diff --git a/packages/block-library/src/navigation-link/shared/test/use-entity-binding.js b/packages/block-library/src/navigation-link/shared/test/use-entity-binding.js
index 74bb603a05a699..62513e1d55b178 100644
--- a/packages/block-library/src/navigation-link/shared/test/use-entity-binding.js
+++ b/packages/block-library/src/navigation-link/shared/test/use-entity-binding.js
@@ -7,22 +7,21 @@
  */
 import { renderHook, act } from '@testing-library/react';
 
-/**
- * WordPress dependencies
- */
-import { useBlockBindingsUtils } from '@wordpress/block-editor';
-
 /**
  * Internal dependencies
  */
 import { useEntityBinding } from '../use-entity-binding';
 
-// Mock the useBlockBindingsUtils hook
+// Mock the entire @wordpress/block-editor module
 jest.mock( '@wordpress/block-editor', () => ( {
-	...jest.requireActual( '@wordpress/block-editor' ),
 	useBlockBindingsUtils: jest.fn(),
 } ) );
 
+/**
+ * WordPress dependencies
+ */
+import { useBlockBindingsUtils } from '@wordpress/block-editor';
+
 describe( 'useEntityBinding', () => {
 	const mockUpdateBlockBindings = jest.fn();
 
@@ -33,23 +32,117 @@ describe( 'useEntityBinding', () => {
 		} );
 	} );
 
-	it( 'should return hasUrlBinding as false when no binding exists', () => {
-		const attributes = {
-			metadata: {},
-			id: null,
-		};
+	describe( 'hasUrlBinding', () => {
+		it( 'should return false when no binding exists', () => {
+			const attributes = {
+				metadata: {},
+				id: null,
+			};
+
+			const { result } = renderHook( () =>
+				useEntityBinding( {
+					clientId: 'test-client-id',
+					attributes,
+				} )
+			);
+
+			expect( result.current.hasUrlBinding ).toBe( false );
+		} );
 
-		const { result } = renderHook( () =>
-			useEntityBinding( {
-				clientId: 'test-client-id',
-				attributes,
-			} )
-		);
+		it( 'should return true when core/entity binding exists with id', () => {
+			const attributes = {
+				metadata: {
+					bindings: {
+						url: {
+							source: 'core/entity',
+							args: { key: 'url' },
+						},
+					},
+				},
+				id: 123,
+			};
+
+			const { result } = renderHook( () =>
+				useEntityBinding( {
+					clientId: 'test-client-id',
+					attributes,
+				} )
+			);
+
+			expect( result.current.hasUrlBinding ).toBe( true );
+		} );
+
+		it( 'should return false when source is not core/entity', () => {
+			const attributes = {
+				metadata: {
+					bindings: {
+						url: {
+							source: 'some-other-source',
+							args: { key: 'url' },
+						},
+					},
+				},
+				id: 123,
+			};
+
+			const { result } = renderHook( () =>
+				useEntityBinding( {
+					clientId: 'test-client-id',
+					attributes,
+				} )
+			);
 
-		expect( result.current.hasUrlBinding ).toBe( false );
+			expect( result.current.hasUrlBinding ).toBe( false );
+		} );
+
+		it( 'should return false when core/entity binding exists but no id', () => {
+			const attributes = {
+				metadata: {
+					bindings: {
+						url: {
+							source: 'core/entity',
+							args: { key: 'url' },
+						},
+					},
+				},
+				id: null,
+			};
+
+			const { result } = renderHook( () =>
+				useEntityBinding( {
+					clientId: 'test-client-id',
+					attributes,
+				} )
+			);
+
+			expect( result.current.hasUrlBinding ).toBe( false );
+		} );
+
+		it( 'should return false when binding source is null', () => {
+			const attributes = {
+				metadata: {
+					bindings: {
+						url: {
+							source: null,
+							args: null,
+						},
+					},
+				},
+				id: 123,
+			};
+
+			const { result } = renderHook( () =>
+				useEntityBinding( {
+					clientId: 'test-client-id',
+					attributes,
+				} )
+			);
+
+			expect( result.current.hasUrlBinding ).toBe( false );
+		} );
 	} );
 
-	it( 'should return hasUrlBinding as true when binding exists', () => {
+	it( 'should clear binding when clearBinding is called and binding exists', () => {
 		const attributes = {
 			metadata: {
 				bindings: {
@@ -69,16 +162,42 @@ describe( 'useEntityBinding', () => {
 			} )
 		);
 
-		expect( result.current.hasUrlBinding ).toBe( true );
+		act( () => {
+			result.current.clearBinding();
+		} );
+
+		expect( mockUpdateBlockBindings ).toHaveBeenCalledWith( {
+			url: undefined,
+		} );
+	} );
+
+	it( 'should NOT clear binding when clearBinding is called and no binding exists', () => {
+		const attributes = {
+			metadata: {},
+			id: null,
+		};
+
+		const { result } = renderHook( () =>
+			useEntityBinding( {
+				clientId: 'test-client-id',
+				attributes,
+			} )
+		);
+
+		act( () => {
+			result.current.clearBinding();
+		} );
+
+		expect( mockUpdateBlockBindings ).not.toHaveBeenCalled();
 	} );
 
-	it( 'should clear binding when clearBinding is called', () => {
+	it( 'should NOT clear binding when binding metadata exists but source is null', () => {
 		const attributes = {
 			metadata: {
 				bindings: {
 					url: {
-						source: 'core/entity',
-						args: { key: 'url' },
+						source: null,
+						args: null,
 					},
 				},
 			},
@@ -96,12 +215,7 @@ describe( 'useEntityBinding', () => {
 			result.current.clearBinding();
 		} );
 
-		expect( mockUpdateBlockBindings ).toHaveBeenCalledWith( {
-			url: {
-				source: null,
-				args: null,
-			},
-		} );
+		expect( mockUpdateBlockBindings ).not.toHaveBeenCalled();
 	} );
 
 	it( 'should create binding when createBinding is called', () => {
diff --git a/packages/block-library/src/navigation-link/shared/use-entity-binding.js b/packages/block-library/src/navigation-link/shared/use-entity-binding.js
index a07e77b3e84ddb..a24127d1004a31 100644
--- a/packages/block-library/src/navigation-link/shared/use-entity-binding.js
+++ b/packages/block-library/src/navigation-link/shared/use-entity-binding.js
@@ -19,16 +19,17 @@ export function useEntityBinding( { clientId, attributes } ) {
 	const { updateBlockBindings } = useBlockBindingsUtils( clientId );
 	const { metadata, id } = attributes;
 
-	const hasUrlBinding = !! metadata?.bindings?.url && !! id;
+	// Check if there's a URL binding with the core/entity source
+	const hasUrlBinding =
+		metadata?.bindings?.url?.source === 'core/entity' && !! id;
 
 	const clearBinding = useCallback( () => {
-		updateBlockBindings( {
-			url: {
-				source: null,
-				args: null,
-			},
-		} );
-	}, [ updateBlockBindings ] );
+		// Only clear if there's actually a valid binding to clear
+		if ( hasUrlBinding ) {
+			// Remove the URL binding by setting it to undefined
+			updateBlockBindings( { url: undefined } );
+		}
+	}, [ hasUrlBinding, updateBlockBindings ] );
 
 	const createBinding = useCallback( () => {
 		updateBlockBindings( {