diff --git a/app/client/src/ce/pages/Applications/WorkspaceAction.tsx b/app/client/src/ce/pages/Applications/WorkspaceAction.tsx
index e3fe9c4c37..275bcb6581 100644
--- a/app/client/src/ce/pages/Applications/WorkspaceAction.tsx
+++ b/app/client/src/ce/pages/Applications/WorkspaceAction.tsx
@@ -20,6 +20,7 @@ import type { Workspace } from "@appsmith/constants/workspaceConstants";
 import { getIsCreatingApplicationByWorkspaceId } from "@appsmith/selectors/applicationSelectors";
 import { getIsFetchingApplications } from "@appsmith/selectors/selectedWorkspaceSelectors";
 import { hasCreateNewAppPermission } from "@appsmith/utils/permissionHelpers";
+import { isAirgapped } from "@appsmith/utils/airgapHelpers";
 
 export interface WorkspaceActionProps {
   workspace: Workspace;
@@ -45,6 +46,7 @@ function WorkspaceAction({
   const isCreatingApplication = Boolean(
     useSelector(getIsCreatingApplicationByWorkspaceId(workspace.id)),
   );
+  const isAirgappedInstance = isAirgapped();
 
   const openActionMenu = useCallback(() => {
     setIsActionMenuOpen(true);
@@ -93,14 +95,16 @@ function WorkspaceAction({
         </MenuItem>
         {<Divider className="!block mb-[2px]" />}
 
-        <MenuItem
-          data-testid="t--workspace-action-create-app-from-template"
-          disabled={!hasCreateNewApplicationPermission}
-          onSelect={() => onStartFromTemplate(workspaceId)}
-          startIcon="layout-2-line"
-        >
-          {createMessage(NEW_APP_FROM_TEMPLATE)}
-        </MenuItem>
+        {!isAirgappedInstance && (
+          <MenuItem
+            data-testid="t--workspace-action-create-app-from-template"
+            disabled={!hasCreateNewApplicationPermission}
+            onSelect={() => onStartFromTemplate(workspaceId)}
+            startIcon="layout-2-line"
+          >
+            {createMessage(NEW_APP_FROM_TEMPLATE)}
+          </MenuItem>
+        )}
 
