diff --git a/web/src/compose_validate.js b/web/src/compose_validate.js
index 5289383d91..bb47e30dc1 100644
--- a/web/src/compose_validate.js
+++ b/web/src/compose_validate.js
@@ -341,7 +341,15 @@ function check_unsubscribed_stream_for_send(stream_name, autosubscribe) {
     return result;
 }
 
-export function wildcard_mention_allowed() {
+function is_recipient_large_stream() {
+    return (
+        compose_state.stream_id() &&
+        peer_data.get_subscriber_count(compose_state.stream_id()) >
+            wildcard_mention_large_stream_threshold
+    );
+}
+
+function wildcard_mention_allowed_in_large_stream() {
     if (
         page_params.realm_wildcard_mention_policy ===
         settings_config.wildcard_mention_policy_values.by_everyone.code
@@ -385,6 +393,10 @@ export function wildcard_mention_allowed() {
     return !page_params.is_guest;
 }
 
+export function wildcard_mention_allowed() {
+    return !is_recipient_large_stream() || wildcard_mention_allowed_in_large_stream();
+}
+
 export function set_wildcard_mention_large_stream_threshold(value) {
     wildcard_mention_large_stream_threshold = value;
 }
@@ -393,12 +405,13 @@ export function validate_stream_message_mentions(opts) {
     const subscriber_count = peer_data.get_subscriber_count(opts.stream_id) || 0;
 
     // If the user is attempting to do a wildcard mention in a large
-    // stream, check if they permission to do so.
+    // stream, check if they permission to do so. If yes, warn them
+    // if they haven't acknowledged the wildcard warning yet.
     if (
         opts.wildcard_mention !== null &&
         subscriber_count > wildcard_mention_large_stream_threshold
     ) {
-        if (!wildcard_mention_allowed()) {
+        if (!wildcard_mention_allowed_in_large_stream()) {
             compose_banner.show_error_message(
                 $t({
                     defaultMessage:
diff --git a/web/tests/compose_validate.test.js b/web/tests/compose_validate.test.js
index caabe51940..e8d0b595a3 100644
--- a/web/tests/compose_validate.test.js
+++ b/web/tests/compose_validate.test.js
@@ -324,9 +324,13 @@ test_ui("get_invalid_recipient_emails", ({override_rewire}) => {
     assert.deepEqual(compose_validate.get_invalid_recipient_emails(), []);
 });
 
-test_ui("test_wildcard_mention_allowed", () => {
+test_ui("test_wildcard_mention_allowed", ({override_rewire}) => {
     page_params.user_id = me.user_id;
 
+    // First, check for large streams (>15 subscribers) where the wildcard mention
+    // policy matters.
+    override_rewire(peer_data, "get_subscriber_count", () => 16);
+
     page_params.realm_wildcard_mention_policy =
         settings_config.wildcard_mention_policy_values.by_everyone.code;
     page_params.is_guest = true;
@@ -374,6 +378,15 @@ test_ui("test_wildcard_mention_allowed", () => {
     assert.ok(compose_validate.wildcard_mention_allowed());
     page_params.is_admin = false;
     assert.ok(!compose_validate.wildcard_mention_allowed());
+
+    // Now, check for small streams (<=15 subscribers) where the wildcard mention
+    // policy doesn't matter; everyone is allowed to use wildcard mentions.
+    override_rewire(peer_data, "get_subscriber_count", () => 14);
+    page_params.realm_wildcard_mention_policy =
+        settings_config.wildcard_mention_policy_values.by_admins_only.code;
+    page_params.is_admin = false;
+    page_params.is_guest = true;
+    assert.ok(compose_validate.wildcard_mention_allowed());
 });
 
 test_ui("validate_stream_message", ({override_rewire, mock_template}) => {
@@ -407,7 +420,7 @@ test_ui("validate_stream_message", ({override_rewire, mock_template}) => {
         assert.equal(data.subscriber_count, 16);
     });
 
-    override_rewire(compose_validate, "wildcard_mention_allowed", () => true);
+    override_rewire(compose_validate, "wildcard_mention_allowed_in_large_stream", () => true);
     compose_state.message_content("Hey @**all**");
     assert.ok(!compose_validate.validate());
     assert.equal($("#compose-send-button").prop("disabled"), false);
@@ -425,7 +438,7 @@ test_ui("validate_stream_message", ({override_rewire, mock_template}) => {
         );
         wildcards_not_allowed_rendered = true;
     });
-    override_rewire(compose_validate, "wildcard_mention_allowed", () => false);
+    override_rewire(compose_validate, "wildcard_mention_allowed_in_large_stream", () => false);
     assert.ok(!compose_validate.validate());
     assert.ok(wildcards_not_allowed_rendered);
 });