diff --git a/Inventory/Model/ResourceModel/SourceItem/SaveMultiple.php b/Inventory/Model/ResourceModel/SourceItem/SaveMultiple.php
index 0f0a40c4577c..26727bca54f7 100755
--- a/Inventory/Model/ResourceModel/SourceItem/SaveMultiple.php
+++ b/Inventory/Model/ResourceModel/SourceItem/SaveMultiple.php
@@ -130,9 +130,11 @@ private function separateExistingAndNewItems(array $sourceItems): array
 
         $skus = [];
         $stock = [];
+        $indexedSourceItems = [];
         foreach ($sourceItems as $sourceItem) {
             $skus[] = $sourceItem->getSku();
             $stock[] = $sourceItem->getSourceCode();
+            $indexedSourceItems[$sourceItem->getSourceCode()][$sourceItem->getSku()] = $sourceItem;
         }
 
         $storedSourceItems = $connection->fetchAll(
@@ -142,16 +144,20 @@ private function separateExistingAndNewItems(array $sourceItems): array
         );
 
         $exisingSourceItems = [];
-        foreach ($sourceItems as $key => $sourceItem) {
-            foreach ($storedSourceItems as $storedSourceItem) {
-                if ($sourceItem->getSku() === $storedSourceItem['sku'] &&
-                    $sourceItem->getSourceCode() === $storedSourceItem['source_code']) {
-                    unset($sourceItems[$key]);
-                    $exisingSourceItems[$storedSourceItem['source_item_id']] = $sourceItem;
-                }
+        foreach ($storedSourceItems as $storedSourceItem) {
+            $sku = $storedSourceItem['sku'];
+            $sourceCode = $storedSourceItem['source_code'];
+
+            if (isset($indexedSourceItems[$sourceCode][$sku])) {
+                $sourceItemId = $storedSourceItem['source_item_id'];
+                $exisingSourceItems[$sourceItemId] = $indexedSourceItems[$sourceCode][$sku];
+                unset($indexedSourceItems[$sourceCode][$sku]);
             }
         }
-        return [$sourceItems, $exisingSourceItems];
+
+        $newSourceItems = array_merge(...array_values($indexedSourceItems));
+
+        return [$newSourceItems, $exisingSourceItems];
     }
 
     /**
diff --git a/Inventory/Test/Unit/Model/ResourceModel/SourceItem/SaveMultipleTest.php b/Inventory/Test/Unit/Model/ResourceModel/SourceItem/SaveMultipleTest.php
new file mode 100644
index 000000000000..ba58014190a3
--- /dev/null
+++ b/Inventory/Test/Unit/Model/ResourceModel/SourceItem/SaveMultipleTest.php
@@ -0,0 +1,127 @@
+<?php
+/**
+ * Copyright 2017 Adobe
+ * All Rights Reserved.
+ */
+declare(strict_types=1);
+
+namespace Magento\Inventory\Test\Unit\Model\ResourceModel\SourceItem;
+
+use Magento\Framework\App\ResourceConnection;
+use Magento\Framework\DB\Adapter\AdapterInterface;
+use Magento\Framework\DB\Select;
+use Magento\Inventory\Model\ResourceModel\SourceItem as SourceItemResourceModel;
+use Magento\Inventory\Model\ResourceModel\SourceItem\SaveMultiple;
+use Magento\InventoryApi\Api\Data\SourceItemInterface;
+use PHPUnit\Framework\MockObject\MockObject;
+use PHPUnit\Framework\TestCase;
+
+/**
+ * @covers \Magento\Inventory\Model\ResourceModel\SourceItem\SaveMultiple
+ */
+class SaveMultipleTest extends TestCase
+{
+    public function testSeparateExistingAndNewItems(): void
+    {
+        $select = $this->createMock(Select::class);
+        $connection = $this->createMock(AdapterInterface::class);
+        $resourceConnection = $this->createMock(ResourceConnection::class);
+
+        $resourceConnection
+            ->method('getConnection')
+            ->willReturn($connection);
+
+        $resourceConnection
+            ->method('getTableName')
+            ->with(SourceItemResourceModel::TABLE_NAME_SOURCE_ITEM)
+            ->willReturn('inventory_source_item');
+
+        // The code does: $connection->select()->from(...)->where(...)->where(...)
+        $connection
+            ->method('select')
+            ->willReturn($select);
+
+        $select
+            ->method('from')
+            ->willReturnSelf();
+
+        $select
+            ->method('where')
+            ->willReturnSelf();
+
+        // Two items already exist in the DB
+        $storedItems = [
+            ['source_item_id' => 1111, 'source_code' => 'warehouse', 'sku' => 'EXISTING-1'],
+            ['source_item_id' => 2222, 'source_code' => 'warehouse', 'sku' => 'EXISTING-2'],
+        ];
+
+        $connection
+            ->method('fetchAll')
+            ->willReturn($storedItems);
+
+        // Capture what gets INSERTed (new items)
+        $insertedBind = null;
+        $connection
+            ->expects($this->once())
+            ->method('query')
+            ->willReturnCallback(function (string $sql, array $bind) use (&$insertedBind): void {
+                $insertedBind = $bind;
+            });
+
+        // Capture what gets UPDATED (existing items)
+        $updatedItems = [];
+        $connection
+            ->expects($this->exactly(2))
+            ->method('update')
+            ->willReturnCallback(function (
+                string $tableName,
+                array $bind,
+                array $condition,
+            ) use (&$updatedItems): void {
+                $updatedItems[] = ['bind' => $bind, 'condition' => $condition];
+            });
+
+        // Build 4 source items: 2 existing + 2 new
+        $sourceItems = [
+            $this->createSourceItem('warehouse', 'EXISTING-1', 10, 1),
+            $this->createSourceItem('warehouse', 'EXISTING-2', 20, 1),
+            $this->createSourceItem('warehouse', 'NEW-1', 30, 1),
+            $this->createSourceItem('warehouse', 'NEW-2', 40, 1),
+        ];
+
+        $saveMultiple = new SaveMultiple($resourceConnection);
+        $saveMultiple->execute($sourceItems);
+
+        // ASSERT — 2 new items should have been INSERTed
+        $this->assertIsArray($insertedBind);
+        $this->assertContains('NEW-1', $insertedBind);
+        $this->assertContains('NEW-2', $insertedBind);
+        $this->assertNotContains('EXISTING-1', $insertedBind);
+        $this->assertNotContains('EXISTING-2', $insertedBind);
+
+        // ASSERT — 2 existing items should have been UPDATED
+        $this->assertContains('EXISTING-1', $updatedItems[0]['bind']);
+        $this->assertContains(1111, $updatedItems[0]['condition']);
+        $this->assertContains('EXISTING-2', $updatedItems[1]['bind']);
+        $this->assertContains(2222, $updatedItems[1]['condition']);
+    }
+
+    /**
+     * Helper to create a mock SourceItemInterface.
+     *
+     * @return SourceItemInterface&MockObject
+     */
+    private function createSourceItem(
+        string $sourceCode,
+        string $sku,
+        int|float $quantity,
+        int $status,
+    ): SourceItemInterface {
+        $item = $this->createMock(SourceItemInterface::class);
+        $item->method('getSourceCode')->willReturn($sourceCode);
+        $item->method('getSku')->willReturn($sku);
+        $item->method('getQuantity')->willReturn((float) $quantity);
+        $item->method('getStatus')->willReturn($status);
+        return $item;
+    }
+}