diff --git a/includes/admin/wc-admin-functions.php b/includes/admin/wc-admin-functions.php
index 26be8a6a88d..32636fb904f 100644
--- a/includes/admin/wc-admin-functions.php
+++ b/includes/admin/wc-admin-functions.php
@@ -218,6 +218,14 @@ function wc_maybe_adjust_line_item_product_stock( $item, $item_quantity = -1 ) {
 	$refunded_item_quantity = $order->get_qty_refunded_for_item( $item->get_id() );
 	$diff                   = $item_quantity + $refunded_item_quantity - $already_reduced_stock;
 
+	/*
+	 * 0 as $item_quantity usually indicates we're deleting the order item.
+	 * We need to perform different calculations for this case.
+	 */
+	if ( 0 === $item_quantity ) {
+		$diff = min( absint( $refunded_item_quantity ), $already_reduced_stock ) * -1;
+	}
+
 	if ( $diff < 0 ) {
 		$new_stock = wc_update_product_stock( $product, $diff * -1, 'increase' );
 	} elseif ( $diff > 0 ) {
diff --git a/tests/php/includes/admin/class-wc-admin-functions-test.php b/tests/php/includes/admin/class-wc-admin-functions-test.php
index b881fe9a54d..18787eb02a7 100644
--- a/tests/php/includes/admin/class-wc-admin-functions-test.php
+++ b/tests/php/includes/admin/class-wc-admin-functions-test.php
@@ -69,4 +69,221 @@ class WC_Admin_Functions_Test extends \WC_Unit_Test_Case {
 		$this->assertEquals( 990, $product->get_stock_quantity() );
 	}
 
+	/**
+	 * Test adjust line item function when order item is deleted after a full refund with restock.
+	 *
+	 * @link https://github.com/woocommerce/woocommerce/issues/27504.
+	 */
+	public function test_admin_delete_order_item_after_full_refund_restock() {
+		$product = WC_Helper_Product::create_simple_product();
+		$product->set_manage_stock( true );
+		$product->set_stock_quantity( 100 );
+		$product->set_price( 100 );
+		$product->set_regular_price( 100 );
+		$product->save();
+
+		$order = WC_Helper_Order::create_order();
+		$order->set_status( 'on-hold' );
+		$order_item_id = $order->add_product( $product, 10 );
+		$order_item = new WC_Order_Item_Product( $order_item_id );
+
+		// Stocks have not reduced yet.
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item );
+
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 90, $product->get_stock_quantity() );
+
+		$args = array(
+			'amount'     => 10,
+			'order_id'   => $order->get_id(),
+			'line_items' => array(
+				$order_item_id => array(
+					'qty'          => 10,
+					'refund_total' => 0,
+				),
+			),
+			'refund_payment' => false,
+			'restock_items'  => true,
+		);
+
+		wc_create_refund( $args );
+
+		$order->remove_item( $order_item_id );
+		$order->save();
+
+		$order_item->delete_meta_data( '_reduced_stock' );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item, 0 );
+
+		$product = wc_get_product( $product->get_id() );
+
+		// Stocks should have been increased back to original level.
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+	}
+
+	/**
+	 * Test adjust line item function when order item is deleted after a full refund with no restock.
+	 *
+	 * @link https://github.com/woocommerce/woocommerce/issues/27504.
+	 */
+	public function test_admin_delete_order_item_after_full_refund_no_restock() {
+		$product = WC_Helper_Product::create_simple_product();
+		$product->set_manage_stock( true );
+		$product->set_stock_quantity( 100 );
+		$product->set_price( 100 );
+		$product->set_regular_price( 100 );
+		$product->save();
+
+		$order = WC_Helper_Order::create_order();
+		$order->set_status( 'on-hold' );
+		$order_item_id = $order->add_product( $product, 10 );
+		$order_item = new WC_Order_Item_Product( $order_item_id );
+
+		// Stocks have not reduced yet.
