diff --git a/packages/grafana-ui/src/components/DataSourceSettings/DataSourceHttpSettings.tsx b/packages/grafana-ui/src/components/DataSourceSettings/DataSourceHttpSettings.tsx
index c6516dca493..03c902a3880 100644
--- a/packages/grafana-ui/src/components/DataSourceSettings/DataSourceHttpSettings.tsx
+++ b/packages/grafana-ui/src/components/DataSourceSettings/DataSourceHttpSettings.tsx
@@ -148,6 +148,12 @@ export const DataSourceHttpSettings = (props: HttpSettingsProps) => {
   const azureAuthEnabled: boolean =
     (azureAuthSettings?.azureAuthSupported && azureAuthSettings.getAzureAuthEnabled(dataSourceConfig)) || false;
 
+  // Azure Authentication doesn't work correctly when Forward OAuth Identity is enabled.
+  // The Authorization header that has been set by the ApplyAzureAuth middleware gets overwritten
+  // with the Authorization header set by the OAuthTokenMiddleware.
+  dataSourceConfig.jsonData.oauthPassThru = azureAuthEnabled ? false : dataSourceConfig.jsonData.oauthPassThru;
+  const shouldShowForwardOAuthIdentityOption = azureAuthEnabled ? false : showForwardOAuthIdentityOption;
+
   return (
     <div className="gf-form-group">
       <>
@@ -295,7 +301,7 @@ export const DataSourceHttpSettings = (props: HttpSettingsProps) => {
             <HttpProxySettings
               dataSourceConfig={dataSourceConfig}
               onChange={(jsonData) => onSettingsChange({ jsonData })}
-              showForwardOAuthIdentityOption={showForwardOAuthIdentityOption}
+              showForwardOAuthIdentityOption={shouldShowForwardOAuthIdentityOption}
             />
           )}
         </div>