diff --git a/keystone/api/_shared/authentication.py b/keystone/api/_shared/authentication.py
index e1839566f2..7b1311087c 100644
--- a/keystone/api/_shared/authentication.py
+++ b/keystone/api/_shared/authentication.py
@@ -183,6 +183,13 @@ def authenticate(auth_info, auth_context):
                 resp_method_names = resp.response_data.pop('method_names', [])
                 auth_context['method_names'].extend(resp_method_names)
                 auth_context.update(resp.response_data or {})
+                # NOTE(gtema): When trying to get token from
+                # application_credential based token we need to restore
+                # application_credential_id to prevent escaping its bounds.
+                if "application_credential_id" in resp:
+                    auth_context["application_credential_id"] = resp[
+                        "application_credential_id"
+                    ]
             elif resp.response_body:
                 auth_response['methods'].append(method_name)
                 auth_response[method_name] = resp.response_body
@@ -231,7 +238,14 @@ def authenticate_for_token(auth=None):
         app_cred_id = None
         if 'application_credential' in method_names:
             token_auth = auth_info.auth['identity']
-            app_cred_id = token_auth['application_credential']['id']
+            if "application_credential" in token_auth:
+                app_cred_id = token_auth['application_credential']['id']
+            elif "application_credential_id" in auth_context:
+                app_cred_id = auth_context["application_credential_id"]
+            else:
+                raise exception.MissingApplicationCredentialId(
+                    user_id=auth_context['user_id']
+                )
 
         # Do MFA Rule Validation for the user
         if not core.UserMFARulesValidator.check_auth_methods_against_rules(
diff --git a/keystone/auth/plugins/token.py b/keystone/auth/plugins/token.py
index 31675e1952..3347a1eb68 100644
--- a/keystone/auth/plugins/token.py
+++ b/keystone/auth/plugins/token.py
@@ -14,6 +14,7 @@
 
 import flask
 from oslo_log import log
+import typing as ty
 
 from keystone.auth.plugins import base
 from keystone.auth.plugins import mapped
@@ -21,6 +22,7 @@ from keystone.common import provider_api
 import keystone.conf
 from keystone import exception
 from keystone.i18n import _
+from keystone.models.token_model import TokenModel
 
 LOG = log.getLogger(__name__)
 
@@ -49,13 +51,12 @@ class Token(base.AuthMethodHandler):
         # for re-scoping and we want to maintain the values. Most
         # AuthMethodHandlers do no such thing and this is not required.
         response_data.setdefault('method_names', []).extend(token.methods)
-
         return base.AuthHandlerResponse(
             status=True, response_body=None, response_data=response_data
         )
 
 
-def token_authenticate(token):
+def token_authenticate(token: TokenModel) -> dict[str, ty.Any]:
     response_data = {}
     try:
         # Do not allow tokens used for delegation to
@@ -88,6 +89,20 @@ def token_authenticate(token):
                     'or domain-scoped token is not allowed.'
                 )
             )
+        elif token.application_credential:
+            # NOTE(gtema): when getting token from token (initially issued by
+            # application credential) it is necessary to ensure scope is not
+            # requested.
+            if project_scoped or domain_scoped:
+                raise exception.ForbiddenAction(
+                    action=_(
+                        "Using an application credential token to create a "
+                        "project-scoped or domain-scoped token is not allowed."
+                    )
+                )
+            response_data["application_credential_id"] = (
+                token.application_credential["id"]
+            )
 
         if not CONF.token.allow_rescope_scoped_token:
             # Do not allow conversion from scoped tokens.