diff --git a/common/djangoapps/entitlements/api/v1/tests/test_views.py b/common/djangoapps/entitlements/api/v1/tests/test_views.py
index 03fc7dddff..1585b4c4f6 100644
--- a/common/djangoapps/entitlements/api/v1/tests/test_views.py
+++ b/common/djangoapps/entitlements/api/v1/tests/test_views.py
@@ -156,6 +156,38 @@ class EntitlementViewSetTest(ModuleStoreTestCase):
         assert course_entitlement.enrollment_course_run == enrollment
         assert results == CourseEntitlementSerializer(course_entitlement).data
 
+    @patch("entitlements.api.v1.views.get_course_runs_for_course")
+    def test_add_entitlement_inactive_audit_enrollment(self, mock_get_course_runs):
+        """
+        Verify that if an entitlement is added for a user, if the user has one upgradeable enrollment
+        that enrollment is upgraded to the mode of the entitlement and linked to the entitlement.
+        """
+        course_uuid = uuid.uuid4()
+        entitlement_data = self._get_data_set(self.user, str(course_uuid))
+        mock_get_course_runs.return_value = [{'key': str(self.course.id)}]
+
+        # Add an audit course enrollment for user.
+        enrollment = CourseEnrollment.enroll(self.user, self.course.id, mode=CourseMode.AUDIT)
+        enrollment.update_enrollment(is_active=False)
+        response = self.client.post(
+            self.entitlements_list_url,
+            data=json.dumps(entitlement_data),
+            content_type='application/json',
+        )
+        assert response.status_code == 201
+        results = response.data
+
+        course_entitlement = CourseEntitlement.objects.get(
+            user=self.user,
+            course_uuid=course_uuid
+        )
+        # Assert that enrollment mode is now verified
+        enrollment_mode, enrollment_active = CourseEnrollment.enrollment_mode_for_user(self.user, self.course.id)
+        assert enrollment_mode == CourseMode.AUDIT
+        assert enrollment_active is False
+        assert course_entitlement.enrollment_course_run is None
+        assert results == CourseEntitlementSerializer(course_entitlement).data
+
     def test_non_staff_get_select_entitlements(self):
         not_staff_user = UserFactory()
         self.client.login(username=not_staff_user.username, password=TEST_PASSWORD)
diff --git a/common/djangoapps/entitlements/api/v1/views.py b/common/djangoapps/entitlements/api/v1/views.py
index a5fdfe22a0..52aab7faf9 100644
--- a/common/djangoapps/entitlements/api/v1/views.py
+++ b/common/djangoapps/entitlements/api/v1/views.py
@@ -77,7 +77,7 @@ class EntitlementViewSet(viewsets.ModelViewSet):
             enrollment
             for enrollment
             in user_run_enrollments
-            if enrollment.upgrade_deadline and enrollment.upgrade_deadline > timezone.now()
+            if enrollment.is_active and enrollment.upgrade_deadline and enrollment.upgrade_deadline > timezone.now()
         ]
 
         # if there is only one upgradeable enrollment, convert it from audit to the entitlement.mode
@@ -85,14 +85,26 @@ class EntitlementViewSet(viewsets.ModelViewSet):
         # (i.e. multiple upgradeable enrollments or no available upgradeable enrollment), dont enroll
         if len(upgradeable_enrollments) == 1:
             enrollment = upgradeable_enrollments[0]
-            log.info('Upgrading enrollment [%s] from audit to [%s] while adding entitlement for user [%s] for course [%s] ', enrollment, serializer.data.get('mode'), user.username, serializer.data.get('course_uuid'))
+            log.info(
+                'Upgrading enrollment [%s] from %s to %s while adding entitlement for user [%s] for course [%s]',
+                enrollment,
+                enrollment.mode,
+                serializer.data.get('mode'),
+                user.username,
+                serializer.data.get('course_uuid')
+            )
             enrollment.update_enrollment(mode=entitlement.mode)
             entitlement.set_enrollment(enrollment)
         else:
-            log.info('No enrollment upgraded while adding entitlement for user [%s] for course [%s] ', user.username, serializer.data.get('course_uuid'))
+            log.info(
+                'No enrollment upgraded while adding entitlement for user [%s] for course [%s] ',
+                user.username,
+                serializer.data.get('course_uuid')
+            )
 
         headers = self.get_success_headers(serializer.data)
-        # Note, the entitlement is re-serialized before getting added to the Response, so that the 'modified' date reflects changes that occur when upgrading enrollment.
+        # Note, the entitlement is re-serialized before getting added to the Response,
+        # so that the 'modified' date reflects changes that occur when upgrading enrollment.
         return Response(CourseEntitlementSerializer(entitlement).data, status=status.HTTP_201_CREATED, headers=headers)
 
     def retrieve(self, request, *args, **kwargs):