diff --git a/browser/components/customizableui/src/CustomizableUI.jsm b/browser/components/customizableui/src/CustomizableUI.jsm
index a7e07d1da760..2685e8527d56 100644
--- a/browser/components/customizableui/src/CustomizableUI.jsm
+++ b/browser/components/customizableui/src/CustomizableUI.jsm
@@ -867,24 +867,27 @@ let CustomizableUIInternal = {
     if (node) {
       let parent = node.parentNode;
       while (parent && !(parent.customizationTarget ||
-                         parent.localName == "toolbarpaletteitem")) {
+                         parent == aWindow.gNavToolbox.palette)) {
         parent = parent.parentNode;
       }
 
-      if (parent && ((parent.customizationTarget == node.parentNode &&
-                      gBuildWindows.get(aWindow).has(parent.toolbox)) ||
-                     parent.localName == "toolbarpaletteitem")) {
-        // Normalize the removable attribute. For backwards compat, if
-        // the widget is not defined in a toolbox palette then absence
-        // of the "removable" attribute means it is not removable.
-        if (!node.hasAttribute("removable")) {
-          parent = parent.localName == "toolbarpaletteitem" ? parent.parentNode : parent;
-          // If we first see this in customization mode, it may be in the
-          // customization palette instead of the toolbox palette.
-          node.setAttribute("removable", !parent.customizationTarget);
+      if (parent) {
+        let nodeInArea = node.parentNode.localName == "toolbarpaletteitem" ?
+                         node.parentNode : node;
+        // Check if we're in a customization target, or in the palette:
+        if ((parent.customizationTarget == nodeInArea.parentNode &&
+             gBuildWindows.get(aWindow).has(parent.toolbox)) ||
+            aWindow.gNavToolbox.palette == nodeInArea.parentNode) {
+          // Normalize the removable attribute. For backwards compat, if
+          // the widget is not located in a toolbox palette then absence
+          // of the "removable" attribute means it is not removable.
+          if (!node.hasAttribute("removable")) {
+            // If we first see this in customization mode, it may be in the
+            // customization palette instead of the toolbox palette.
+            node.setAttribute("removable", !parent.customizationTarget);
+          }
+          return node;
         }
-
-        return node;
       }
     }
 
@@ -896,8 +899,8 @@ let CustomizableUIInternal = {
         let node = toolbox.palette.querySelector(idToSelector(aId));
         if (node) {
           // Normalize the removable attribute. For backwards compat, this
-          // is optional if the widget is defined in the toolbox palette,
-          // and defaults to *true*, unlike if it was defined elsewhere.
+          // is optional if the widget is located in the toolbox palette,
+          // and defaults to *true*, unlike if it was located elsewhere.
           if (!node.hasAttribute("removable")) {
             node.setAttribute("removable", true);
           }
diff --git a/browser/components/customizableui/test/browser.ini b/browser/components/customizableui/test/browser.ini
index e89ad23a32cb..c80d3284a82d 100644
--- a/browser/components/customizableui/test/browser.ini
+++ b/browser/components/customizableui/test/browser.ini
@@ -36,5 +36,6 @@ skip-if = true
 skip-if = os == "mac"
 
 [browser_938980_navbar_collapsed.js]
+[browser_940946_removable_from_navbar_customizemode.js]
 [browser_941083_invalidate_wrapper_cache_createWidget.js]
 [browser_panel_toggle.js]
diff --git a/browser/components/customizableui/test/browser_940946_removable_from_navbar_customizemode.js b/browser/components/customizableui/test/browser_940946_removable_from_navbar_customizemode.js
new file mode 100644
index 000000000000..ef3b22957b96
--- /dev/null
+++ b/browser/components/customizableui/test/browser_940946_removable_from_navbar_customizemode.js
@@ -0,0 +1,33 @@
+/* This Source Code Form is subject to the terms of the Mozilla Public
+ * License, v. 2.0. If a copy of the MPL was not distributed with this
+ * file, You can obtain one at http://mozilla.org/MPL/2.0/. */
+
+const kTestBtnId = "test-removable-navbar-customize-mode";
+
+let gTests = [
+  {
+    desc: "Items without the removable attribute in the navbar should be considered non-removable",
+    setup: function() {
+      let btn = createDummyXULButton(kTestBtnId, "Test removable in navbar in customize mode");
+      document.getElementById("nav-bar").customizationTarget.appendChild(btn);
+      return startCustomizing();
+    },
+    run: function() {
+      ok(!CustomizableUI.isWidgetRemovable(kTestBtnId), "Widget should not be considered removable");
+    },
+    teardown: function() {
+      yield endCustomizing();
+      document.getElementById(kTestBtnId).remove();
+    }
+  },
+];
+function asyncCleanup() {
+  yield endCustomizing();
+  yield resetCustomization();
+}
+
+function test() {
+  waitForExplicitFinish();
+  runTests(gTests, asyncCleanup);
+}
+