diff --git a/web/src/settings_data.ts b/web/src/settings_data.ts
index 094526dc95..fa6440fd81 100644
--- a/web/src/settings_data.ts
+++ b/web/src/settings_data.ts
@@ -162,7 +162,7 @@ export function user_can_move_messages_between_streams(): boolean {
     return user_has_permission(realm.realm_move_messages_between_streams_policy);
 }
 
-export function user_can_edit_user_groups(): boolean {
+export function user_can_edit_all_user_groups(): boolean {
     return user_has_permission(realm.realm_user_group_edit_policy);
 }
 
@@ -171,18 +171,22 @@ export function can_edit_user_group(group_id: number): boolean {
         return false;
     }
 
-    if (!user_can_edit_user_groups()) {
-        return false;
+    let can_edit_all_user_groups = user_can_edit_all_user_groups();
+
+    if (
+        !current_user.is_admin &&
+        !current_user.is_moderator &&
+        !user_groups.is_direct_member_of(current_user.user_id, group_id)
+    ) {
+        can_edit_all_user_groups = false;
     }
 
-    // Admins and moderators are allowed to edit user groups even if they
-    // are not a member of that user group. Members can edit user groups
-    // only if they belong to that group.
-    if (current_user.is_admin || current_user.is_moderator) {
+    if (can_edit_all_user_groups) {
         return true;
     }
 
-    return user_groups.is_direct_member_of(current_user.user_id, group_id);
+    const group = user_groups.get_user_group_from_id(group_id);
+    return user_groups.is_user_in_group(group.can_manage_group, current_user.user_id);
 }
 
 export function user_can_create_user_groups(): boolean {
diff --git a/web/tests/settings_data.test.js b/web/tests/settings_data.test.js
index 56f19ae143..7dd658788e 100644
--- a/web/tests/settings_data.test.js
+++ b/web/tests/settings_data.test.js
@@ -162,9 +162,9 @@ test_policy(
     settings_data.user_can_create_user_groups,
 );
 test_policy(
-    "user_can_edit_user_groups",
+    "user_can_edit_all_user_groups",
     "realm_user_group_edit_policy",
-    settings_data.user_can_edit_user_groups,
+    settings_data.user_can_edit_all_user_groups,
 );
 test_policy(
     "user_can_add_custom_emoji",
@@ -335,36 +335,96 @@ run_test("user_can_create_multiuse_invite", () => {
 });
 
 run_test("can_edit_user_group", () => {
+    const admins = {
+        description: "Administrators",
+        name: "role:administrators",
+        id: 1,
+        members: new Set([1]),
+        is_system_group: true,
+        direct_subgroup_ids: new Set([]),
+        can_manage_group: 4,
+        can_mention_group: 1,
+    };
+    const moderators = {
+        description: "Moderators",
+        name: "role:moderators",
+        id: 2,
+        members: new Set([2]),
+        is_system_group: true,
+        direct_subgroup_ids: new Set([1]),
+        can_manage_group: 4,
+        can_mention_group: 1,
+    };
+    const members = {
+        description: "Members",
+        name: "role:members",
+        id: 3,
+        members: new Set([3]),
+        is_system_group: true,
+        direct_subgroup_ids: new Set([1, 2]),
+        can_manage_group: 4,
+        can_mention_group: 4,
+    };
+    const nobody = {
+        description: "Nobody",
+        name: "role:nobody",
+        id: 4,
+        members: new Set([]),
+        is_system_group: true,
+        direct_subgroup_ids: new Set([]),
+        can_manage_group: 4,
+        can_mention_group: 2,
+    };
     const students = {
         description: "Students group",
         name: "Students",
-        id: 0,
+        id: 5,
         members: new Set([1, 2]),
         is_system_group: false,
         direct_subgroup_ids: new Set([4, 5]),
-        can_mention_group: 2,
+        can_manage_group: 4,
+        can_mention_group: 3,
     };
     user_groups.initialize({
-        realm_user_groups: [students],
+        realm_user_groups: [admins, moderators, members, nobody, students],
     });
 
     page_params.is_spectator = true;
     assert.ok(!settings_data.can_edit_user_group(students.id));
 
     page_params.is_spectator = false;
+    realm.realm_user_group_edit_policy = settings_config.common_policy_values.by_admins_only.code;
     current_user.user_id = 3;
-    current_user.is_guest = true;
     assert.ok(!settings_data.can_edit_user_group(students.id));
 
-    current_user.is_guest = false;
-    current_user.is_moderator = true;
+    current_user.is_admin = true;
     assert.ok(settings_data.can_edit_user_group(students.id));
 
+    current_user.is_admin = false;
+    current_user.is_moderator = true;
+    assert.ok(!settings_data.can_edit_user_group(students.id));
+
+    realm.realm_user_group_edit_policy = settings_config.common_policy_values.by_members.code;
     current_user.is_moderator = false;
+    current_user.is_guest = false;
     assert.ok(!settings_data.can_edit_user_group(students.id));
 
     current_user.user_id = 2;
-    realm.realm_waiting_period_threshold = 0;
+    assert.ok(settings_data.can_edit_user_group(students.id));
+
+    realm.realm_user_group_edit_policy = settings_config.common_policy_values.by_admins_only.code;
+    assert.ok(!settings_data.can_edit_user_group(students.id));
+
+    const event = {
+        group_id: students.id,
+        data: {
+            can_manage_group: members.id,
+        },
+    };
+    user_groups.update(event);
+    assert.ok(settings_data.can_edit_user_group(students.id));
+
+    current_user.user_id = 3;
     assert.ok(settings_data.can_edit_user_group(students.id));
 });