diff --git a/erpnext/controllers/sales_and_purchase_return.py b/erpnext/controllers/sales_and_purchase_return.py
index 5c0f78ac986..29f7d5810b3 100644
--- a/erpnext/controllers/sales_and_purchase_return.py
+++ b/erpnext/controllers/sales_and_purchase_return.py
@@ -480,6 +480,13 @@ def make_return_doc(doctype: str, source_name: str, target_doc=None, return_agai
 				target_doc.subcontracting_order_item = source_doc.subcontracting_order_item
 				target_doc.rejected_warehouse = source_doc.rejected_warehouse
 				target_doc.subcontracting_receipt_item = source_doc.name
+				if return_against_rejected_qty:
+					target_doc.qty = -1 * flt(source_doc.rejected_qty - (returned_qty_map.get("qty") or 0))
+					target_doc.rejected_qty = 0.0
+					target_doc.rejected_warehouse = ""
+					target_doc.warehouse = source_doc.rejected_warehouse
+					target_doc.received_qty = target_doc.qty
+					target_doc.return_qty_from_rejected_warehouse = 1
 			else:
 				target_doc.purchase_order = source_doc.purchase_order
 				target_doc.purchase_order_item = source_doc.purchase_order_item
diff --git a/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.js b/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.js
index fee1cac2542..4e502793068 100644
--- a/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.js
+++ b/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.js
@@ -82,10 +82,53 @@ frappe.ui.form.on("Subcontracting Receipt", {
 			frm.add_custom_button(
 				__("Subcontract Return"),
 				() => {
-					frappe.model.open_mapped_doc({
-						method: "erpnext.subcontracting.doctype.subcontracting_receipt.subcontracting_receipt.make_subcontract_return",
-						frm: frm,
+					const make_standard_return = () => {
+						frappe.model.open_mapped_doc({
+							method: "erpnext.subcontracting.doctype.subcontracting_receipt.subcontracting_receipt.make_subcontract_return",
+							frm: frm,
+						});
+					};
+
+					let has_rejected_items = frm.doc.items.filter((item) => {
+						if (item.rejected_qty > 0) {
+							return true;
+						}
 					});
+
+					if (has_rejected_items && has_rejected_items.length > 0) {
+						frappe.prompt(
+							[
+								{
+									label: __("Return Qty from Rejected Warehouse"),
+									fieldtype: "Check",
+									fieldname: "return_for_rejected_warehouse",
+									default: 1,
+								},
+							],
+							function (values) {
+								if (values.return_for_rejected_warehouse) {
+									frappe.call({
+										method: "erpnext.subcontracting.doctype.subcontracting_receipt.subcontracting_receipt.make_subcontract_return_against_rejected_warehouse",
+										args: {
+											source_name: frm.doc.name,
+										},
+										callback: function (r) {
+											if (r.message) {
+												frappe.model.sync(r.message);
+												frappe.set_route("Form", r.message.doctype, r.message.name);
+											}
+										},
+									});
+								} else {
+									make_standard_return();
+								}
+							},
+							__("Return Qty"),
+							__("Make Return Entry")
+						);
+					} else {
+						make_standard_return();
+					}
 				},
 				__("Create")
 			);
diff --git a/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.py b/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.py
index 99a6abc8b91..d2ceb90ad52 100644
--- a/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.py
+++ b/erpnext/subcontracting/doctype/subcontracting_receipt/subcontracting_receipt.py
@@ -774,6 +774,13 @@ class SubcontractingReceipt(SubcontractingController):
 			make_purchase_receipt(self, save=True, notify=True)
 
 
+@frappe.whitelist()
+def make_subcontract_return_against_rejected_warehouse(source_name):
+	from erpnext.controllers.sales_and_purchase_return import make_return_doc
+
+	return make_return_doc("Subcontracting Receipt", source_name, return_against_rejected_qty=True)
+
+
 @frappe.whitelist()
 def make_subcontract_return(source_name, target_doc=None):
 	from erpnext.controllers.sales_and_purchase_return import make_return_doc
diff --git a/erpnext/subcontracting/doctype/subcontracting_receipt/test_subcontracting_receipt.py b/erpnext/subcontracting/doctype/subcontracting_receipt/test_subcontracting_receipt.py
index d5e30bd9368..b9d062af5b2 100644
--- a/erpnext/subcontracting/doctype/subcontracting_receipt/test_subcontracting_receipt.py
+++ b/erpnext/subcontracting/doctype/subcontracting_receipt/test_subcontracting_receipt.py
@@ -1196,6 +1196,136 @@ class TestSubcontractingReceipt(FrappeTestCase):
 		scr.cancel()
 		self.assertTrue(scr.docstatus == 2)
 
+	def test_subcontract_return_from_rejected_warehouse(self):
+		from erpnext.stock.doctype.warehouse.test_warehouse import create_warehouse