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item );
+
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 90, $product->get_stock_quantity() );
+
+		$args = array(
+			'amount'     => 10,
+			'order_id'   => $order->get_id(),
+			'line_items' => array(
+				$order_item_id => array(
+					'qty'          => 10,
+					'refund_total' => 0,
+				),
+			),
+			'refund_payment' => false,
+			'restock_items'  => false,
+		);
+
+		wc_create_refund( $args );
+
+		$order->remove_item( $order_item_id );
+		$order->save();
+
+		wc_maybe_adjust_line_item_product_stock( $order_item, 0 );
+
+		$product = wc_get_product( $product->get_id() );
+
+		// Stocks should have been increased back to original level.
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+	}
+
+	/**
+	 * Test adjust line item function when order item is deleted after a partial refund with restock.
+	 *
+	 * @link https://github.com/woocommerce/woocommerce/issues/27504.
+	 */
+	public function test_admin_delete_order_item_after_partial_refund_restock() {
+		$product = WC_Helper_Product::create_simple_product();
+		$product->set_manage_stock( true );
+		$product->set_stock_quantity( 100 );
+		$product->set_price( 100 );
+		$product->set_regular_price( 100 );
+		$product->save();
+
+		$order = WC_Helper_Order::create_order();
+		$order->set_status( 'on-hold' );
+		$order_item_id = $order->add_product( $product, 10 );
+		$order_item = new WC_Order_Item_Product( $order_item_id );
+
+		// Stocks have not reduced yet.
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item );
+
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 90, $product->get_stock_quantity() );
+
+		$args = array(
+			'amount'     => 10,
+			'order_id'   => $order->get_id(),
+			'line_items' => array(
+				$order_item_id => array(
+					'qty'          => 5,
+					'refund_total' => 0,
+				),
+			),
+			'refund_payment' => false,
+			'restock_items'  => true,
+		);
+
+		wc_create_refund( $args );
+
+		$order->remove_item( $order_item_id );
+		$order->save();
+
+		$order_item->update_meta_data( '_reduced_stock', 5 );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item, 0 );
+
+		$product = wc_get_product( $product->get_id() );
+
+		// Stocks should have been increased back to original level.
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+	}
+
+	/**
+	 * Test adjust line item function when order item is deleted after a partial refund with no restock.
+	 *
+	 * @link https://github.com/woocommerce/woocommerce/issues/27504.
+	 */
+	public function test_admin_delete_order_item_after_partial_refund_no_restock() {
+		$product = WC_Helper_Product::create_simple_product();
+		$product->set_manage_stock( true );
+		$product->set_stock_quantity( 100 );
+		$product->set_price( 100 );
+		$product->set_regular_price( 100 );
+		$product->save();
+
+		$order = WC_Helper_Order::create_order();
+		$order->set_status( 'on-hold' );
+		$order_item_id = $order->add_product( $product, 10 );
+		$order_item = new WC_Order_Item_Product( $order_item_id );
+
+		// Stocks have not reduced yet.
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 100, $product->get_stock_quantity() );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item );
+
+		$product = wc_get_product( $product->get_id() );
+		$this->assertEquals( 90, $product->get_stock_quantity() );
+
+		$args = array(
+			'amount'     => 10,
+			'order_id'   => $order->get_id(),
+			'line_items' => array(
+				$order_item_id => array(
+					'qty'          => 5,
+					'refund_total' => 0,
+				),
+			),
+			'refund_payment' => false,
+			'restock_items'  => false,
+		);
+
+		wc_create_refund( $args );
+
+		$order->remove_item( $order_item_id );
+		$order->save();
+
+		$order_item->update_meta_data( '_reduced_stock', 5 );
+
+		wc_maybe_adjust_line_item_product_stock( $order_item, 0 );
+
+		$product = wc_get_product( $product->get_id() );
+
+		// Stocks should have been increased to orignal amount minus the partially refunded stock.
+		$this->assertEquals( 95, $product->get_stock_quantity() );
+	}
 }