diff --git a/includes/incoming-events/class-woocommerce-membership-updated.php b/includes/incoming-events/class-woocommerce-membership-updated.php
index 25f31910..0321a1fe 100644
--- a/includes/incoming-events/class-woocommerce-membership-updated.php
+++ b/includes/incoming-events/class-woocommerce-membership-updated.php
@@ -99,7 +99,16 @@ public function update_membership() {
 			return;
 		}
 
-		$user_membership->update_status( $this->get_new_status() );
+		$status     = $this->get_new_status();
+		$is_managed = get_post_meta( $user_membership->get_id(), Memberships_Admin::NETWORK_MANAGED_META_KEY, true );
+		// If the membership is being cancelled or expired, remove the network managed flag.
+		if ( in_array( $status, [ 'cancelled', 'expired' ], true ) && $is_managed ) {
+			delete_post_meta( $user_membership->get_id(), Memberships_Admin::NETWORK_MANAGED_META_KEY );
+			// Otherwise, if the membership is not managed, set the network managed flag.
+		} elseif ( ! $is_managed ) {
+			update_post_meta( $user_membership->get_id(), Memberships_Admin::NETWORK_MANAGED_META_KEY, true );
+		}
+		$user_membership->update_status( $status );
 		$user_membership->add_note(
 			sprintf(
 				// translators: %s is the site URL.