diff --git a/subsys/fs/zms/zms.c b/subsys/fs/zms/zms.c
index 80b86a41cdc..95c2ef82c3b 100644
--- a/subsys/fs/zms/zms.c
+++ b/subsys/fs/zms/zms.c
@@ -13,8 +13,12 @@
 #include <zephyr/sys/crc.h>
 #include "zms_priv.h"
 #ifdef CONFIG_ZMS_LOOKUP_CACHE_FOR_SETTINGS
+#ifdef CONFIG_SETTINGS_ZMS_LEGACY
+#include <settings/settings_zms_legacy.h>
+#else
 #include <settings/settings_zms.h>
 #endif
+#endif
 
 #include <zephyr/logging/log.h>
 LOG_MODULE_REGISTER(fs_zms, CONFIG_ZMS_LOG_LEVEL);
@@ -34,6 +38,39 @@ static inline size_t zms_lookup_cache_pos(uint32_t id)
 	uint32_t hash = id;
 
 #ifdef CONFIG_ZMS_LOOKUP_CACHE_FOR_SETTINGS
+#ifdef CONFIG_SETTINGS_ZMS_LEGACY
+	/*
+	 * 1. The ZMS settings backend uses up to (ZMS_NAME_ID_OFFSET - 1) ZMS IDs to
+	      store keys and equal number of ZMS IDs to store values.
+	 * 2. For each key-value pair, the value is stored at ZMS ID greater by exactly
+	 *    ZMS_NAME_ID_OFFSET than ZMS ID that holds the key.
+	 * 3. The backend tries to minimize the range of ZMS IDs used to store keys.
+	 *    That is, ZMS IDs are allocated sequentially, and freed ZMS IDs are reused
+	 *    before allocating new ones.
+	 *
+	 * Therefore, to assure the least number of collisions in the lookup cache,
+	 * the least significant bit of the hash indicates whether the given ZMS ID
+	 * represents a key or a value, and remaining bits of the hash are set to
+	 * the ordinal number of the key-value pair. Consequently, the hash function
+	 * provides the following mapping:
+	 *
+	 * 1st settings key   => hash 0
+	 * 1st settings value => hash 1
+	 * 2nd settings key   => hash 2
+	 * 2nd settings value => hash 3
+	 * ...
+	 */
+	BUILD_ASSERT(IS_POWER_OF_TWO(ZMS_NAMECNT_ID), "ZMS_NAMECNT_ID is not power of 2");
+	BUILD_ASSERT(IS_POWER_OF_TWO(ZMS_NAME_ID_OFFSET), "ZMS_NAME_ID_OFFSET is not power of 2");
+
+	uint32_t key_value_bit;
+	uint32_t key_value_ord;
+
+	key_value_bit = (id >> LOG2(ZMS_NAME_ID_OFFSET)) & 1;
+	key_value_ord = id & (ZMS_NAME_ID_OFFSET - 1);
+
+	hash = ((key_value_ord << 1) | key_value_bit);
+#else
 	/*
 	 * 1. Settings subsystem is storing the name ID and the linked list node ID
 	 *    with only one bit difference at BIT(0).
@@ -58,6 +95,7 @@ static inline size_t zms_lookup_cache_pos(uint32_t id)
 	key_value_ll = id & BIT(0);
 
 	hash = (key_value_hash << 2) | (key_value_bit << 1) | key_value_ll;
+#endif /* CONFIG_SETTINGS_ZMS_LEGACY */
 #else
 	/* 32-bit integer hash function found by https://github.com/skeeto/hash-prospector. */
 	hash ^= hash >> 16;