
                 # We never block the server from doing actions on behalf of
                 # users.
                 return
-            elif requester.app_service and not self._track_appservice_user_ips:
+            if requester.app_service and not self._track_appservice_user_ips:
                 # If we're authenticated as an appservice then we only block
                 # auth if `track_appservice_user_ips` is set, as that option
                 # implicitly means that application services are part of MAU
diff --git a/tests/api/test_auth.py b/tests/api/test_auth.py
index f76fea4f66e2..0fdc9a2e271b 100644
--- a/tests/api/test_auth.py
+++ b/tests/api/test_auth.py
@@ -25,7 +25,9 @@
     MissingClientTokenError,
     ResourceLimitError,
 )
+from synapse.appservice import ApplicationService
 from synapse.storage.databases.main.registration import TokenLookupResult
+from synapse.types import Requester
 
 from tests import unittest
 from tests.test_utils import simple_async_mock
@@ -290,6 +292,66 @@ def test_blocking_mau__depending_on_user_type(self):
         # Real users not allowed
         self.get_failure(self.auth.check_auth_blocking(), ResourceLimitError)
 
+    def test_blocking_mau__appservice_requester_allowed_when_not_tracking_ips(self):
+        self.auth_blocking._max_mau_value = 50
+        self.auth_blocking._limit_usage_by_mau = True
+        self.auth_blocking._track_appservice_user_ips = False
+
+        self.store.get_monthly_active_count = simple_async_mock(100)
+        self.store.user_last_seen_monthly_active = simple_async_mock()
+        self.store.is_trial_user = simple_async_mock()
+
+        appservice = ApplicationService(
+            "abcd",
+            self.hs.config.server_name,
+            id="1234",
+            namespaces={
+                "users": [{"regex": "@_appservice.*:sender", "exclusive": True}]
+            },
+            sender="@appservice:sender",
+        )
+        requester = Requester(
+            user="@appservice:server",
+            access_token_id=None,
+            device_id="FOOBAR",
+            is_guest=False,
+            shadow_banned=False,
+            app_service=appservice,
+            authenticated_entity="@appservice:server",
+        )
+        self.get_success(self.auth.check_auth_blocking(requester=requester))
+
+    def test_blocking_mau__appservice_requester_disallowed_when_tracking_ips(self):
+        self.auth_blocking._max_mau_value = 50
+        self.auth_blocking._limit_usage_by_mau = True
+        self.auth_blocking._track_appservice_user_ips = True
+
+        self.store.get_monthly_active_count = simple_async_mock(100)
+        self.store.user_last_seen_monthly_active = simple_async_mock()
+        self.store.is_trial_user = simple_async_mock()
+
+        appservice = ApplicationService(
+            "abcd",
+            self.hs.config.server_name,
+            id="1234",
+            namespaces={
+                "users": [{"regex": "@_appservice.*:sender", "exclusive": True}]
+            },
+            sender="@appservice:sender",
+        )
+        requester = Requester(
+            user="@appservice:server",
+            access_token_id=None,
+            device_id="FOOBAR",
+            is_guest=False,
+            shadow_banned=False,
+            app_service=appservice,
+            authenticated_entity="@appservice:server",
+        )
+        self.get_failure(
+            self.auth.check_auth_blocking(requester=requester), ResourceLimitError
+        )
+
     def test_reserved_threepid(self):
         self.auth_blocking._limit_usage_by_mau = True
         self.auth_blocking._max_mau_value = 1