diff --git a/apps/login/src/lib/server/loginname.test.ts b/apps/login/src/lib/server/loginname.test.ts
new file mode 100644
index 000000000..a394e4805
--- /dev/null
+++ b/apps/login/src/lib/server/loginname.test.ts
@@ -0,0 +1,548 @@
+import { describe, expect, test, vi, beforeEach, afterEach } from "vitest";
+import { sendLoginname } from "./loginname";
+import { AuthenticationMethodType } from "@zitadel/proto/zitadel/user/v2/user_service_pb";
+import { PasskeysType } from "@zitadel/proto/zitadel/settings/v2/login_settings_pb";
+import { UserState } from "@zitadel/proto/zitadel/user/v2/user_pb";
+import { getIDPByID } from "../zitadel";
+
+// Mock all the dependencies
+vi.mock("next/headers", () => ({
+  headers: vi.fn(),
+}));
+
+vi.mock("@zitadel/client", () => ({
+  create: vi.fn(),
+}));
+
+vi.mock("../service-url", () => ({
+  getServiceUrlFromHeaders: vi.fn(),
+}));
+
+vi.mock("../idp", () => ({
+  idpTypeToIdentityProviderType: vi.fn(),
+  idpTypeToSlug: vi.fn(),
+}));
+
+vi.mock("../zitadel", () => ({
+  getActiveIdentityProviders: vi.fn(),
+  getIDPByID: vi.fn(),
+  getLoginSettings: vi.fn(),
+  getOrgsByDomain: vi.fn(),
+  listAuthenticationMethodTypes: vi.fn(),
+  listIDPLinks: vi.fn(),
+  searchUsers: vi.fn(),
+  startIdentityProviderFlow: vi.fn(),
+}));
+
+vi.mock("./cookie", () => ({
+  createSessionAndUpdateCookie: vi.fn(),
+}));
+
+vi.mock("./host", () => ({
+  getOriginalHost: vi.fn(),
+}));
+
+describe("sendLoginname", () => {
+  // Mock modules
+  let mockHeaders: any;
+  let mockCreate: any;
+  let mockGetServiceUrlFromHeaders: any;
+  let mockGetLoginSettings: any;
+  let mockSearchUsers: any;
+  let mockCreateSessionAndUpdateCookie: any;
+  let mockListAuthenticationMethodTypes: any;
+  let mockListIDPLinks: any;
+  let mockGetOriginalHost: any;
+  let mockStartIdentityProviderFlow: any;
+  let mockGetActiveIdentityProviders: any;
+  let mockGetIDPByID: any;
+  let mockIdpTypeToSlug: any;
+
+  beforeEach(async () => {
+    vi.clearAllMocks();
+
+    // Import mocked modules
+    const { headers } = await import("next/headers");
+    const { create } = await import("@zitadel/client");
+    const { getServiceUrlFromHeaders } = await import("../service-url");
+    const {
+      getLoginSettings,
+      searchUsers,
+      listAuthenticationMethodTypes,
+      listIDPLinks,
+      startIdentityProviderFlow,
+      getActiveIdentityProviders,
+    } = await import("../zitadel");
+    const { createSessionAndUpdateCookie } = await import("./cookie");
+    const { getOriginalHost } = await import("./host");
+    const { idpTypeToSlug } = await import("../idp");
+
+    // Setup mocks
+    mockHeaders = vi.mocked(headers);
+    mockCreate = vi.mocked(create);
+    mockGetServiceUrlFromHeaders = vi.mocked(getServiceUrlFromHeaders);
+    mockGetLoginSettings = vi.mocked(getLoginSettings);
+    mockSearchUsers = vi.mocked(searchUsers);
+    mockCreateSessionAndUpdateCookie = vi.mocked(createSessionAndUpdateCookie);
+    mockListAuthenticationMethodTypes = vi.mocked(listAuthenticationMethodTypes);
+    mockListIDPLinks = vi.mocked(listIDPLinks);
+    mockGetOriginalHost = vi.mocked(getOriginalHost);
+    mockStartIdentityProviderFlow = vi.mocked(startIdentityProviderFlow);
+    mockGetActiveIdentityProviders = vi.mocked(getActiveIdentityProviders);
+    mockGetIDPByID = vi.mocked(getIDPByID);
+    mockIdpTypeToSlug = vi.mocked(idpTypeToSlug);
+
+    // Default mock implementations
+    mockHeaders.mockResolvedValue({} as any);
+    mockGetServiceUrlFromHeaders.mockReturnValue({ serviceUrl: "https://api.example.com" });
+    mockGetOriginalHost.mockResolvedValue("example.com");
+    mockIdpTypeToSlug.mockReturnValue("google");
+    mockGetIDPByID.mockResolvedValue({
+      id: "idp123",
+      name: "Google",
+      type: "GOOGLE",
+    });
+  });
+
+  afterEach(() => {
+    vi.restoreAllMocks();
+  });
+
+  describe("Error cases", () => {
+    test("should return error when login settings cannot be retrieved", async () => {
+      mockGetLoginSettings.mockResolvedValue(null);
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "Could not get login settings" });
+    });
+
+    test("should return error when user search fails", async () => {
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({ error: "Search failed" });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "Search failed" });
+    });
+
+    test("should return error when search result has no result field", async () => {
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({});
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "Could not search users" });
+    });
+
+    test("should return error when more than one user found", async () => {
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({
+        result: [
+          { userId: "user1", preferredLoginName: "user1@example.com" },
+          { userId: "user2", preferredLoginName: "user2@example.com" },
+        ],
+      });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "More than one user found. Provide a unique identifier." });