         {enableImportExport && hasCreateNewApplicationPermission && (
           <MenuItem
diff --git a/app/client/src/ce/pages/Applications/tests/WorkspaceAction.test.tsx b/app/client/src/ce/pages/Applications/tests/WorkspaceAction.test.tsx
new file mode 100644
index 0000000000..125a714f5b
--- /dev/null
+++ b/app/client/src/ce/pages/Applications/tests/WorkspaceAction.test.tsx
@@ -0,0 +1,265 @@
+import {
+  WORKSPACE_ACTION_BUTTON,
+  createMessage,
+} from "@appsmith/constants/messages";
+import type { Workspace } from "@appsmith/constants/workspaceConstants";
+import "@testing-library/jest-dom";
+import { fireEvent, render } from "@testing-library/react";
+import "jest-styled-components";
+import { unitTestBaseMockStore } from "layoutSystems/common/dropTarget/unitTestUtils";
+import React from "react";
+import { Provider } from "react-redux";
+import configureStore from "redux-mock-store";
+import { lightTheme } from "selectors/themeSelectors";
+import { ThemeProvider } from "styled-components";
+import WorkspaceAction from "../WorkspaceAction";
+
+const mockStore = configureStore([]);
+const locators = {
+  testId: {
+    createNewApp: "t--workspace-action-create-app",
+    createAppFromTemplates: "t--workspace-action-create-app-from-template",
+    importApp: "t--workspace-import-app",
+  },
+};
+
+const onCreateNewApplication = jest.fn();
+const onStartFromTemplate = jest.fn();
+const setSelectedWorkspaceIdForImportApplication = jest.fn();
+
+const renderWorkspaceActionComponent = (
+  workspace: Workspace,
+  workspaceId: string,
+) =>
+  render(
+    <Provider store={mockStore(baseStoreForSpec)}>
+      <ThemeProvider theme={lightTheme}>
+        <WorkspaceAction
+          enableImportExport
+          isMobile={false}
+          onCreateNewApplication={onCreateNewApplication}
+          onStartFromTemplate={onStartFromTemplate}
+          setSelectedWorkspaceIdForImportApplication={
+            setSelectedWorkspaceIdForImportApplication
+          }
+          workspace={workspace}
+          workspaceId={workspaceId}
+        />
+      </ThemeProvider>
+    </Provider>,
+  );
+
+describe("WorkspaceAction", () => {
+  const workspace = {
+    id: "663a0815de1fdf7aa1618918",
+    userPermissions: [
+      "publish:workspaceApplications",
+      "delete:workspace",
+      "manage:workspaceApplications",
+      "delete:workspaceDatasources",
+      "export:workspaceApplications",
+      "read:workspaceDatasources",
+      "read:workspaceApplications",
+      "inviteUsers:workspace",
+      "read:workspaces",
+      "manage:workspaceDatasources",
+      "create:datasources",
+      "delete:workspaceApplications",
+      "manage:workspaces",
+      "create:applications",
+    ],
+  } as Workspace;
+
+  it("1. should render the WorkspaceAction component", () => {
+    const { getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    expect(
+      getByText(createMessage(WORKSPACE_ACTION_BUTTON)),
+    ).toBeInTheDocument();
+  });
+
+  it("2. should call onCreateNewApplication when 'Create New App' is selected", () => {
+    const { getByTestId, getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    fireEvent.click(getByText(createMessage(WORKSPACE_ACTION_BUTTON)));
+    fireEvent.click(getByTestId(locators.testId.createNewApp));
+
+    expect(onCreateNewApplication).toHaveBeenCalledWith(workspace.id);
+  });
+
+  it("3. should call onStartFromTemplate when 'Start from Template' is selected", () => {
+    const { getByTestId, getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    fireEvent.click(getByText(createMessage(WORKSPACE_ACTION_BUTTON)));
+    fireEvent.click(getByTestId(locators.testId.createAppFromTemplates));
+
+    expect(onStartFromTemplate).toHaveBeenCalledWith(workspace.id);
+  });
+
+  it("4. should call setSelectedWorkspaceIdForImportApplication when 'Import App' is selected", () => {
+    const { getByTestId, getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    fireEvent.click(getByText(createMessage(WORKSPACE_ACTION_BUTTON)));
+    fireEvent.click(getByTestId(locators.testId.importApp));
+
+    expect(setSelectedWorkspaceIdForImportApplication).toHaveBeenCalledWith(
+      workspace.id,
+    );
+  });
+
+  it("5. should not render anything if create app permission is unavailable", () => {
+    //setup
+    const existingPermissions = workspace.userPermissions;
+
+    // execute test
+    workspace.userPermissions = ["manage:workspaces"];
+    const { queryByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    expect(queryByText(createMessage(WORKSPACE_ACTION_BUTTON))).toBeNull();
+
+    // reset the changes
+    workspace.userPermissions = existingPermissions;
+  });
+});
+
+jest.mock("@appsmith/utils/airgapHelpers", () => ({
+  isAirgapped: jest.fn(),
+}));
+
+const mockIsAirGapped = (val: boolean) => {
+  /* eslint-disable @typescript-eslint/no-var-requires */
+  const { isAirgapped } = require("@appsmith/utils/airgapHelpers");
+  isAirgapped.mockImplementation(() => val);
+};
+
+describe("[Airgap] WorkspaceAction", () => {
+  const workspace = {
+    id: "663a0815de1fdf7aa1618918",
+    userPermissions: [
+      "publish:workspaceApplications",
+      "delete:workspace",
+      "manage:workspaceApplications",
+      "delete:workspaceDatasources",
+      "export:workspaceApplications",
+      "read:workspaceDatasources",
+      "read:workspaceApplications",
+      "inviteUsers:workspace",
+      "read:workspaces",
+      "manage:workspaceDatasources",
+      "create:datasources",
+      "delete:workspaceApplications",
+      "manage:workspaces",
+      "create:applications",
+    ],
+  } as Workspace;
+
+  beforeEach(() => mockIsAirGapped(true));
+
+  it("1. [Airgap] should render the WorkspaceAction component", () => {
+    const { getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    expect(
+      getByText(createMessage(WORKSPACE_ACTION_BUTTON)),
+    ).toBeInTheDocument();
+  });
+
+  it("2. [Airgap] should call onCreateNewApplication when 'Create New App' is selected", () => {
+    const { getByTestId, getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    fireEvent.click(getByText(createMessage(WORKSPACE_ACTION_BUTTON)));
+    fireEvent.click(getByTestId(locators.testId.createNewApp));
+
+    expect(onCreateNewApplication).toHaveBeenCalledWith(workspace.id);
+  });
+
+  it("3. [Airgap] should not have 'Start from Template'", () => {
+    const { getByText, queryByTestId } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    fireEvent.click(getByText(createMessage(WORKSPACE_ACTION_BUTTON)));
+    expect(queryByTestId(locators.testId.createAppFromTemplates)).toBeNull();
+  });
+
+  it("4. [Airgap] should call setSelectedWorkspaceIdForImportApplication when 'Import App' is selected", () => {
+    const { getByTestId, getByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    fireEvent.click(getByText(createMessage(WORKSPACE_ACTION_BUTTON)));
+    fireEvent.click(getByTestId(locators.testId.importApp));
+
+    expect(setSelectedWorkspaceIdForImportApplication).toHaveBeenCalledWith(
+      workspace.id,
+    );
+  });
+
+  it("5. [Airgap] should not render anything if create app permission is unavailable", () => {
+    //setup
+    const existingPermissions = workspace.userPermissions;
+
+    // execute test
+    workspace.userPermissions = ["manage:workspaces"];
+    const { queryByText } = renderWorkspaceActionComponent(
+      workspace,
+      workspace.id,
+    );
+
+    expect(queryByText(createMessage(WORKSPACE_ACTION_BUTTON))).toBeNull();
+
+    // reset the changes
+    workspace.userPermissions = existingPermissions;
+  });
+});
+
+const baseStoreForSpec = {
+  ...unitTestBaseMockStore,
+  ui: {
+    ...unitTestBaseMockStore.ui,
+    applications: {
+      creatingApplication: {},
+    },
+    workspaces: {
+      loadingStates: {
+        isFetchAllRoles: false,
+        isSavingWorkspaceInfo: false,
+        isFetchingWorkspaces: false,
+        isFetchingEntities: false,
+        isDeletingWorkspace: false,
+      },
+      workspaceRoles: [],
+      searchEntities: {},
+    },
+    selectedWorkspace: {
+      packages: [],
+      loadingStates: {
+        isFetchingApplications: false,
+        isFetchingAllUsers: false,
+        isFetchingCurrentWorkspace: false,
+      },
+    },
+  },
+};