diff --git a/prism-agent/service/server/src/main/scala/io/iohk/atala/agent/server/jobs/BackgroundJobs.scala b/prism-agent/service/server/src/main/scala/io/iohk/atala/agent/server/jobs/BackgroundJobs.scala
index 7b8c8cf374..a05728a6d3 100644
--- a/prism-agent/service/server/src/main/scala/io/iohk/atala/agent/server/jobs/BackgroundJobs.scala
+++ b/prism-agent/service/server/src/main/scala/io/iohk/atala/agent/server/jobs/BackgroundJobs.scala
@@ -274,7 +274,7 @@ object BackgroundJobs {
           // Set PublicationState to PublicationPending
           for {
             credentialService <- ZIO.service[CredentialService]
-            longFormPrismDID <- getLongForm(issuerDID, false)
+            longFormPrismDID <- getLongForm(issuerDID, true)
             jwtIssuer <- createJwtIssuer(longFormPrismDID, VerificationRelationship.AssertionMethod)
             w3Credential <- credentialService.createCredentialPayloadFromRecord(
               record,
@@ -402,9 +402,8 @@ object BackgroundJobs {
         .mapError(e => RuntimeException(s"Error occurred while getting did from wallet: ${e.toString}"))
         .someOrFail(RuntimeException(s"Issuer DID does not exist in the wallet: $did"))
         .flatMap {
-          case s: ManagedDIDState.Published    => ZIO.succeed(s)
-          case s if allowUnpublishedIssuingDID => ZIO.succeed(s)
-          case _                               => ZIO.fail(RuntimeException(s"Issuer DID must be published: $did"))
+          case s: ManagedDIDState.Published => ZIO.succeed(s)
+          case s => ZIO.cond(allowUnpublishedIssuingDID, s, RuntimeException(s"Issuer DID must be published: $did"))
         }
       longFormPrismDID = PrismDID.buildLongFormFromOperation(didState.createOperation)
     } yield longFormPrismDID
diff --git a/tests/e2e-tests/src/test/kotlin/features/CommonSteps.kt b/tests/e2e-tests/src/test/kotlin/features/CommonSteps.kt
index a242901540..9d54b304cf 100644
--- a/tests/e2e-tests/src/test/kotlin/features/CommonSteps.kt
+++ b/tests/e2e-tests/src/test/kotlin/features/CommonSteps.kt
@@ -68,7 +68,7 @@ class CommonSteps {
             publishDidSteps.createsUnpublishedDid(holder)
             publishDidSteps.createsUnpublishedDid(issuer)
             publishDidSteps.hePublishesDidToLedger(issuer)
-            issueSteps.acmeOffersACredential(issuer, holder)
+            issueSteps.acmeOffersACredential(issuer, holder, "short")
             issueSteps.bobRequestsTheCredential(holder)
             issueSteps.acmeIssuesTheCredential(issuer)
             issueSteps.bobHasTheCredentialIssued(holder)
diff --git a/tests/e2e-tests/src/test/kotlin/features/issue_credentials/IssueCredentialsSteps.kt b/tests/e2e-tests/src/test/kotlin/features/issue_credentials/IssueCredentialsSteps.kt
index 66c0d2a2d6..c6355b3dfb 100644
--- a/tests/e2e-tests/src/test/kotlin/features/issue_credentials/IssueCredentialsSteps.kt
+++ b/tests/e2e-tests/src/test/kotlin/features/issue_credentials/IssueCredentialsSteps.kt
@@ -15,8 +15,12 @@ import org.apache.http.HttpStatus.SC_CREATED
 import org.apache.http.HttpStatus.SC_OK
 
 class IssueCredentialsSteps {
-    @When("{actor} offers a credential to {actor}")
-    fun acmeOffersACredential(issuer: Actor, holder: Actor) {
+    @When("{actor} offers a credential to {actor} with {string} form DID")
+    fun acmeOffersACredential(issuer: Actor, holder: Actor, didForm: String) {
+
+        val did: String = if (didForm == "short")
+            issuer.recall("shortFormDid") else issuer.recall("longFormDid")
+
         val newCredential = Credential(
             schemaId = "schema:1234",
             validityPeriod = 3600,
@@ -26,10 +30,9 @@ class IssueCredentialsSteps {
                 "firstName" to "FirstName",
                 "lastName" to "LastName",
             ),
-            issuingDID = issuer.recall("shortFormDid"),
+            issuingDID = did,
             connectionId = issuer.recall<Connection>("connection-with-${holder.name}").connectionId,
         )
-
         issuer.attemptsTo(
             Post.to("/issue-credentials/credential-offers")
                 .with {
diff --git a/tests/e2e-tests/src/test/resources/features/issue_credentials/issue_credentials.feature b/tests/e2e-tests/src/test/resources/features/issue_credentials/issue_credentials.feature
index f45b492ff7..527e4fa667 100644
--- a/tests/e2e-tests/src/test/resources/features/issue_credentials/issue_credentials.feature
+++ b/tests/e2e-tests/src/test/resources/features/issue_credentials/issue_credentials.feature
@@ -7,7 +7,17 @@ Scenario: Issuing credential with published PRISM DID to unpublished PRISM DID
   When Acme creates unpublished DID
   And He publishes DID to ledger
   And Bob creates unpublished DID
-  And Acme offers a credential to Bob
+  And Acme offers a credential to Bob with "short" form DID
+  And Bob receives the credential offer and accepts
+  And Acme issues the credential
+  Then Bob receives the issued credential
+
+@TEST_ATL-3894
+Scenario: Issuing credential with unpublished PRISM DID to unpublished PRISM DID
+  Given Acme and Bob have an existing connection
+  When Acme creates unpublished DID
+  And Bob creates unpublished DID
+  And Acme offers a credential to Bob with "long" form DID
   And Bob receives the credential offer and accepts
   And Acme issues the credential
   Then Bob receives the issued credential