diff --git a/src/components/CategoryPicker/index.tsx b/src/components/CategoryPicker/index.tsx
index 737f722ce394..16f811681165 100644
--- a/src/components/CategoryPicker/index.tsx
+++ b/src/components/CategoryPicker/index.tsx
@@ -13,7 +13,8 @@ import useThemeStyles from '@hooks/useThemeStyles';
 import {getCategoryListSections} from '@libs/CategoryOptionListUtils';
 import type {Category} from '@libs/CategoryOptionListUtils';
 import {getEnabledCategoriesCount} from '@libs/CategoryUtils';
-import {getHeaderMessageForNonUserList} from '@libs/OptionsListUtils';
+import {getHeaderMessageForNonUserList, getNoneOption} from '@libs/OptionsListUtils';
+import type {OptionTree} from '@libs/OptionsListUtils/types';
 
 import CONST from '@src/CONST';
 import ONYXKEYS from '@src/ONYXKEYS';
@@ -25,6 +26,7 @@ type CategoryPickerProps = {
     policyID: string | undefined;
     selectedCategory?: string;
     onSubmit: (item: ListItem) => void;
+    shouldShowNoneOption?: boolean;
 
     /**
      * If enabled, the content will have a bottom padding equal to account for the safe bottom area inset.
@@ -46,7 +48,7 @@ const getSelectedOptions = (selectedCategory?: string): Category[] => {
     ];
 };
 
-function CategoryPicker({selectedCategory, policyID, onSubmit, addBottomSafeAreaPadding = false}: CategoryPickerProps) {
+function CategoryPicker({selectedCategory, policyID, onSubmit, shouldShowNoneOption = false, addBottomSafeAreaPadding = false}: CategoryPickerProps) {
     const styles = useThemeStyles();
     const {inputCallbackRef} = useAutoFocusInput();
     const [policyCategories] = useOnyx(`${ONYXKEYS.COLLECTION.POLICY_CATEGORIES}${policyID}`);
@@ -71,7 +73,28 @@ function CategoryPicker({selectedCategory, policyID, onSubmit, addBottomSafeArea
         translate,
     });
 
-    const categoryData = sections?.at(0)?.data ?? [];
+    const noneOption: OptionTree[] = shouldShowNoneOption
+        ? getNoneOption(debouncedSearchValue, !selectedCategory, translate).map(
+              (option): OptionTree => ({
+                  text: option.text,
+                  keyForList: option.keyForList,
+                  searchText: '',
+                  tooltipText: option.text,
+                  isDisabled: false,
+                  isSelected: option.isSelected,
+              }),
+          )
+        : [];
+    const noneOptionSection = {
+        title: '',
+        data: noneOption,
+        sectionIndex: -1,
+    };
+    const selectedCategorySectionIndex = sections.findIndex((section) => section.data.some((category) => category.searchText === selectedCategory));
+    const sectionsWithNoneOption =
+        noneOption.length > 0 ? [...sections.slice(0, selectedCategorySectionIndex + 1), noneOptionSection, ...sections.slice(selectedCategorySectionIndex + 1)] : sections;
+
+    const categoryData = sectionsWithNoneOption.flatMap((section) => section.data);
     const categoriesCount = getEnabledCategoriesCount(categories);
     const selectedOptionKey = categoryData.find((category) => category.searchText === selectedCategory)?.keyForList;
 
@@ -87,7 +110,7 @@ function CategoryPicker({selectedCategory, policyID, onSubmit, addBottomSafeArea
 
     return (
         <SelectionListWithSections
-            sections={sections}
+            sections={sectionsWithNoneOption}
             onSelectRow={onSubmit}
             ListItem={SingleSelectListItem}
             shouldShowTextInput={categoriesCount >= CONST.STANDARD_LIST_ITEM_LIMIT}
diff --git a/src/components/CustomUnitDefaultCategorySelector/index.tsx b/src/components/CustomUnitDefaultCategorySelector/index.tsx
index 45b1e3c8ec5a..3ce21b18d9ee 100644
--- a/src/components/CustomUnitDefaultCategorySelector/index.tsx
+++ b/src/components/CustomUnitDefaultCategorySelector/index.tsx
@@ -1,5 +1,6 @@
 import MenuItemWithTopDescription from '@components/MenuItemWithTopDescription';
 
