diff --git a/.changeset/blue-dragons-shout.md b/.changeset/blue-dragons-shout.md
new file mode 100644
index 0000000000..762234a72b
--- /dev/null
+++ b/.changeset/blue-dragons-shout.md
@@ -0,0 +1,5 @@
+---
+'@backstage/plugin-catalog-backend-module-gitlab': patch
+---
+
+`restrictUsersToGroup` should use the entire group path when getting members
diff --git a/plugins/catalog-backend-module-gitlab/src/__testUtils__/handlers.ts b/plugins/catalog-backend-module-gitlab/src/__testUtils__/handlers.ts
index a4fb3ba391..041aa5b835 100644
--- a/plugins/catalog-backend-module-gitlab/src/__testUtils__/handlers.ts
+++ b/plugins/catalog-backend-module-gitlab/src/__testUtils__/handlers.ts
@@ -83,7 +83,7 @@ const httpHandlers = [
   }),
 
   rest.get(
-    `${apiBaseUrlSaas}/groups/subgroup1/members/all`,
+    `${apiBaseUrlSaas}/groups/group1%2Fsubgroup1/members/all`,
     (_req, res, ctx) => {
       return res(ctx.json(subgroup_saas_users_response)); // To-DO change
     },
diff --git a/plugins/catalog-backend-module-gitlab/src/providers/GitlabOrgDiscoveryEntityProvider.ts b/plugins/catalog-backend-module-gitlab/src/providers/GitlabOrgDiscoveryEntityProvider.ts
index eb10dd2274..1fbd2a2a13 100644
--- a/plugins/catalog-backend-module-gitlab/src/providers/GitlabOrgDiscoveryEntityProvider.ts
+++ b/plugins/catalog-backend-module-gitlab/src/providers/GitlabOrgDiscoveryEntityProvider.ts
@@ -400,14 +400,14 @@ export class GitlabOrgDiscoveryEntityProvider implements EntityProvider {
       groups.push(await this.gitLabClient.getGroupByPath(this.config.group)); // adds the parent group for #26554
 
       const rootGroupSplit = this.config.group.split('/');
-      const rootGroup = this.config.restrictUsersToGroup
-        ? rootGroupSplit[rootGroupSplit.length - 1]
+      const groupPath = this.config.restrictUsersToGroup
+        ? this.config.group
         : rootGroupSplit[0];
 
       users = paginated<GitLabUser>(
         options =>
           this.gitLabClient.listSaaSUsers(
-            rootGroup,
+            groupPath,
             options,
             this.config.includeUsersWithoutSeat,
           ),