diff --git a/changelog.d/6781.bugfix b/changelog.d/6781.bugfix
new file mode 100644
index 0000000000..47cd671bff
--- /dev/null
+++ b/changelog.d/6781.bugfix
@@ -0,0 +1 @@
+Fixed third party event rules function `on_create_room`'s return value being ignored.
diff --git a/synapse/events/third_party_rules.py b/synapse/events/third_party_rules.py
index 86f7e5f8aa..459132d388 100644
--- a/synapse/events/third_party_rules.py
+++ b/synapse/events/third_party_rules.py
@@ -74,15 +74,16 @@ class ThirdPartyEventRules(object):
             is_requester_admin (bool): If the requester is an admin
 
         Returns:
-            defer.Deferred
+            defer.Deferred[bool]: Whether room creation is allowed or denied.
         """
 
         if self.third_party_rules is None:
-            return
+            return True
 
-        yield self.third_party_rules.on_create_room(
+        ret = yield self.third_party_rules.on_create_room(
             requester, config, is_requester_admin
         )
+        return ret
 
     @defer.inlineCallbacks
     def check_threepid_can_be_invited(self, medium, address, room_id):
diff --git a/synapse/handlers/room.py b/synapse/handlers/room.py
index 559e3399b8..ab07edd2fc 100644
--- a/synapse/handlers/room.py
+++ b/synapse/handlers/room.py
@@ -579,9 +579,13 @@ class RoomCreationHandler(BaseHandler):
 
         # Check whether the third party rules allows/changes the room create
         # request.
-        yield self.third_party_event_rules.on_create_room(
+        event_allowed = yield self.third_party_event_rules.on_create_room(
             requester, config, is_requester_admin=is_requester_admin
         )
+        if not event_allowed:
+            raise SynapseError(
+                403, "You are not permitted to create rooms", Codes.FORBIDDEN
+            )
 
         if not is_requester_admin and not self.spam_checker.user_may_create_room(
             user_id