diff --git a/apps/dashboard/app/(app)/apis/[apiId]/_components/create-key/components/external-id-field.tsx b/apps/dashboard/app/(app)/apis/[apiId]/_components/create-key/components/external-id-field.tsx
index e94465f796..6e939d8213 100644
--- a/apps/dashboard/app/(app)/apis/[apiId]/_components/create-key/components/external-id-field.tsx
+++ b/apps/dashboard/app/(app)/apis/[apiId]/_components/create-key/components/external-id-field.tsx
@@ -21,14 +21,7 @@ export const ExternalIdField = ({
   disabled = false,
 }: ExternalIdFieldProps) => {
   const [searchValue, setSearchValue] = useState("");
-
   const { identities, isFetchingNextPage, hasNextPage, loadMore } = useFetchIdentities();
-  const identityOptions = createIdentityOptions({
-    identities,
-    hasNextPage,
-    isFetchingNextPage,
-    loadMore,
-  });
 
   const createIdentity = useCreateIdentity((data) => {
     onChange(data.identityId);
@@ -43,17 +36,66 @@ export const ExternalIdField = ({
     }
   };
 
+  const exactMatch = identities.some(
+    (id) => id.externalId.toLowerCase() === searchValue.toLowerCase().trim(),
+  );
+
+  const filteredIdentities = searchValue.trim()
+    ? identities.filter((identity) =>
+        identity.externalId.toLowerCase().includes(searchValue.toLowerCase().trim()),
+      )
+    : identities;
+
+  const hasPartialMatches = filteredIdentities.length > 0;
+
+  const baseOptions = createIdentityOptions({
+    identities: filteredIdentities,
+    hasNextPage,
+    isFetchingNextPage,
+    loadMore,
+  });
+
+  const createOption =
+    searchValue.trim() && !exactMatch && hasPartialMatches
+      ? {
+          label: (
+            <div className="flex items-center gap-2 w-full">
+              <div
+                className={cn(
+                  "flex items-center rounded size-5 justify-center flex-shrink-0",
+                  "bg-warningA-4",
+                  "text-warning-11",
+                )}
+              >
+                <TriangleWarning2 size="sm-regular" />
+              </div>
+              <span className="text-[13px] text-gray-12 ">
+                <span className="text-accent-10 font-normal">Create</span> "{searchValue.trim()}"
+              </span>
+            </div>
+          ),
+          value: "__create_new__",
+          selectedLabel: <></>,
+          searchValue: searchValue.trim(),
+        }
+      : null;
+
+  const options = createOption ? [createOption, ...baseOptions] : baseOptions;
+
   return (
     <FormCombobox
       optional
       label="External ID"
       description="ID of the user/workspace in your system for key attribution."
-      options={identityOptions}
-      // This will force close popover whenever new item added or selected.
+      options={options}
       key={value}
       value={value || ""}
       onChange={(e) => setSearchValue(e.currentTarget.value)}
       onSelect={(val) => {
+        if (val === "__create_new__") {
+          handleCreateIdentity();
+          return;
+        }
         const identity = identities.find((id) => id.id === val);
         onChange(identity?.id || null);
       }}
@@ -64,44 +106,49 @@ export const ExternalIdField = ({
       }
       searchPlaceholder="Search External ID..."
       emptyMessage={
-        <div className="p-0 max-w-[460px]">
-          <div className="px-3 py-3 w-full">
-            <div className="flex gap-2 items-center justify-start">
-              <div
-                className={cn(
-                  "flex items-center rounded size-5 justify-center",
-                  "bg-warningA-4",
-                  "text-warning-11",
-                )}
-              >
-                <TriangleWarning2 size="sm-regular" />
-              </div>
-              <div className="font-medium text-[13px] leading-7 text-gray-12">
-                External ID not found
+        searchValue.trim() && !exactMatch ? (
+          <div className="p-0 max-w-[460px]">
+            <div className="px-3 py-3 w-full">
+              <div className="flex gap-2 items-center justify-start">
+                <div
+                  className={cn(
+                    "flex items-center rounded size-5 justify-center",
+                    "bg-warningA-4",
+                    "text-warning-11",
+                  )}
+                >
+                  <TriangleWarning2 size="sm-regular" />
+                </div>
+                <div className="font-medium text-[13px] leading-7 text-gray-12">
+                  External ID not found
+                </div>
               </div>
             </div>
+            <div className="w-full">
+              <div className="h-[1px] bg-grayA-3 w-full" />
+            </div>
+            <div className="px-4 w-full text-gray-11 text-[13px] leading-6 my-4 text-left">
+              You can create a new identity with this{" "}
+              <span className="font-medium">External ID</span> and connect it{" "}
+              <span className="font-medium">immediately</span>.
+            </div>
+            <div className="w-full px-4 pb-4">
+              <Button
+                type="button"
+                variant="primary"
+                size="xlg"
+                className="rounded-lg w-full"
+                onClick={handleCreateIdentity}
+                loading={createIdentity.isLoading}
+                disabled={!searchValue.trim() || createIdentity.isLoading || disabled}
+              >
+                Create
+              </Button>
+            </div>
           </div>
-          <div className="w-full">
-            <div className="h-[1px] bg-grayA-3 w-full" />
-          </div>
-          <div className="px-4 w-full text-gray-11 text-[13px] leading-6 my-4 text-left">
-            You can create a new identity with this <span className="font-medium">External ID</span>{" "}
-            and connect it <span className="font-medium">immediately</span>.
-          </div>
-          <div className="w-full px-4 pb-4">
-            <Button
-              type="button"
-              variant="primary"
-              size="xlg"
-              className="rounded-lg w-full"
-              onClick={handleCreateIdentity}
-              loading={createIdentity.isLoading}
-              disabled={!searchValue.trim() || createIdentity.isLoading || disabled}
-            >
-              Create
-            </Button>
-          </div>
-        </div>
+        ) : (
+          <div className="px-3 py-3 text-gray-10 text-[13px]">No results found</div>
+        )
       }
       variant="default"
       error={error}