diff --git a/auth/oidc/classes/loginflow/authcode.php b/auth/oidc/classes/loginflow/authcode.php
index b12867dca..e79da2f63 100644
--- a/auth/oidc/classes/loginflow/authcode.php
+++ b/auth/oidc/classes/loginflow/authcode.php
@@ -574,7 +574,11 @@ protected function check_for_matched($entraidupn) {
         global $DB;
 
         if (auth_oidc_is_local_365_installed()) {
-            $match = $DB->get_record('local_o365_connections', ['entraidupn' => $entraidupn]);
+            $entraidupn = trim($entraidupn);
+            $sql = 'SELECT *
+                      FROM {local_o365_connections}
+                     WHERE ' . $DB->sql_equal('entraidupn', ':entraidupn', false);
+            $match = $DB->get_record_sql($sql, ['entraidupn' => $entraidupn]);
             if (!empty($match) && \local_o365\utils::is_o365_connected($match->muserid) !== true) {
                 return $DB->get_record('user', ['id' => $match->muserid]);
             }
@@ -850,6 +854,10 @@ protected function handlelogin(string $oidcuniqid, array $authparams, array $tok
                     $matchedwith->entraidupn = $username;
                     throw new moodle_exception('errorusermatched', 'auth_oidc', null, $matchedwith);
                 }
+                // The matched Moodle user is already set to auth 'oidc': bind the login to that user's own
+                // username rather than the Microsoft-derived one, which may not match it (e.g. a manual match
+                // keyed on the full UPN while the Moodle username is only the UPN prefix).
+                $username = $matchedwith->username;
             }
             $username = trim(core_text::strtolower($username));
             $tokenrec = $this->createtoken($oidcuniqid, $username, $authparams, $tokenparams, $idtoken, 0, $originalupn);
diff --git a/auth/oidc/tests/loginflow/authcode_test.php b/auth/oidc/tests/loginflow/authcode_test.php
new file mode 100644
index 000000000..d0caae076
--- /dev/null
+++ b/auth/oidc/tests/loginflow/authcode_test.php
@@ -0,0 +1,146 @@
+<?php
+// This file is part of Moodle - http://moodle.org/
+//
+// Moodle is free software: you can redistribute it and/or modify
+// it under the terms of the GNU General Public License as published by
+// the Free Software Foundation, either version 3 of the License, or
+// (at your option) any later version.
+//
+// Moodle is distributed in the hope that it will be useful,
+// but WITHOUT ANY WARRANTY; without even the implied warranty of
+// MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+// GNU General Public License for more details.
+//
+// You should have received a copy of the GNU General Public License
+// along with Moodle.  If not, see <https://www.gnu.org/licenses/>.
+
+namespace auth_oidc\loginflow;
+
+use advanced_testcase;
+use auth_oidc\jwt;
+use core\plugininfo\auth as auth_plugininfo;
+use phpunit_util;
+
+/**
+ * Unit tests for the class \auth_oidc\loginflow\authcode.
+ *
+ * @package    auth_oidc
+ * @copyright  2026 Enovation Solutions
+ * @license    http://www.gnu.org/copyleft/gpl.html GNU GPL v3 or later
+ * @group      auth_oidc
+ * @group      office365
+ * @coversDefaultClass \auth_oidc\loginflow\authcode
+ */
+final class authcode_test extends advanced_testcase {
+    /**
+     * Set up test environment.
+     *
+     * @return void
+     */
+    protected function setUp(): void {
+        parent::setUp();
+        $this->resetAfterTest(true);
+
+        auth_plugininfo::enable_plugin('oidc', 1);
+        set_config('bindingusernameclaim', 'upn', 'auth_oidc');
+    }
+
+    /**
+     * A manually matched user (auth already 'oidc', local_o365_connections keyed on the full Entra UPN,
+     * Moodle username only the UPN prefix) must complete on the very first OIDC login: the token must be
+     * bound to the matched Moodle user, not left dangling because the Moodle username differs from the UPN.
+     *
+     * Regression test for https://github.com/microsoft/o365-moodle/issues/2875.
+     *
+     * @return void
+     * @covers ::handlelogin
+     * @covers ::check_for_matched
+     */
+    public function test_handlelogin_completes_manually_matched_user_with_differing_username(): void {
+        if (!auth_oidc_is_local_365_installed()) {
+            $this->markTestSkipped('This test requires local_o365 to be installed (local_o365_connections table).');
+        }
+
+        $this->assert_login_completes_for_matched_user('asmith@sc.school.edu.au', 'asmith@sc.school.edu.au');
+    }
+
+    /**
+     * A local_o365_connections row stored with mixed-case entraidupn (e.g. saved before UPNs were
+     * normalized to lower case, or entered that way by an admin) must still match a differently-cased
+     * UPN claim from the ID token, including on case-sensitive database collations such as PostgreSQL.
