diff --git a/includes/class-wc-discounts.php b/includes/class-wc-discounts.php
index 7ff1c8a22c7..9780c4d3c5d 100644
--- a/includes/class-wc-discounts.php
+++ b/includes/class-wc-discounts.php
@@ -764,12 +764,12 @@ class WC_Discounts {
 	 * @return bool
 	 */
 	protected function validate_coupon_sale_items( $coupon ) {
-		if ( $coupon->get_exclude_sale_items() ) {
-			$valid = false;
+		if ( $coupon->get_exclude_sale_items() && 'fixed_product' !== $coupon->get_discount_type() ) {
+			$valid = true;
 
 			foreach ( $this->get_items_to_validate() as $item ) {
-				if ( $item->product && ! $item->product->is_on_sale() ) {
-					$valid = true;
+				if ( $item->product && $item->product->is_on_sale() ) {
+					$valid = false;
 					break;
 				}
 			}
diff --git a/tests/unit-tests/discounts/discounts.php b/tests/unit-tests/discounts/discounts.php
index a9e318a9474..2dff8493279 100644
--- a/tests/unit-tests/discounts/discounts.php
+++ b/tests/unit-tests/discounts/discounts.php
@@ -1393,4 +1393,78 @@ class WC_Tests_Discounts extends WC_Unit_Test_Case {
 
 		remove_filter( 'woocommerce_coupon_get_discount_amount', array( $this, 'filter_woocommerce_coupon_get_discount_amount' ) );
 	}
+
+	/**
+	 * Test the is_coupon_valid logic with sale items.
+	 *
+	 * @since 3.4.5
+	 */
+	public function test_is_coupon_valid_sale_items() {
+
+		$product1 = new WC_Product_Simple();
+		$product1->set_regular_price( 20 );
+		$product1->save();
+
+		$product2 = new WC_Product_Simple();
+		$product2->set_regular_price( 20 );
+		$product2->set_sale_price( 10 );
+		$product2->save();
+
+		$coupon_cart = new WC_Coupon();
+		$coupon_cart->set_props( array(
+			'amount'             => 5,
+			'discount_type'      => 'fixed_cart',
+			'exclude_sale_items' => false,
+		) );
+		$coupon_cart->save();
+
+		$coupon_cart_no_sale = new WC_Coupon();
+		$coupon_cart_no_sale->set_props( array(
+			'amount'             => 5,
+			'discount_type'      => 'fixed_cart',
+			'exclude_sale_items' => true,
+		) );
+		$coupon_cart_no_sale->save();
+
+		$coupon_product = new WC_Coupon();
+		$coupon_product->set_props( array(
+			'amount'             => 5,
+			'discount_type'      => 'fixed_product',
+			'exclude_sale_items' => false,
+		) );
+		$coupon_product->save();
+
+		$coupon_product_no_sale = new WC_Coupon();
+		$coupon_product_no_sale->set_props( array(
+			'amount'             => 5,
+			'discount_type'      => 'fixed_product',
+			'exclude_sale_items' => true,
+		) );
+		$coupon_product_no_sale->save();
+
+		WC()->cart->empty_cart();
+		WC()->cart->add_to_cart( $product1->get_id(), 1 );
+		WC()->cart->add_to_cart( $product2->get_id(), 1 );
+		$discounts = new WC_Discounts( WC()->cart );
+
+		// Cart coupon with no sale restriction should be valid if sale item is in cart.
+		$this->assertTrue( $discounts->is_coupon_valid( $coupon_cart ) );
+
+		// Cart coupon with sale restriction should not be valid if sale item is in cart.
+		$this->assertTrue( is_wp_error( $discounts->is_coupon_valid( $coupon_cart_no_sale ) ) );
+
+		// Product coupon with no sale restriction should be valid if sale item is in cart.
+		$this->assertTrue( $discounts->is_coupon_valid( $coupon_product ) );
+
+		// Product coupon with sale restriction should be valid if sale item is in cart,
+		// but it should not apply the discount to the sale item.
+		$this->assertTrue( $discounts->is_coupon_valid( $coupon_product_no_sale ) );
+
+		$discounts->apply_coupon( $coupon_product_no_sale );
+		$coupon_discounts = $discounts->get_discounts_by_coupon();
+		$coupon_discount = reset( $coupon_discounts );
+
+		// $5 coupon should only get applied to the one cart item not on sale.
+		$this->assertEquals( 5, $coupon_discount );
+	}
 }