diff --git a/packages/indexer-common/src/errors.ts b/packages/indexer-common/src/errors.ts
index 0b1c0ddbd..56b4c18b2 100644
--- a/packages/indexer-common/src/errors.ts
+++ b/packages/indexer-common/src/errors.ts
@@ -100,6 +100,7 @@ export enum IndexerErrorCode {
   IE087 = 'IE087',
   IE088 = 'IE088',
   IE089 = 'IE089',
+  IE090 = 'IE090',
 }
 
 export const INDEXER_ERROR_MESSAGES: Record<IndexerErrorCode, string> = {
@@ -193,6 +194,7 @@ export const INDEXER_ERROR_MESSAGES: Record<IndexerErrorCode, string> = {
   IE087: 'Failed to resize allocation',
   IE088: 'Failed to present POI',
   IE089: 'Failed to collect indexing rewards',
+  IE090: 'Failed to reallocate: indexer is overallocated',
 }
 
 export type IndexerErrorCause = unknown
diff --git a/packages/indexer-common/src/indexer-management/allocations.ts b/packages/indexer-common/src/indexer-management/allocations.ts
index 344e0cc42..f30356861 100644
--- a/packages/indexer-common/src/indexer-management/allocations.ts
+++ b/packages/indexer-common/src/indexer-management/allocations.ts
@@ -2123,6 +2123,39 @@ export class AllocationManager {
         }
       }
     } else {
+      // Check if indexer is over-allocated - if so, collect() will auto-close the allocation
+      // and new allocations won't be able to be created until the condition is cleared.
+      // In this case indexer should manually remediate the issue.
+      const isOverAllocated =
+        await this.network.contracts.SubgraphService.isOverAllocated(params.indexer)
+
+      logger.debug('Checking over-allocation status for reallocate allocation', {
+        allocationId: params.closingAllocationID,
+        isOverAllocated,
+      })
+
+      if (isOverAllocated) {
+        const allocatedTokens =
+          await this.network.contracts.SubgraphService.allocationProvisionTracker(
+            params.indexer,
+          )
+        const delegationRatio =
+          await this.network.contracts.SubgraphService.getDelegationRatio()
+        const tokensAvailable =
+          await this.network.contracts.HorizonStaking.getTokensAvailable(
+            params.indexer,
+            this.network.contracts.SubgraphService.target,
+            delegationRatio,
+          )
+        const overallocatedAmount = allocatedTokens - tokensAvailable
+        throw indexerError(
+          IndexerErrorCode.IE090,
+          `Overallocated by ${formatGRT(
+            overallocatedAmount,
+          )} GRT, please manually unallocate that amount.`,
+        )
+      }
+
       // Horizon: Need to multicall collect and stopService
 
       // collect
diff --git a/packages/indexer-common/src/indexer-management/resolvers/allocations.ts b/packages/indexer-common/src/indexer-management/resolvers/allocations.ts
index b35e81cc5..6108d8d82 100644
--- a/packages/indexer-common/src/indexer-management/resolvers/allocations.ts
+++ b/packages/indexer-common/src/indexer-management/resolvers/allocations.ts
@@ -1207,6 +1207,34 @@ async function reallocateHorizonAllocation(
     epoch: currentEpoch.toString(),
   })
 
+  // Check if indexer is over-allocated - if so, collect() will auto-close the allocation
+  // and new allocations won't be able to be created until the condition is cleared.
+  // In this case indexer should manually remediate the issue.
+  const isOverAllocated = await contracts.SubgraphService.isOverAllocated(address)
+
+  logger.debug('Checking over-allocation status for reallocate allocation', {
+    allocationId: allocation.id,
+    isOverAllocated,
+  })
+
+  if (isOverAllocated) {
+    const allocatedTokens =
+      await contracts.SubgraphService.allocationProvisionTracker(address)
+    const delegationRatio = await contracts.SubgraphService.getDelegationRatio()
+    const tokensAvailable = await contracts.HorizonStaking.getTokensAvailable(
+      address,
+      contracts.SubgraphService.target,
+      delegationRatio,
+    )
+    const overallocatedAmount = allocatedTokens - tokensAvailable
+    throw indexerError(
+      IndexerErrorCode.IE090,
+      `Overallocated by ${formatGRT(
+        overallocatedAmount,
+      )} GRT, please manually unallocate that amount.`,
+    )
+  }
+
   // Identify how many GRT the indexer has staked
   const freeStake = (await network.networkMonitor.freeStake()).horizon