+import useLocalize from '@hooks/useLocalize';
 import useThemeStyles from '@hooks/useThemeStyles';
 
 import {getDecodedCategoryName} from '@libs/CategoryUtils';
@@ -35,8 +36,10 @@ type CustomUnitDefaultCategorySelectorProps = {
 
 function CustomUnitDefaultCategorySelector({defaultValue = '', wrapperStyle, label, focused, customUnitID, interactive = true}: CustomUnitDefaultCategorySelectorProps) {
     const styles = useThemeStyles();
+    const {translate} = useLocalize();
 
     const decodedCategoryName = getDecodedCategoryName(defaultValue);
+    const title = decodedCategoryName || translate('common.none');
     const descStyle = decodedCategoryName.length === 0 ? styles.textNormal : null;
 
     const onPress = () => {
@@ -46,7 +49,7 @@ function CustomUnitDefaultCategorySelector({defaultValue = '', wrapperStyle, lab
     return (
         <MenuItemWithTopDescription
             shouldShowRightIcon={interactive}
-            title={decodedCategoryName}
+            title={title}
             description={label}
             descriptionTextStyle={descStyle}
             onPress={onPress}
diff --git a/src/components/Search/SearchSingleSelectionPicker.tsx b/src/components/Search/SearchSingleSelectionPicker.tsx
index 25278ad8394d..3058001be328 100644
--- a/src/components/Search/SearchSingleSelectionPicker.tsx
+++ b/src/components/Search/SearchSingleSelectionPicker.tsx
@@ -5,10 +5,10 @@ import useDebouncedState from '@hooks/useDebouncedState';
 import useLocalize from '@hooks/useLocalize';
 
 import Navigation from '@libs/Navigation/Navigation';
+import {getNoneOption} from '@libs/OptionsListUtils';
 import type {OptionData} from '@libs/ReportUtils';
 import {sortOptionsWithEmptyValue} from '@libs/SearchQueryUtils';
 
-import CONST from '@src/CONST';
 import ROUTES from '@src/ROUTES';
 import type {Route} from '@src/ROUTES';
 
@@ -53,17 +53,7 @@ function SearchSingleSelectionPicker({
     }, [initiallySelectedItem]);
 
     const searchLower = debouncedSearchTerm?.toLowerCase();
-    const noneItem =
-        allowNoneOption && translate('common.none').toLowerCase().includes(searchLower)
-            ? [
-                  {
-                      text: translate('common.none'),
-                      keyForList: CONST.SEARCH.NONE_OPTION_KEY,
-                      isSelected: !selectedItem?.value,
-                      value: '',
-                  },
-              ]
-            : [];
+    const noneItem = allowNoneOption ? getNoneOption(debouncedSearchTerm, !selectedItem?.value, translate) : [];
 
     const initiallySelectedItemSection =
         initiallySelectedItem?.name.toLowerCase().includes(searchLower) || initiallySelectedItem?.searchableText?.toLowerCase().includes(searchLower)
diff --git a/src/libs/OptionsListUtils/index.ts b/src/libs/OptionsListUtils/index.ts
index 95204ae05c6d..d5aa342aec08 100644
--- a/src/libs/OptionsListUtils/index.ts
+++ b/src/libs/OptionsListUtils/index.ts
@@ -2979,6 +2979,22 @@ function getHeaderMessageForNonUserList(hasSelectableOptions: boolean, searchVal
     return '';
 }
 
+function getNoneOption(searchValue: string, isSelected: boolean, translate: LocalizedTranslate) {
+    const noneText = translate('common.none');
+    if (!noneText.toLowerCase().includes(searchValue.toLowerCase())) {
+        return [];
+    }
+
+    return [
+        {
+            text: noneText,
+            keyForList: CONST.SEARCH.NONE_OPTION_KEY,
+            isSelected,
+            value: '',
+        },
+    ];
+}
+
 /**
  * Helper method to check whether an option can show tooltip or not
  */
@@ -3397,6 +3413,7 @@ export {
     getLastActorDisplayName,
     getLastActorDisplayNameFromLastVisibleActions,
     getLastMessageTextForReport,
+    getNoneOption,
     getParticipantsOption,
     getPersonalDetailsForAccountIDs,
     getPolicyExpenseReportOption,
diff --git a/src/libs/actions/Policy/Category.ts b/src/libs/actions/Policy/Category.ts
index e63d7c958fbc..31d9dbe58337 100644
--- a/src/libs/actions/Policy/Category.ts
+++ b/src/libs/actions/Policy/Category.ts
@@ -31,7 +31,7 @@ import getIsNarrowLayout from '@libs/getIsNarrowLayout';
 import Log from '@libs/Log';
 import enhanceParameters from '@libs/Network/enhanceParameters';
 import {hasEnabledOptions} from '@libs/OptionsListUtils';
-import {goBackWhenEnableFeature} from '@libs/PolicyUtils';
+import {goBackWhenEnableFeature, removePendingFieldsFromCustomUnit} from '@libs/PolicyUtils';
 import {pushTransactionAutoSelectionsOnyxData, pushTransactionViolationsOnyxData} from '@libs/ReportUtils';
 
 import {getFinishOnboardingTaskOnyxData} from '@userActions/Task';
@@ -40,7 +40,7 @@ import CONST from '@src/CONST';
 import ONYXKEYS from '@src/ONYXKEYS';
 import type {Policy, PolicyCategories, PolicyCategory, Report, ReportAction} from '@src/types/onyx';
 import type {ImportFinalModal} from '@src/types/onyx/ImportedSpreadsheet';
-import type {ApprovalRule, ExpenseRule, MccGroup} from '@src/types/onyx/Policy';
+import type {ApprovalRule, CustomUnit, ExpenseRule, MccGroup} from '@src/types/onyx/Policy';
 import type {PolicyCategoryExpenseLimitType} from '@src/types/onyx/PolicyCategory';
 import type {OnyxData} from '@src/types/onyx/Request';
 