+    });
+  });
+
+  describe("Single user found - authentication method handling", () => {
+    const mockUser = {
+      userId: "user123",
+      preferredLoginName: "user@example.com",
+      details: { resourceOwner: "org123" },
+      type: { case: "human", value: { email: { email: "user@example.com" } } },
+      state: UserState.ACTIVE,
+    };
+
+    const mockSession = {
+      factors: {
+        user: {
+          id: "user123",
+          loginName: "user@example.com",
+          organizationId: "org123",
+        },
+      },
+    };
+
+    beforeEach(() => {
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({ result: [mockUser] });
+      mockCreate.mockReturnValue({});
+      mockCreateSessionAndUpdateCookie.mockResolvedValue(mockSession);
+    });
+
+    test("should redirect to verify when user has no authentication methods", async () => {
+      mockListAuthenticationMethodTypes.mockResolvedValue({ authMethodTypes: [] });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+        requestId: "req123",
+      });
+
+      expect(result).toHaveProperty("redirect");
+      expect((result as any).redirect).toMatch(/^\/verify\?/);
+      expect((result as any).redirect).toContain("loginName=user%40example.com");
+      expect((result as any).redirect).toContain("send=true");
+      expect((result as any).redirect).toContain("invite=true");
+      expect((result as any).redirect).toContain("requestId=req123");
+    });
+
+    describe("Single authentication method", () => {
+      test("should redirect to password when user has only password method and it's allowed", async () => {
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD],
+        });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+          requestId: "req123",
+        });
+
+        expect(result).toHaveProperty("redirect");
+        expect((result as any).redirect).toMatch(/^\/password\?/);
+        expect((result as any).redirect).toContain("loginName=user%40example.com");
+        expect((result as any).redirect).toContain("requestId=req123");
+      });
+
+      test("should attempt IDP redirect when password is not allowed but user has IDP links", async () => {
+        mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: false });
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD],
+        });
+        mockListIDPLinks.mockResolvedValue({
+          result: [{ idpId: "idp123" }],
+        });
+        mockStartIdentityProviderFlow.mockResolvedValue("https://idp.example.com/auth");
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toEqual({ redirect: "https://idp.example.com/auth" });
+        expect(mockListIDPLinks).toHaveBeenCalledWith({
+          serviceUrl: "https://api.example.com",
+          userId: "user123",
+        });
+      });
+
+      test("should return error when password not allowed and no IDP links available", async () => {
+        mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: false });
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD],
+        });
+        mockListIDPLinks.mockResolvedValue({ result: [] });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toEqual({
+          error: "Username Password not allowed! Contact your administrator for more information.",
+        });
+      });
+
+      test("should redirect to passkey when user has only passkey method and it's allowed", async () => {
+        mockGetLoginSettings.mockResolvedValue({ passkeysType: PasskeysType.ALLOWED });
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSKEY],
+        });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+          requestId: "req123",
+        });
+
+        expect(result).toHaveProperty("redirect");
+        expect((result as any).redirect).toMatch(/^\/passkey\?/);
+        expect((result as any).redirect).toContain("loginName=user%40example.com");
+        expect((result as any).redirect).toContain("requestId=req123");
+      });
+
+      test("should return error when passkeys are not allowed", async () => {
+        mockGetLoginSettings.mockResolvedValue({ passkeysType: PasskeysType.NOT_ALLOWED });
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSKEY],
+        });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toEqual({
+          error: "Passkeys not allowed! Contact your administrator for more information.",
+        });
+      });
+
+      test("should redirect to IDP when user has only IDP method", async () => {
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.IDP],
+        });
+        mockListIDPLinks.mockResolvedValue({
+          result: [{ idpId: "idp123" }],
+        });
+        mockStartIdentityProviderFlow.mockResolvedValue("https://idp.example.com/auth");
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toEqual({ redirect: "https://idp.example.com/auth" });
+      });
+    });
+
+    describe("Multiple authentication methods", () => {
+      test("should prefer passkey when multiple methods available", async () => {