+     *
+     * @return void
+     * @covers ::check_for_matched
+     */
+    public function test_handlelogin_completes_manually_matched_user_with_legacy_mixed_case_upn(): void {
+        if (!auth_oidc_is_local_365_installed()) {
+            $this->markTestSkipped('This test requires local_o365 to be installed (local_o365_connections table).');
+        }
+
+        $this->assert_login_completes_for_matched_user('ASmith@SC.School.edu.AU', 'asmith@sc.school.edu.au');
+    }
+
+    /**
+     * Creates a Moodle user manually matched to the given (as-stored) Entra UPN, drives handlelogin() with
+     * an ID token carrying the given (as-received) UPN claim, and asserts the login completed and bound
+     * the auth_oidc_token to the matched user.
+     *
+     * @param string $storedentraidupn The UPN as stored in local_o365_connections.entraidupn.
+     * @param string $tokenupn The UPN as received in the ID token's upn/preferred_username claims.
+     * @return void
+     */
+    private function assert_login_completes_for_matched_user(string $storedentraidupn, string $tokenupn): void {
+        global $DB;
+
+        $user = $this->getDataGenerator()->create_user(['username' => 'asmith', 'auth' => 'oidc']);
+
+        // Simulate an admin manually matching the Moodle user to their Entra UPN via
+        // Manage User Connections, then flipping the account to auth 'oidc'.
+        $DB->insert_record('local_o365_connections', (object) [
+            'muserid' => $user->id,
+            'entraidupn' => $storedentraidupn,
+            'uselogin' => 0,
+        ]);
+
+        $idtoken = new jwt();
+        $idtoken->set_claims([
+            'sub' => 'sub-' . $user->id,
+            'upn' => $tokenupn,
+            'preferred_username' => $tokenupn,
+        ]);
+
+        $oidcuniqid = 'oidcuniqid-' . $user->id;
+        $authparams = ['code' => 'authcode-' . $user->id];
+        $tokenparams = [
+            'access_token' => 'access-token',
+            'id_token' => 'id-token',
+            'expires_in' => 3600,
+            'resource' => 'resource',
+            'scope' => 'scope',
+        ];
+
+        // The user_login() method validates the auth code against the current request, so it has to be
+        // available via optional_param() the same way it would be on a real OIDC callback request.
+        $_GET['code'] = $authparams['code'];
+
+        try {
+            $loginflow = new authcode();
+            phpunit_util::call_internal_method(
+                $loginflow,
+                'handlelogin',
+                [$oidcuniqid, $authparams, $tokenparams, $idtoken],
+                authcode::class
+            );
+        } finally {
+            unset($_GET['code']);
+        }
+
+        $tokenrec = $DB->get_record('auth_oidc_token', ['oidcuniqid' => $oidcuniqid]);
+        $this->assertNotEmpty($tokenrec);
+        $this->assertEquals($user->id, $tokenrec->userid);
+        $this->assertEquals('asmith', $tokenrec->username);
+
+        global $USER;
+        $this->assertEquals($user->id, $USER->id);
+    }
+}
diff --git a/local/o365/classes/page/acp.php b/local/o365/classes/page/acp.php
index 089650bdc..7aa147f35 100644
--- a/local/o365/classes/page/acp.php
+++ b/local/o365/classes/page/acp.php
@@ -34,6 +34,7 @@
 use core_course_category;
 use core_php_time_limit;
 use core_plugin_manager;
+use core_text;
 use core_user;
 use finfo;
 use html_table;
@@ -2077,11 +2078,15 @@ public function mode_userconnections_manualmatch() {
         $customdata = ['userid' => $userid];
         $mform = new manualusermatch($redirect, $customdata);
         if ($fromform = $mform->get_data()) {
-            $o365username = trim($fromform->o365username);
-
-            // Check existing matches for Microsoft user.
-            $existingmatchforo365user = $DB->get_record('local_o365_connections', ['entraidupn' => $o365username]);
-            if (!empty($existingmatchforo365user)) {
+            $o365username = core_text::strtolower(trim($fromform->o365username));
+
+            // Check existing matches for Microsoft user. Compared case-insensitively so legacy rows stored
+            // with different casing (e.g. before entraidupn values were normalized to lower case) are found
+            // too, rather than allowing a duplicate match to be created for the same Microsoft 365 user.
+            $sql = 'SELECT 1
+                      FROM {local_o365_connections}
+                     WHERE ' . $DB->sql_equal('entraidupn', ':entraidupn', false);
+            if ($DB->record_exists_sql($sql, ['entraidupn' => $o365username])) {
                 throw new moodle_exception('acp_userconnections_manualmatch_error_o365usermatched', 'local_o365');
             }