diff --git a/app/assets/javascripts/graphql_shared/queries/project_autocomplete_users_with_mr_permissions.query.graphql b/app/assets/javascripts/graphql_shared/queries/project_autocomplete_users_with_mr_permissions.query.graphql
index 8155451fb7cef46862911d753c20947f5622a37a..854842839eb3238329a5fa9c4f7f0041137fae48 100644
--- a/app/assets/javascripts/graphql_shared/queries/project_autocomplete_users_with_mr_permissions.query.graphql
+++ b/app/assets/javascripts/graphql_shared/queries/project_autocomplete_users_with_mr_permissions.query.graphql
@@ -11,6 +11,7 @@ query projectAutocompleteUsersSearchWithMRPermissions(
     users: autocompleteUsers(search: $search) {
       ...User
       ...UserAvailability
+      compositeIdentityEnforced @gl_introduced(version: "18.7.0")
       mergeRequestInteraction(id: $mergeRequestId) {
         canMerge
       }
diff --git a/app/assets/javascripts/merge_requests/components/reviewers/reviewer_dropdown.vue b/app/assets/javascripts/merge_requests/components/reviewers/reviewer_dropdown.vue
index 812a8c48f00f4149f902ca465b2050ec3b2de81d..add17c40eefaea0ac1f2c58e9e6bbae57ba560a8 100644
--- a/app/assets/javascripts/merge_requests/components/reviewers/reviewer_dropdown.vue
+++ b/app/assets/javascripts/merge_requests/components/reviewers/reviewer_dropdown.vue
@@ -1,7 +1,7 @@
 <script>
 import { debounce, difference } from 'lodash';
-import { GlCollapsibleListbox, GlButton, GlAvatar, GlIcon } from '@gitlab/ui';
-import { __ } from '~/locale';
+import { GlCollapsibleListbox, GlButton, GlAvatar, GlIcon, GlBadge } from '@gitlab/ui';
+import { __, s__ } from '~/locale';
 import { InternalEvents } from '~/tracking';
 import { DEFAULT_DEBOUNCE_AND_THROTTLE_MS } from '~/lib/utils/constants';
 import { uuids } from '~/lib/utils/uuids';
@@ -45,6 +45,7 @@ export default {
     GlButton,
     GlAvatar,
     GlIcon,
+    GlBadge,
     InviteMembersTrigger,
   },
   mixins: [InternalEvents.mixin()],
@@ -116,7 +117,14 @@ export default {
       }
       const filteredUsers = users
         .filter((u) => (this.search ? true : !this.selectedReviewers.find(({ id }) => u.id === id)))
-        .map((user) => this.mapUser(user));
+        .map((user) => {
+          const mapped = this.mapUser(user);
+          return {
+            ...mapped,
+            isDisabled: user?.status?.disabled === true,
+            disabledReason: user?.status?.disabledReason || s__('WorkItem|Cannot be assigned'),
+          };
+        });
 
       items.push({
         textSrOnly: true,
@@ -160,6 +168,12 @@ export default {
     isSearchEmpty() {
       return this.search === '';
     },
+    disabledReviewers() {
+      const selectedReviewerIds = this.selectedReviewers.map((r) => r.id);
+      return (this.usersForList || [])
+        .filter((u) => u?.status?.disabled === true && !selectedReviewerIds.includes(u.id))
+        .map((u) => u.username);
+    },
   },
   watch: {
     selectedReviewers(newVal) {
@@ -204,7 +218,9 @@ export default {
       });
 
       if (!search) {
-        const eligibleReviewers = toUsernames(users);
+        const eligibleReviewers = toUsernames(users).filter(
+          (username) => !this.disabledReviewers.includes(username),
+        );
         const unselectedEligibleReviewers = difference(
           eligibleReviewers,
           this.currentSelectedReviewers,
@@ -267,10 +283,15 @@ export default {
     async updateReviewers() {
       this.loading = true;
 
