diff --git a/src/wallet/rpcwallet.cpp b/src/wallet/rpcwallet.cpp
--- a/src/wallet/rpcwallet.cpp
+++ b/src/wallet/rpcwallet.cpp
@@ -3183,10 +3183,10 @@
 
     std::string error;
     std::string warning;
-    WalletCreationStatus status;
-    std::shared_ptr<CWallet> wallet =
+    std::shared_ptr<CWallet> wallet;
+    WalletCreationStatus status =
         CreateWallet(config.GetChainParams(), *g_rpc_chain, passphrase, flags,
-                     request.params[0].get_str(), error, warning, status);
+                     request.params[0].get_str(), error, warning, wallet);
     if (status == WalletCreationStatus::CREATION_FAILED) {
         throw JSONRPCError(RPC_WALLET_ERROR, error);
     } else if (status == WalletCreationStatus::ENCRYPTION_FAILED) {
diff --git a/src/wallet/wallet.h b/src/wallet/wallet.h
--- a/src/wallet/wallet.h
+++ b/src/wallet/wallet.h
@@ -57,11 +57,11 @@
 
 enum class WalletCreationStatus { SUCCESS, CREATION_FAILED, ENCRYPTION_FAILED };
 
-std::shared_ptr<CWallet>
+WalletCreationStatus
 CreateWallet(const CChainParams &params, interfaces::Chain &chain,
              const SecureString &passphrase, uint64_t wallet_creation_flags,
              const std::string &name, std::string &error, std::string &warning,
-             WalletCreationStatus &status);
+             std::shared_ptr<CWallet> &result);
 
 //! Default for -keypool
 static const unsigned int DEFAULT_KEYPOOL_SIZE = 1000;
diff --git a/src/wallet/wallet.cpp b/src/wallet/wallet.cpp
--- a/src/wallet/wallet.cpp
+++ b/src/wallet/wallet.cpp
@@ -166,11 +166,11 @@
     return LoadWallet(chainParams, chain, WalletLocation(name), error, warning);
 }
 
-std::shared_ptr<CWallet>
+WalletCreationStatus
 CreateWallet(const CChainParams &params, interfaces::Chain &chain,
              const SecureString &passphrase, uint64_t wallet_creation_flags,
              const std::string &name, std::string &error, std::string &warning,
-             WalletCreationStatus &status) {
+             std::shared_ptr<CWallet> &result) {
     // Indicate that the wallet is actually supposed to be blank and not just
     // blank to make it encrypted
     bool create_blank = (wallet_creation_flags & WALLET_FLAG_BLANK_WALLET);
@@ -184,8 +184,7 @@
     WalletLocation location(name);
     if (location.Exists()) {
         error = "Wallet " + location.GetName() + " already exists.";
-        status = WalletCreationStatus::CREATION_FAILED;
-        return nullptr;
+        return WalletCreationStatus::CREATION_FAILED;
     }
 
     // Wallet::Verify will check if we're trying to create a wallet with a
@@ -194,8 +193,16 @@
     if (!CWallet::Verify(params, chain, location, false, wallet_error,
                          warning)) {
         error = "Wallet file verification failed: " + wallet_error;
-        status = WalletCreationStatus::CREATION_FAILED;
-        return nullptr;
+        return WalletCreationStatus::CREATION_FAILED;
+    }
+
+    // Do not allow a passphrase when private keys are disabled
+    if (!passphrase.empty() &&
+        (wallet_creation_flags & WALLET_FLAG_DISABLE_PRIVATE_KEYS)) {
+        error = "Passphrase provided but private keys are disabled. A "
+                "passphrase is only used to encrypt private keys, so cannot be "
+                "used for wallets with private keys disabled.";
+        return WalletCreationStatus::CREATION_FAILED;
     }
 
     // Make the wallet
@@ -203,8 +210,7 @@
         params, chain, location, wallet_creation_flags);
     if (!wallet) {
         error = "Wallet creation failed";
-        status = WalletCreationStatus::CREATION_FAILED;
-        return nullptr;
+        return WalletCreationStatus::CREATION_FAILED;
     }
 
     // Encrypt the wallet
@@ -212,15 +218,13 @@
         !(wallet_creation_flags & WALLET_FLAG_DISABLE_PRIVATE_KEYS)) {
         if (!wallet->EncryptWallet(passphrase)) {
             error = "Error: Wallet created but failed to encrypt.";
-            status = WalletCreationStatus::ENCRYPTION_FAILED;
-            return nullptr;
+            return WalletCreationStatus::ENCRYPTION_FAILED;
         }
         if (!create_blank) {
             // Unlock the wallet
             if (!wallet->Unlock(passphrase)) {
                 error = "Error: Wallet was encrypted but could not be unlocked";
-                status = WalletCreationStatus::ENCRYPTION_FAILED;
-                return nullptr;
+                return WalletCreationStatus::ENCRYPTION_FAILED;
             }
 
             // Set a seed for the wallet
@@ -234,8 +238,8 @@
     }
     AddWallet(wallet);
     wallet->postInitProcess();
-    status = WalletCreationStatus::SUCCESS;
-    return wallet;
+    result = wallet;
+    return WalletCreationStatus::SUCCESS;
 }
 
 const uint32_t BIP32_HARDENED_KEY_LIMIT = 0x80000000;
diff --git a/test/functional/wallet_createwallet.py b/test/functional/wallet_createwallet.py
--- a/test/functional/wallet_createwallet.py
+++ b/test/functional/wallet_createwallet.py
@@ -174,6 +174,16 @@
                                 False,
                                 '')
 
+        self.log.info(
+            'Using a passphrase with private keys disabled returns error')
+        assert_raises_rpc_error(
+            -4,
+            'Passphrase provided but private keys are disabled. A passphrase is only used to encrypt private keys, so cannot be used for wallets with private keys disabled.',
+            self.nodes[0].createwallet,
+            wallet_name='w8',
+            disable_private_keys=True,
+            passphrase='thisisapassphrase')
+
 
 if __name__ == '__main__':
     CreateWalletTest().main()