diff --git a/C4/Circulation.pm b/C4/Circulation.pm
index d7c3088b7c..0da90779b7 100644
--- a/C4/Circulation.pm
+++ b/C4/Circulation.pm
@@ -1958,7 +1958,9 @@ sub AddReturn {
         UpdateHoldingbranch($branch, $item->{'itemnumber'});
         $item->{'holdingbranch'} = $branch; # update item data holdingbranch too
     }
-    ModDateLastSeen( $item->{'itemnumber'} );
+
+    my $leave_item_lost = C4::Context->preference("BlockReturnOfLostItems") ? 1 : 0;
+    ModDateLastSeen( $item->{itemnumber}, $leave_item_lost );
 
     # check if we have a transfer for this document
     my ($datesent,$frombranch,$tobranch) = GetTransfers( $item->{'itemnumber'} );
diff --git a/C4/Items.pm b/C4/Items.pm
index e9c9fc4946..845d63595c 100644
--- a/C4/Items.pm
+++ b/C4/Items.pm
@@ -638,18 +638,24 @@ sub ModItemTransfer {
 
 =head2 ModDateLastSeen
 
-  ModDateLastSeen($itemnum);
+ModDateLastSeen( $itemnumber, $leave_item_lost );
 
 Mark item as seen. Is called when an item is issued, returned or manually marked during inventory/stocktaking.
-C<$itemnum> is the item number
+C<$itemnumber> is the item number
+C<$leave_item_lost> determines if a lost item will be found or remain lost
 
 =cut
 
 sub ModDateLastSeen {
-    my ($itemnumber) = @_;
-    
+    my ( $itemnumber, $leave_item_lost ) = @_;
+
     my $today = output_pref({ dt => dt_from_string, dateformat => 'iso', dateonly => 1 });
-    ModItem({ itemlost => 0, datelastseen => $today }, undef, $itemnumber);
+
+    my $params;
+    $params->{datelastseen} = $today;
+    $params->{itemlost} = 0 unless $leave_item_lost;
+
+    ModItem( $params, undef, $itemnumber );
 }
 
 =head2 DelItem
diff --git a/koha-tmpl/intranet-tmpl/prog/en/modules/circ/returns.tt b/koha-tmpl/intranet-tmpl/prog/en/modules/circ/returns.tt
index bd5393c119..f3daa0e064 100644
--- a/koha-tmpl/intranet-tmpl/prog/en/modules/circ/returns.tt
+++ b/koha-tmpl/intranet-tmpl/prog/en/modules/circ/returns.tt
@@ -616,7 +616,12 @@ $(document).ready(function () {
                 <p class="problem">Local use recorded</p>
             [% END %]
             [% IF ( errmsgloo.waslost ) %]
-                <p class="problem">Item was lost, now found.</p>
+                [% IF Koha.Preference('BlockReturnOfLostItems') %]
+                    <p class="problem">Item is lost, cannot be checked in.</p>
+                [% ELSE %]
+                    <p class="problem">Item was lost, now found.</p>
+                [% END %]
+
                 [% IF LostItemFeeRefunded and not Koha.Preference('BlockReturnOfLostItems') %]
                     <p class="problem">A refund has been applied to the borrowing patron's account.</p>
                 [% ELSIF Koha.Preference('BlockReturnOfLostItems') %]