diff --git a/litellm/proxy/auth/reject_invalid_tokens.py b/litellm/proxy/auth/reject_invalid_tokens.py
index 06f2cf8ee27..fb90bfc2e8c 100644
--- a/litellm/proxy/auth/reject_invalid_tokens.py
+++ b/litellm/proxy/auth/reject_invalid_tokens.py
@@ -64,6 +64,23 @@ class InvalidVirtualKeyCache:
     def _cache_key(cls, hashed_token: str) -> str:
         return "{}{}".format(cls._prefix, hashed_token)
 
+    @classmethod
+    async def delete_invalid_token_cache(
+        cls,
+        *,
+        hashed_token: str,
+        user_api_key_cache: Any,
+    ) -> None:
+        """Clear a stale negative-cache entry after the token is created/restored."""
+        try:
+            await user_api_key_cache.async_delete_cache(
+                key=cls._cache_key(hashed_token)
+            )
+        except Exception as e:
+            verbose_proxy_logger.debug(
+                "InvalidVirtualKeyCache.delete_invalid_token_cache: %s", e
+            )
+
     @classmethod
     async def allows_db_lookup(
         cls,
diff --git a/litellm/proxy/management_endpoints/key_management_endpoints.py b/litellm/proxy/management_endpoints/key_management_endpoints.py
index a424f1558fb..1536efe4a3d 100644
--- a/litellm/proxy/management_endpoints/key_management_endpoints.py
+++ b/litellm/proxy/management_endpoints/key_management_endpoints.py
@@ -48,6 +48,7 @@ from litellm.proxy.auth.auth_checks import (
     get_team_object,
 )
 from litellm.proxy.auth.auth_utils import abbreviate_api_key
+from litellm.proxy.auth.reject_invalid_tokens import InvalidVirtualKeyCache
 from litellm.proxy.auth.user_api_key_auth import user_api_key_auth
 from litellm.proxy.common_utils.rbac_utils import check_org_admin_can_generate_keys
 from litellm.proxy.common_utils.timezone_utils import get_budget_reset_time
@@ -3031,7 +3032,7 @@ async def generate_key_helper_fn(  # noqa: PLR0915
     access_group_ids: Optional[list] = None,
     budget_limits: Optional[list] = None,  # multiple concurrent budget windows
 ):
-    from litellm.proxy.proxy_server import premium_user, prisma_client
+    from litellm.proxy.proxy_server import premium_user, prisma_client, user_api_key_cache
 
     if prisma_client is None:
         raise Exception(
@@ -3244,6 +3245,11 @@ async def generate_key_helper_fn(  # noqa: PLR0915
             )
 
             key_data["token_id"] = getattr(create_key_response, "token", None)
+            if key_data["token_id"] is not None:
+                await InvalidVirtualKeyCache.delete_invalid_token_cache(
+                    hashed_token=key_data["token_id"],
+                    user_api_key_cache=user_api_key_cache,
+                )
             key_data["litellm_budget_table"] = getattr(
                 create_key_response, "litellm_budget_table", None
             )
diff --git a/tests/proxy_unit_tests/test_key_generate_invalid_token_cache.py b/tests/proxy_unit_tests/test_key_generate_invalid_token_cache.py
new file mode 100644
index 00000000000..38388bf03e6
--- /dev/null
+++ b/tests/proxy_unit_tests/test_key_generate_invalid_token_cache.py
@@ -0,0 +1,46 @@
+import os
+import sys
+from types import SimpleNamespace
+from unittest.mock import AsyncMock, MagicMock
+
+import pytest
+
+sys.path.insert(0, os.path.abspath("../.."))
+
+import litellm.proxy.proxy_server
+from litellm.proxy._types import hash_token
+from litellm.proxy.auth.reject_invalid_tokens import InvalidVirtualKeyCache
+from litellm.proxy.management_endpoints.key_management_endpoints import (
+    generate_key_helper_fn,
+)
+
+
+@pytest.mark.asyncio
+async def test_generate_key_helper_clears_stale_invalid_token_cache(monkeypatch):
+    raw_key = "sk-user-supplied-key-that-was-previously-invalid"
+    hashed_key = hash_token(token=raw_key)
+    mock_prisma_client = MagicMock()
+    mock_prisma_client.insert_data = AsyncMock(
+        return_value=SimpleNamespace(
+            token=hashed_key,
+            litellm_budget_table=None,
+            created_at=None,
+            updated_at=None,
+        )
+    )
+    mock_cache = MagicMock()
+    mock_cache.async_delete_cache = AsyncMock()
+
+    monkeypatch.setattr(litellm.proxy.proxy_server, "prisma_client", mock_prisma_client)
+    monkeypatch.setattr(litellm.proxy.proxy_server, "user_api_key_cache", mock_cache)
+    monkeypatch.setattr(litellm.proxy.proxy_server, "premium_user", False)
+
+    await generate_key_helper_fn(
+        request_type="key",
+        key=raw_key,
+        table_name="key",
+    )
+
+    mock_cache.async_delete_cache.assert_awaited_once_with(
+        key=InvalidVirtualKeyCache._cache_key(hashed_key)
+    )
diff --git a/tests/proxy_unit_tests/test_reject_invalid_tokens.py b/tests/proxy_unit_tests/test_reject_invalid_tokens.py
index 28979c11ed7..2b7db9229af 100644
--- a/tests/proxy_unit_tests/test_reject_invalid_tokens.py
+++ b/tests/proxy_unit_tests/test_reject_invalid_tokens.py
@@ -15,6 +15,7 @@ from litellm.proxy.auth.reject_invalid_tokens import InvalidVirtualKeyCache
 def _sk_key() -> str:
     return "sk-test-invalid-virtual-key"
 
+
 def _general_settings_positive_ttl() -> dict:
     """Force negative-cache path on (avoid relying only on default constant)."""
     return {"invalid_virtual_key_cache_ttl": 3600}
@@ -63,7 +64,7 @@ async def test_check_invalid_token_empty_cache_db_miss_records_negative_entry():
 async def test_check_invalid_token_negative_cache_hit_short_circuits_even_if_db_has_row():
     """
     Hash already negative-cached → reject immediately without calling Prisma,
-    even if a row exists in DB (stale negative cache after key creation is possible).
+    even if a row exists in DB.
     """
     api_key = _sk_key()
     neg_key = _negative_cache_key_for(api_key)
@@ -88,6 +89,23 @@ async def test_check_invalid_token_negative_cache_hit_short_circuits_even_if_db_
     user_api_key_cache.async_set_cache.assert_not_called()
 
 
+@pytest.mark.asyncio
+async def test_delete_invalid_token_cache_removes_negative_cache_key():
+    api_key = _sk_key()
+    hashed = hash_token(token=api_key)
+    neg_key = _negative_cache_key_for(api_key)
+
+    user_api_key_cache = MagicMock()
+    user_api_key_cache.async_delete_cache = AsyncMock()
+
+    await InvalidVirtualKeyCache.delete_invalid_token_cache(
+        hashed_token=hashed,
+        user_api_key_cache=user_api_key_cache,
+    )
+
+    user_api_key_cache.async_delete_cache.assert_awaited_once_with(key=neg_key)
+
+
 @pytest.mark.asyncio
 async def test_check_invalid_token_cache_miss_db_hit_allows_auth_flow():
     """Negative cache empty, Prisma finds a verification row → preflight passes (False)."""