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD, AuthenticationMethodType.PASSKEY],
+        });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toHaveProperty("redirect");
+        expect((result as any).redirect).toMatch(/^\/passkey\?/);
+        expect((result as any).redirect).toContain("altPassword=true"); // password is allowed
+      });
+
+      test("should not show password alternative when password is not allowed", async () => {
+        mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: false });
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD, AuthenticationMethodType.PASSKEY],
+        });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toBeDefined();
+        expect(result?.redirect).toMatch(/^\/passkey\?/);
+        expect(result?.redirect).toContain("altPassword=false"); // password is not allowed
+      });
+
+      test("should redirect to IDP when no passkey but IDP available", async () => {
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD, AuthenticationMethodType.IDP],
+        });
+        mockListIDPLinks.mockResolvedValue({
+          result: [{ idpId: "idp123" }],
+        });
+        mockStartIdentityProviderFlow.mockResolvedValue("https://idp.example.com/auth");
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toEqual({ redirect: "https://idp.example.com/auth" });
+      });
+
+      test("should redirect to password when no passkey or IDP, only password available and allowed", async () => {
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD],
+        });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toBeDefined();
+        expect(result?.redirect).toMatch(/^\/password\?/);
+      });
+
+      test("should return error when password is only method in multi-method scenario but not allowed", async () => {
+        mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: false });
+        mockListAuthenticationMethodTypes.mockResolvedValue({
+          authMethodTypes: [AuthenticationMethodType.PASSWORD],
+        });
+        mockListIDPLinks.mockResolvedValue({ result: [] });
+
+        const result = await sendLoginname({
+          loginName: "user@example.com",
+        });
+
+        expect(result).toEqual({
+          error: "Username Password not allowed! Contact your administrator for more information.",
+        });
+      });
+    });
+  });
+
+  describe("User not found scenarios", () => {
+    beforeEach(() => {
+      mockSearchUsers.mockResolvedValue({ result: [] });
+    });
+
+    test("should redirect to single IDP when register allowed but password not allowed", async () => {
+      mockGetLoginSettings.mockResolvedValue({
+        allowRegister: true,
+        allowUsernamePassword: false,
+      });
+      mockGetActiveIdentityProviders.mockResolvedValue({
+        identityProviders: [{ id: "idp123", type: "OIDC" }],
+      });
+      mockStartIdentityProviderFlow.mockResolvedValue("https://idp.example.com/auth");
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ redirect: "https://idp.example.com/auth" });
+    });
+
+    test("should redirect to register when both register and password allowed", async () => {
+      mockGetLoginSettings.mockResolvedValue({
+        allowRegister: true,
+        allowUsernamePassword: true,
+        ignoreUnknownUsernames: false,
+      });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+        organization: "org123",
+        requestId: "req123",
+      });
+
+      expect(result).toBeDefined();
+      expect(result?.redirect).toMatch(/^\/register\?/);
+      expect(result?.redirect).toContain("organization=org123");
+      expect(result?.redirect).toContain("requestId=req123");
+      expect(result?.redirect).toContain("email=user%40example.com");
+    });
+
+    test("should redirect to password when ignoreUnknownUsernames is true", async () => {
+      mockGetLoginSettings.mockResolvedValue({
+        ignoreUnknownUsernames: true,
+      });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+        requestId: "req123",
+        organization: "org123",
+      });
+
+      expect(result).toBeDefined();
+      expect(result?.redirect).toMatch(/^\/password\?/);
+      expect(result?.redirect).toContain("loginName=user%40example.com");
+      expect(result?.redirect).toContain("requestId=req123");
+      expect(result?.redirect).toContain("organization=org123");
+    });
+
+    test("should return error when user not found and no registration allowed", async () => {
+      mockGetLoginSettings.mockResolvedValue({
+        allowRegister: false,
+        allowUsernamePassword: true,
+      });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "User not found in the system" });
+    });
+  });
+
+  describe("Edge cases", () => {
+    test("should handle session creation failure", async () => {
+      const mockUser = {
+        userId: "user123",
+        preferredLoginName: "user@example.com",
+        details: { resourceOwner: "org123" },