+		from erpnext.subcontracting.doctype.subcontracting_receipt.subcontracting_receipt import (
+			make_subcontract_return_against_rejected_warehouse,
+		)
+
+		# Create subcontracted item
+		fg_item = make_item(
+			"_Test Subcontract Item Return from Rejected Warehouse",
+			properties={
+				"is_stock_item": 1,
+				"is_sub_contracted_item": 1,
+			},
+		).name
+
+		# Create service item
+		service_item = make_item(
+			"_Test Service Item Return from Rejected Warehouse", properties={"is_stock_item": 0}
+		).name
+
+		# Create BOM for the subcontracted item with required raw materials
+		rm_item1 = make_item(
+			"_Test RM Item 1 Return from Rejected Warehouse", properties={"is_stock_item": 1}
+		).name
+
+		rm_item2 = make_item(
+			"_Test RM Item 2 Return from Rejected Warehouse", properties={"is_stock_item": 1}
+		).name
+
+		make_bom(item=fg_item, raw_materials=[rm_item1, rm_item2])
+
+		# Create warehouses
+		rejected_warehouse = create_warehouse("_Test Subcontract Rejected Warehouse Return Qty Warehouse")
+
+		# Create service items for subcontracting order
+		service_items = [
+			{
+				"warehouse": "_Test Warehouse - _TC",
+				"item_code": service_item,
+				"qty": 10,
+				"rate": 100,
+				"fg_item": fg_item,
+				"fg_item_qty": 10,
+			},
+		]
+
+		# Create Subcontracting Order
+		sco = get_subcontracting_order(service_items=service_items)
+
+		# Stock raw materials
+		make_stock_entry(item_code=rm_item1, qty=100, target="_Test Warehouse 1 - _TC", basic_rate=100)
+		make_stock_entry(item_code=rm_item2, qty=100, target="_Test Warehouse 1 - _TC", basic_rate=100)
+
+		# Transfer raw materials
+		rm_items = get_rm_items(sco.supplied_items)
+		itemwise_details = make_stock_in_entry(rm_items=rm_items)
+		make_stock_transfer_entry(
+			sco_no=sco.name,
+			rm_items=rm_items,
+			itemwise_details=copy.deepcopy(itemwise_details),
+		)
+
+		# Step 1: Create Subcontracting Receipt with rejected quantity
+		sr = make_subcontracting_receipt(sco.name)
+		sr.items[0].qty = 8  # Accepted quantity
+		sr.items[0].rejected_qty = 2
+		sr.items[0].rejected_warehouse = rejected_warehouse
+		sr.save()
+		sr.submit()
+
+		# Verify initial state
+		sr.reload()
+		self.assertEqual(sr.items[0].qty, 8)
+		self.assertEqual(sr.items[0].rejected_qty, 2)
+		self.assertEqual(sr.items[0].rejected_warehouse, rejected_warehouse)
+
+		# Step 2: Create Subcontract Return from Rejected Warehouse
+		sr_return = make_subcontract_return_against_rejected_warehouse(sr.name)
+
+		# Verify the return document properties
+		self.assertEqual(sr_return.doctype, "Subcontracting Receipt")
+		self.assertEqual(sr_return.is_return, 1)
+		self.assertEqual(sr_return.return_against, sr.name)
+
+		# Verify item details in return document
+		self.assertEqual(len(sr_return.items), 1)
+		self.assertEqual(sr_return.items[0].item_code, fg_item)
+		self.assertEqual(sr_return.items[0].warehouse, rejected_warehouse)
+		self.assertEqual(sr_return.items[0].qty, -2.0)  # Negative for return
+		self.assertEqual(sr_return.items[0].rejected_qty, 0.0)
+		self.assertEqual(sr_return.items[0].rejected_warehouse, "")
+
+		# Check specific fields that should be set for subcontracting returns
+		self.assertEqual(sr_return.items[0].subcontracting_order, sco.name)
+		self.assertEqual(sr_return.items[0].subcontracting_order_item, sr.items[0].subcontracting_order_item)
+		self.assertEqual(sr_return.items[0].return_qty_from_rejected_warehouse, 1)
+
+		# For returns from rejected warehouse, supplied_items might be empty initially
+		# They might get populated when the document is saved/submitted
+		# Or they might not be needed since we're returning finished goods
+
+		# Save and submit the return
+		sr_return.save()
+		sr_return.submit()
+
+		# Verify final state
+		sr_return.reload()
+		self.assertEqual(sr_return.docstatus, 1)
+		self.assertEqual(sr_return.status, "Return")
+
+		# Verify stock ledger entries for the return
+		sle = frappe.get_all(
+			"Stock Ledger Entry",
+			filters={
+				"voucher_type": "Subcontracting Receipt",
+				"voucher_no": sr_return.name,
+				"warehouse": rejected_warehouse,
+			},
+			fields=["item_code", "actual_qty", "warehouse"],
+		)
+
+		self.assertEqual(len(sle), 1)
+		self.assertEqual(sle[0].item_code, fg_item)
+		self.assertEqual(sle[0].actual_qty, -2.0)  # Outward entry from rejected warehouse
+		self.assertEqual(sle[0].warehouse, rejected_warehouse)
+
+		# Verify that the original document's rejected quantity is not affected
+		sr.reload()
+		self.assertEqual(sr.items[0].rejected_qty, 2)  # Should remain the same
+
 	@change_settings("Buying Settings", {"auto_create_purchase_receipt": 1})
 	def test_auto_create_purchase_receipt(self):
 		from erpnext.buying.doctype.purchase_order.test_purchase_order import create_purchase_order