diff --git a/litellm/proxy/management_endpoints/key_management_endpoints.py b/litellm/proxy/management_endpoints/key_management_endpoints.py
index 5b58ffde3db..d3cddd78301 100644
--- a/litellm/proxy/management_endpoints/key_management_endpoints.py
+++ b/litellm/proxy/management_endpoints/key_management_endpoints.py
@@ -893,7 +893,7 @@ async def _check_team_key_limits(
 async def _validate_key_models_against_effective_team_models(
     team_id: str,
     user_id: Optional[str],
-    requested_models: List[str],
+    data: Union[GenerateKeyRequest, UpdateKeyRequest],
     team_table: LiteLLM_TeamTableCachedObj,
     prisma_client: PrismaClient,
 ) -> None:
@@ -908,9 +908,6 @@ async def _validate_key_models_against_effective_team_models(
     if not _is_team_model_overrides_enabled():
         return
 
-    if not requested_models:
-        return
-
     # 1. Fetch team membership if user_id is provided
     member_models: List[str] = []
     if user_id:
@@ -928,22 +925,28 @@ async def _validate_key_models_against_effective_team_models(
         team_member_models=member_models,
     )
 
-    # 3. If effective models are defined, validate requested models are a subset
-    if effective_models:
-        for m in requested_models:
+    # 3. Step 6b: If effective models are empty, deny access (empty list != all access)
+    if not effective_models:
+        raise HTTPException(
+            status_code=403,
+            detail={
+                "error": f"No models available for User={user_id} in Team={team_id}. Admins must set 'default_models' on the team or per-user 'models' overrides."
+            },
+        )
+
+    # 4. Step 6b: If data.models is empty, default to effective models
+    if not data.models:
+        data.models = effective_models
+    else:
+        # Verify requested models are a subset of effective models
+        for m in data.models:
             if m not in effective_models:
                 raise HTTPException(
-                    status_code=400,
+                    status_code=403,
                     detail={
                         "error": f"Model '{m}' is not available for this user in Team={team_id}. Available models = {effective_models}"
                     },
                 )
-    else:
-        # If no effective models (empty defaults AND empty member overrides)
-        # and feature is enabled, we only allow models that are in the global team models.
-        # But according to plan: "If Effective models is empty, follow EXISTING behavior (team.models)."
-        # So we don't raise error here.
-        pass
 
 
 async def _check_project_key_limits(
@@ -1260,7 +1263,7 @@ async def generate_key_fn(
             await _validate_key_models_against_effective_team_models(
                 team_id=data.team_id,
                 user_id=data.user_id,
-                requested_models=data.models or [],
+                data=data,
                 team_table=team_table,
                 prisma_client=prisma_client,
             )
@@ -1420,7 +1423,7 @@ async def generate_service_account_key_fn(
         await _validate_key_models_against_effective_team_models(
             team_id=data.team_id,
             user_id=data.user_id,
-            requested_models=data.models or [],
+            data=data,
             team_table=team_table,
             prisma_client=prisma_client,
         )
diff --git a/litellm/proxy/management_endpoints/team_endpoints.py b/litellm/proxy/management_endpoints/team_endpoints.py
index 498d41afa25..2ff78c60877 100644
--- a/litellm/proxy/management_endpoints/team_endpoints.py
+++ b/litellm/proxy/management_endpoints/team_endpoints.py
@@ -1672,6 +1672,26 @@ async def _process_team_members(
     updated_users: List[LiteLLM_UserTable] = []
     updated_team_memberships: List[LiteLLM_TeamMembership] = []
 
+    if data.models is not None:
+        from litellm.proxy.management_endpoints.common_utils import (
+            _is_team_model_overrides_enabled,
+        )
+
+        if _is_team_model_overrides_enabled():
+            if (
+                complete_team_data.models
+                and SpecialModelNames.all_proxy_models.value
+                not in complete_team_data.models
+            ):
+                invalid = set(data.models) - set(complete_team_data.models)
+                if invalid:
+                    raise HTTPException(
+                        status_code=400,
+                        detail={
+                            "error": f"Models {list(invalid)} not in team's allowed models: {complete_team_data.models}"
+                        },
+                    )
+
     default_team_budget_id = (
         complete_team_data.metadata.get("team_member_budget_id")
         if complete_team_data.metadata is not None
@@ -2327,6 +2347,27 @@ async def team_member_update(
             identified_budget_id = tm.budget_id
             break
 
+    if data.models is not None:
+        from litellm.proxy.management_endpoints.common_utils import (
+            _is_team_model_overrides_enabled,
+        )
+
+        if _is_team_model_overrides_enabled():
+            # Validate models are within team's allowed set (team.models)
+            if (
+                existing_team_row.models
+                and SpecialModelNames.all_proxy_models.value
+                not in existing_team_row.models
+            ):
+                invalid = set(data.models) - set(existing_team_row.models)
+                if invalid:
+                    raise HTTPException(
+                        status_code=400,
+                        detail={
+                            "error": f"Models {list(invalid)} not in team's allowed models: {existing_team_row.models}"
+                        },
+                    )
+
     ### upsert new budget
     async with prisma_client.db.tx() as tx:
         await _upsert_budget_and_membership(