diff --git a/src/tests/views/Settings/AllowedGroups.spec.ts b/src/tests/views/Settings/AllowedGroups.spec.ts
index 4aa0578a1b..9dad35ee54 100644
--- a/src/tests/views/Settings/AllowedGroups.spec.ts
+++ b/src/tests/views/Settings/AllowedGroups.spec.ts
@@ -73,7 +73,7 @@ describe('AllowedGroups', () => {
 					NcSelect: {
 						name: 'NcSelect',
 						props: ['modelValue'],
-						emits: ['update:modelValue', 'search-change'],
+						emits: ['update:modelValue', 'search'],
 						template: '<div class="nc-select-stub" />',
 					},
 				},
@@ -137,7 +137,7 @@ describe('AllowedGroups', () => {
 					NcSelect: {
 						name: 'NcSelect',
 						props: ['modelValue'],
-						emits: ['update:modelValue', 'search-change'],
+						emits: ['update:modelValue', 'search'],
 						template: '<div class="nc-select-stub" />',
 					},
 				},
@@ -156,4 +156,102 @@ describe('AllowedGroups', () => {
 			groups: ['admin', 'SÖ'],
 		})
 	})
+
+	it('queries the backend when the user types in the group selector (issue #7988)', async () => {
+		axiosGetMock.mockImplementation((url: string) => {
+			if (url.includes('cloud/groups/details')) {
+				return Promise.resolve({
+					data: {
+						ocs: {
+							data: {
+								groups: [
+									{ id: 'finance', displayname: 'finance' },
+								],
+							},
+						},
+					},
+				})
+			}
+
+			return Promise.resolve({ data: { ocs: { data: {} } } })
+		})
+
+		const wrapper = mount(AllowedGroups as never, {
+			global: {
+				stubs: {
+					NcSettingsSection: { template: '<div><slot /></div>' },
+					NcSelect: {
+						name: 'NcSelect',
+						props: ['modelValue'],
+						// NcSelect re-exposes vue-select's native `search` event (see @nextcloud/vue).
+						emits: ['update:modelValue', 'search'],
+						template: '<div class="nc-select-stub" />',
+					},
+				},
+			},
+		})
+		await flushPromises()
+
+		// Ignore the initial onMounted load; observe only what typing triggers.
+		axiosGetMock.mockClear()
+
+		const select = wrapper.findComponent({ name: 'NcSelect' })
+		// NcSelect's `search` event passes (query, loading); loading toggles its own spinner.
+		select.vm.$emit('search', 'fin', () => {})
+		await flushPromises()
+
+		const searchCalls = axiosGetMock.mock.calls.filter((call: unknown[]) => String(call[0]).includes('cloud/groups/details'))
+		expect(searchCalls.length).toBeGreaterThan(0)
+		const lastSearch = searchCalls.at(-1) as [string, { params: { search: string } }] | undefined
+		expect(lastSearch?.[1].params.search).toBe('fin')
+	})
+
+	it('keeps the group selector enabled while searching so it never loses focus (issue #7988)', async () => {
+		axiosGetMock.mockImplementation((url: string) => {
+			if (url.includes('cloud/groups/details')) {
+				return Promise.resolve({
+					data: { ocs: { data: { groups: [{ id: 'finance', displayname: 'finance' }] } } },
+				})
+			}
+
+			return Promise.resolve({ data: { ocs: { data: {} } } })
+		})
+
+		const wrapper = mount(AllowedGroups as never, {
+			global: {
+				stubs: {
+					NcSettingsSection: { template: '<div><slot /></div>' },
+					NcSelect: {
+						name: 'NcSelect',
+						// Expose disabled/loading so the test can assert the input stays enabled.
+						props: ['modelValue', 'disabled', 'loading'],
+						emits: ['update:modelValue', 'search'],
+						template: '<div class="nc-select-stub" />',
+					},
+				},
+			},
+		})
+		await flushPromises()
+
+		// Ignore the initial onMounted load; observe only what typing triggers.
+		axiosGetMock.mockClear()
+
+		const select = wrapper.findComponent({ name: 'NcSelect' })
+		const vm = wrapper.vm as unknown as { loadingGroups: boolean }
+
+		// The loading state must be driven through NcSelect's own `search`-event
+		// callback, not the reactive `loadingGroups`/`:disabled` binding — disabling
+		// the focused input is exactly what dropped focus per keystroke (#7988).
+		select.vm.$emit('search', 'fin')
+		await flushPromises()
+
+		// `loadingGroups` (and therefore `:disabled`) remains false during search so focus is kept.
+		expect(vm.loadingGroups).toBe(false)
+		expect(select.props('disabled')).toBe(false)
+
+		// And the query still reached the backend.
+		const searchCalls = axiosGetMock.mock.calls.filter((c: unknown[]) => String(c[0]).includes('cloud/groups/details'))
+		expect(searchCalls.length).toBe(1)
+		expect((searchCalls[0] as [string, { params: { search: string } }])[1].params.search).toBe('fin')
+	})
 })
diff --git a/src/views/Settings/AllowedGroups.vue b/src/views/Settings/AllowedGroups.vue
index b3bba68e32..dc14a202cd 100644
--- a/src/views/Settings/AllowedGroups.vue
+++ b/src/views/Settings/AllowedGroups.vue
@@ -15,12 +15,12 @@
 			:aria-label-combobox="t('libresign', 'Select authorized groups that can request to sign documents. Admin group is the default group and don\'t need to be defined.')"
 			:close-on-select="false"
 			:disabled="loadingGroups"
-			:loading="loadingGroups"
+			:loading="isSearching"
 			:multiple="true"
 			:options="groups"
 			:searchable="true"
 			:show-no-options="false"
-			@search-change="searchGroup"
+			@search="searchGroup"
 			@update:modelValue="saveGroups" />
 	</NcSettingsSection>
 </template>
@@ -51,6 +51,7 @@ type GroupRow = {
 const groupsSelected = ref<Array<GroupRow | string>>([])
 const groups = ref<GroupRow[]>([])
 const loadingGroups = ref(false)
+const isSearching = ref(false)
 const idKey = ref(0)
 
 async function getData() {
@@ -91,19 +92,21 @@ async function saveGroups(value: Array<GroupRow | string>) {
 }
 
 async function searchGroup(query: string) {
-	loadingGroups.value = true
-	await axios.get(generateOcsUrl('cloud/groups/details'), {
-		params: {
-			search: query,
-			limit: 20,
-			offset: 0,
-		},
-	})
-		.then(({ data }) => {
-			groups.value = data.ocs.data.groups.sort((a: GroupRow, b: GroupRow) => a.displayname.localeCompare(b.displayname))
+	isSearching.value = true
+	try {
+		const { data } = await axios.get(generateOcsUrl('cloud/groups/details'), {
+			params: {
+				search: query,
+				limit: 20,
+				offset: 0,
+			},
 		})
-		.catch((error) => logger.debug('Could not search by groups', { error }))
-	loadingGroups.value = false
+		groups.value = data.ocs.data.groups.sort((a: GroupRow, b: GroupRow) => a.displayname.localeCompare(b.displayname))
+	} catch (error) {
+		logger.debug('Could not search by groups', { error })
+	} finally {
+		isSearching.value = false
+	}
 }
 
 onMounted(async () => {
@@ -115,6 +118,7 @@ defineExpose({
 	groupsSelected,
 	groups,
 	loadingGroups,
+	isSearching,
 	idKey,
 	getData,
 	saveGroups,