+        type: { case: "human", value: { email: { email: "user@example.com" } } },
+        state: UserState.ACTIVE,
+      };
+
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({ result: [mockUser] });
+      mockCreate.mockReturnValue({});
+      mockCreateSessionAndUpdateCookie.mockResolvedValue({ factors: {} }); // No user in session
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "Could not create session for user" });
+    });
+
+    test("should handle initial user state", async () => {
+      const mockUser = {
+        userId: "user123",
+        preferredLoginName: "user@example.com",
+        details: { resourceOwner: "org123" },
+        type: { case: "human", value: { email: { email: "user@example.com" } } },
+        state: UserState.INITIAL,
+      };
+
+      const mockSession = {
+        factors: {
+          user: {
+            id: "user123",
+            loginName: "user@example.com",
+            organizationId: "org123",
+          },
+        },
+      };
+
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({ result: [mockUser] });
+      mockCreate.mockReturnValue({});
+      mockCreateSessionAndUpdateCookie.mockResolvedValue(mockSession);
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+      });
+
+      expect(result).toEqual({ error: "Initial User not supported" });
+    });
+
+    test("should handle organization parameter in all redirects", async () => {
+      const mockUser = {
+        userId: "user123",
+        preferredLoginName: "user@example.com",
+        details: { resourceOwner: "org123" },
+        type: { case: "human", value: { email: { email: "user@example.com" } } },
+        state: UserState.ACTIVE,
+      };
+
+      const mockSession = {
+        factors: {
+          user: {
+            id: "user123",
+            loginName: "user@example.com",
+            organizationId: "org123",
+          },
+        },
+      };
+
+      mockGetLoginSettings.mockResolvedValue({ allowUsernamePassword: true });
+      mockSearchUsers.mockResolvedValue({ result: [mockUser] });
+      mockCreate.mockReturnValue({});
+      mockCreateSessionAndUpdateCookie.mockResolvedValue(mockSession);
+      mockListAuthenticationMethodTypes.mockResolvedValue({
+        authMethodTypes: [AuthenticationMethodType.PASSWORD],
+      });
+
+      const result = await sendLoginname({
+        loginName: "user@example.com",
+        organization: "custom-org",
+        requestId: "req123",
+      });
+
+      expect(result).toBeDefined();
+      expect(result?.redirect).toContain("organization=custom-org");
+      expect(result?.redirect).toContain("requestId=req123");
+    });
+  });
+});
diff --git a/apps/login/src/lib/server/loginname.ts b/apps/login/src/lib/server/loginname.ts
index c69589212..9f243a86d 100644
--- a/apps/login/src/lib/server/loginname.ts
+++ b/apps/login/src/lib/server/loginname.ts
@@ -255,6 +255,12 @@ export async function sendLoginname(command: SendLoginnameCommand) {
       switch (method) {
         case AuthenticationMethodType.PASSWORD: // user has only password as auth method
           if (!userLoginSettings?.allowUsernamePassword) {
+            // Check if user has IDPs available as alternative, that could eventually be used to register/link.
+            const idpResp = await redirectUserToIDP(userId);
+            if (idpResp?.redirect) {
+              return idpResp;
+            }
+
             return {
               error: "Username Password not allowed! Contact your administrator for more information.",
             };
@@ -312,7 +318,7 @@ export async function sendLoginname(command: SendLoginnameCommand) {
       if (methods.authMethodTypes.includes(AuthenticationMethodType.PASSKEY)) {
         const passkeyParams = new URLSearchParams({
           loginName: session.factors?.user?.loginName,
-          altPassword: `${methods.authMethodTypes.includes(1)}`, // show alternative password option
+          altPassword: `${methods.authMethodTypes.includes(AuthenticationMethodType.PASSWORD) && userLoginSettings?.allowUsernamePassword}`, // show alternative password option only if allowed
         });
 
         if (command.requestId) {
@@ -327,7 +333,14 @@ export async function sendLoginname(command: SendLoginnameCommand) {
       } else if (methods.authMethodTypes.includes(AuthenticationMethodType.IDP)) {
         return redirectUserToIDP(userId);
       } else if (methods.authMethodTypes.includes(AuthenticationMethodType.PASSWORD)) {
-        // user has no passkey setup and login settings allow passkeys
+        // Check if password authentication is allowed
+        if (!userLoginSettings?.allowUsernamePassword) {
+          return {
+            error: "Username Password not allowed! Contact your administrator for more information.",
+          };
+        }
+
+        // user has no passkey setup and login settings allow passwords
         const paramsPasswordDefault = new URLSearchParams({
           loginName: session.factors?.user?.loginName,
         });