+      // Filter out disabled reviewers from the selection
+      const filteredReviewers = this.currentSelectedReviewers.filter(
+        (username) => !this.disabledReviewers.includes(username),
+      );
+
       await this.$apollo.mutate({
         mutation: setReviewersMutation,
         variables: {
-          reviewerUsernames: this.currentSelectedReviewers,
+          reviewerUsernames: filteredReviewers,
           projectPath: this.projectPath,
           iid: this.issuableIid,
         },
@@ -336,7 +357,10 @@ export default {
       </gl-button>
     </template>
     <template #list-item="{ item }">
-      <span class="gl-flex gl-items-center">
+      <span
+        class="gl-flex gl-items-center"
+        :class="{ 'sidebar-reviewer-disabled': item.isDisabled }"
+      >
         <div class="gl-relative gl-mr-3">
           <gl-avatar :size="32" :src="item.avatarUrl" :entity-name="item.value" />
           <gl-icon
@@ -346,9 +370,16 @@ export default {
             class="reviewer-merge-icon"
           />
         </div>
-        <span class="gl-flex gl-flex-col">
+        <span class="gl-flex gl-min-w-0 gl-flex-col">
           <span class="gl-whitespace-nowrap gl-font-bold">{{ item.text }}</span>
-          <span class="gl-text-subtle"> {{ item.secondaryText }}</span>
+          <span class="gl-break-words gl-text-subtle">
+            {{ item.isDisabled ? item.disabledReason : item.secondaryText }}
+          </span>
+          <div v-if="item.compositeIdentityEnforced" class="gl-mt-2">
+            <gl-badge variant="neutral" size="sm" data-testid="agent-badge">
+              {{ __('Agent') }}
+            </gl-badge>
+          </div>
         </span>
       </span>
     </template>
diff --git a/app/assets/stylesheets/page_bundles/merge_requests.scss b/app/assets/stylesheets/page_bundles/merge_requests.scss
index f7eb44bb6bbd7db263e6da254f02a5d95b2c946b..7295e52503455c2eb007192918d91ef705aa7e3c 100644
--- a/app/assets/stylesheets/page_bundles/merge_requests.scss
+++ b/app/assets/stylesheets/page_bundles/merge_requests.scss
@@ -975,3 +975,16 @@ $diff-file-header-top: 11px;
 .merge-request-review-drawer .rte-text-box{
   line-height: 1.5;
 }
+
+/* stylelint-disable-next-line gitlab/no-gl-class */
+.gl-new-dropdown-item:has(.sidebar-reviewer-disabled) {
+  cursor: not-allowed;
+}
+
+.sidebar-reviewer-disabled {
+  /* stylelint-disable-next-line gitlab/no-gl-class */
+  .gl-font-bold,
+  .gl-text-subtle {
+    color: var(--gl-text-color-disabled);
+  }
+}
diff --git a/locale/gitlab.pot b/locale/gitlab.pot
index de441c898f70f4d2dea18466e902e0b56baaf41f..f1bd08616fcaf2ab1299e32edbd2d01e1e430b5e 100644
--- a/locale/gitlab.pot
+++ b/locale/gitlab.pot
@@ -76816,6 +76816,9 @@ msgstr ""
 msgid "WorkItem|Canceled"
 msgstr ""
 
+msgid "WorkItem|Cannot be assigned"
+msgstr ""
+
 msgid "WorkItem|Cannot remove status"
 msgstr ""
 
diff --git a/spec/frontend/merge_requests/components/reviewers/reviewer_dropdown_spec.js b/spec/frontend/merge_requests/components/reviewers/reviewer_dropdown_spec.js
index 3f68b30b371fc673f665b045c580fd30a400648c..a2ed337a3f0f6dae5a04c98e082e879165e28fb8 100644
--- a/spec/frontend/merge_requests/components/reviewers/reviewer_dropdown_spec.js
+++ b/spec/frontend/merge_requests/components/reviewers/reviewer_dropdown_spec.js
@@ -27,7 +27,12 @@ const createMockUser = ({ id = 1, name = 'Administrator', username = 'root' } =
     'https://www.gravatar.com/avatar/e64c7d89f26bd1972efa854d13d7dd61?s=80\u0026d=identicon',
   webUrl: `/${username}`,
   webPath: `/${username}`,
-  status: null,
+  status: {
+    availability: 'NOT_SET',
+    disabled: false,
+    disabledReason: null,
+  },
+  compositeIdentityEnforced: false,
   mergeRequestInteraction: {
     canMerge: true,
   },
@@ -790,4 +795,87 @@ describe('Reviewer dropdown component', () => {
       );
     });
   });
+
+  describe('when reviewer is disabled', () => {
+    describe('and reviewer is not selected', () => {
+      beforeEach(async () => {
+        const disabledUser = createMockUser({
+          id: 2,
+          name: 'Disabled User',
+          username: 'disabled',
+        });
+        disabledUser.status.disabled = true;
+        disabledUser.status.disabledReason = 'Out of credits';
+
+        createComponent(true, { selectedReviewers: [] }, [createMockUser(), disabledUser]);
+        await waitForPromises();
+
+        findDropdown().vm.$emit('shown');
+        await waitForPromises();
+      });
+
+      it('renders disabled reviewer with disabledReason instead of username', () => {
+        const items = findDropdown().props('items');
+        const usersGroup = items.find((group) => group.text === 'Users');
+        const disabledReviewer = usersGroup.options.find((u) => u.username === 'disabled');
+
+        expect(disabledReviewer).toMatchObject({
+          isDisabled: true,
+          disabledReason: 'Out of credits',
+        });
+      });
+
+      it('prevents disabled reviewer from being selected', async () => {
+        findDropdown().vm.$emit('select', ['disabled']);
+        findDropdown().vm.$emit('hidden');
+
+        await waitForPromises();
+
+        expect(setReviewersMutationMock).toHaveBeenCalledWith(
+          expect.objectContaining({
+            reviewerUsernames: [],
+            projectPath: 'gitlab-org/gitlab',
+            iid: '1',
+          }),
+        );
+      });
+    });
+
+    describe('and reviewer is already selected', () => {
+      beforeEach(async () => {
+        const disabledUser = createMockUser({
+          id: 2,
+          name: 'Disabled User',
+          username: 'disabled',
+        });
+        disabledUser.status.disabled = true;
+        disabledUser.status.disabledReason = 'Out of credits';
+
+        createComponent(
+          true,
+          {
+            selectedReviewers: [disabledUser],
+            eligibleReviewers: [disabledUser],
+          },
+          [createMockUser(), disabledUser],
+        );
+        await waitForPromises();
+      });
+
+      it('allows disabled reviewer to be removed', async () => {
+        findDropdown().vm.$emit('select', []);
+        findDropdown().vm.$emit('hidden');
+
+        await waitForPromises();
+
+        expect(setReviewersMutationMock).toHaveBeenCalledWith(
+          expect.objectContaining({
+            reviewerUsernames: [],
+            projectPath: 'gitlab-org/gitlab',
+            iid: '1',
+          }),
+        );
+      });
+    });
+  });
 });