@@ -1454,7 +1454,7 @@ function enablePolicyCategories(policyData: PolicyData, enabled: boolean, should
     }
 }
 
-function setPolicyCustomUnitDefaultCategory(policyID: string, customUnitID: string, oldCategory: string | undefined, category: string) {
+function setPolicyCustomUnitDefaultCategory(policyID: string, customUnitID: string, oldCategory: string | undefined, category: string, customUnit?: CustomUnit) {
     const optimisticData: Array<OnyxUpdate<typeof ONYXKEYS.COLLECTION.POLICY>> = [
         {
             onyxMethod: Onyx.METHOD.MERGE,
@@ -1504,13 +1504,25 @@ function setPolicyCustomUnitDefaultCategory(policyID: string, customUnitID: stri
         },
     ];
 
-    const params = {
-        policyID,
-        customUnitID,
-        category,
-    };
+    const shouldUpdateCustomUnit = category === '' && customUnit !== undefined;
+    const command = shouldUpdateCustomUnit ? WRITE_COMMANDS.UPDATE_WORKSPACE_CUSTOM_UNIT : WRITE_COMMANDS.SET_CUSTOM_UNIT_DEFAULT_CATEGORY;
+    const params = shouldUpdateCustomUnit
+        ? {
+              policyID,
+              customUnit: JSON.stringify(
+                  removePendingFieldsFromCustomUnit({
+                      ...customUnit,
+                      defaultCategory: category,
+                  }),
+              ),
+          }
+        : {
+              policyID,
+              customUnitID,
+              category,
+          };
 
-    API.write(WRITE_COMMANDS.SET_CUSTOM_UNIT_DEFAULT_CATEGORY, params, {
+    API.write(command, params, {
         optimisticData,
         successData,
         failureData,
diff --git a/src/pages/workspace/categories/DynamicDefaultCategorySelectorPage.tsx b/src/pages/workspace/categories/DynamicDefaultCategorySelectorPage.tsx
index 53efdf1c9112..a16e23fd330b 100644
--- a/src/pages/workspace/categories/DynamicDefaultCategorySelectorPage.tsx
+++ b/src/pages/workspace/categories/DynamicDefaultCategorySelectorPage.tsx
@@ -31,18 +31,21 @@ function DynamicDefaultCategorySelectorPage({route}: DynamicDefaultCategorySelec
     const styles = useThemeStyles();
     const {translate} = useLocalize();
     const [policy] = useOnyx(`${ONYXKEYS.COLLECTION.POLICY}${getNonEmptyStringOnyxID(policyID)}`);
-    const currentCategory = policy?.customUnits?.[customUnitID]?.defaultCategory ?? '';
+    const customUnit = policy?.customUnits?.[customUnitID];
+    const currentCategory = customUnit?.defaultCategory ?? '';
     const backPath = useDynamicBackPath(DYNAMIC_ROUTES.DEFAULT_CATEGORY_SELECTOR.path);
 
     const onCategorySelected = (selectedCategory: ListItem) => {
-        if (!selectedCategory.searchText) {
+        const isNoneSelected = selectedCategory.keyForList === CONST.SEARCH.NONE_OPTION_KEY;
+        if (!isNoneSelected && !selectedCategory.searchText) {
             return;
         }
-        if (currentCategory === selectedCategory.searchText) {
+        const newCategory = isNoneSelected ? '' : (selectedCategory.searchText ?? '');
+        if (currentCategory === newCategory) {
             Navigation.goBack(backPath);
             return;
         }
-        setPolicyCustomUnitDefaultCategory(policyID, customUnitID, currentCategory, selectedCategory.searchText);
+        setPolicyCustomUnitDefaultCategory(policyID, customUnitID, currentCategory, newCategory, customUnit);
         Navigation.goBack(backPath);
     };
 
@@ -67,6 +70,7 @@ function DynamicDefaultCategorySelectorPage({route}: DynamicDefaultCategorySelec
                     policyID={policyID}
                     selectedCategory={currentCategory}
                     onSubmit={onCategorySelected}
+                    shouldShowNoneOption
                     addBottomSafeAreaPadding
                 />
             </ScreenWrapper>