diff --git a/module/zfs/dsl_dir.c b/module/zfs/dsl_dir.c
index 73b7943b8f..29672e9a61 100644
--- a/module/zfs/dsl_dir.c
+++ b/module/zfs/dsl_dir.c
@@ -121,13 +121,6 @@
  * and updated by dsl_fs_ss_count_adjust(). A new limit value is setup in
  * dsl_dir_activate_fs_ss_limit() and the counts are adjusted, if necessary, by
  * dsl_dir_init_fs_ss_count().
- *
- * There is a special case when we receive a filesystem that already exists. In
- * this case a temporary clone name of %X is created (see dmu_recv_begin). We
- * never update the filesystem counts for temporary clones.
- *
- * Likewise, we do not update the snapshot counts for temporary snapshots,
- * such as those created by zfs diff.
  */
 
 extern inline dsl_dir_phys_t *dsl_dir_phys(dsl_dir_t *dd);
@@ -593,11 +586,9 @@ dsl_dir_init_fs_ss_count(dsl_dir_t *dd, dmu_tx_t *tx)
 		    &chld_dd));
 
 		/*
-		 * Ignore hidden ($FREE, $MOS & $ORIGIN) objsets and
-		 * temporary datasets.
+		 * Ignore hidden ($FREE, $MOS & $ORIGIN) objsets.
 		 */
-		if (chld_dd->dd_myname[0] == '$' ||
-		    chld_dd->dd_myname[0] == '%') {
+		if (chld_dd->dd_myname[0] == '$') {
 			dsl_dir_rele(chld_dd, FTAG);
 			continue;
 		}
@@ -910,14 +901,12 @@ dsl_fs_ss_count_adjust(dsl_dir_t *dd, int64_t delta, const char *prop,
 	    strcmp(prop, DD_FIELD_SNAPSHOT_COUNT) == 0);
 
 	/*
-	 * When we receive an incremental stream into a filesystem that already
-	 * exists, a temporary clone is created.  We don't count this temporary
-	 * clone, whose name begins with a '%'. We also ignore hidden ($FREE,
-	 * $MOS & $ORIGIN) objsets.
+	 * We don't do accounting for hidden ($FREE, $MOS & $ORIGIN) objsets.
 	 */
-	if ((dd->dd_myname[0] == '%' || dd->dd_myname[0] == '$') &&
-	    strcmp(prop, DD_FIELD_FILESYSTEM_COUNT) == 0)
+	if (dd->dd_myname[0] == '$' && strcmp(prop,
+	    DD_FIELD_FILESYSTEM_COUNT) == 0) {
 		return;
+	}
 
 	/*
 	 * e.g. if renaming a dataset with no snapshots, count adjustment is 0
diff --git a/tests/runfiles/common.run b/tests/runfiles/common.run
index 615c4efc46..851488602f 100644
--- a/tests/runfiles/common.run
+++ b/tests/runfiles/common.run
@@ -216,7 +216,7 @@ tests = ['zfs_receive_001_pos', 'zfs_receive_002_pos', 'zfs_receive_003_pos',
     'zfs_receive_016_pos', 'receive-o-x_props_override',
     'zfs_receive_from_encrypted', 'zfs_receive_to_encrypted',
     'zfs_receive_raw', 'zfs_receive_raw_incremental', 'zfs_receive_-e',
-    'zfs_receive_raw_-d', 'zfs_receive_from_zstd']
+    'zfs_receive_raw_-d', 'zfs_receive_from_zstd', 'zfs_receive_new_props']
 tags = ['functional', 'cli_root', 'zfs_receive']
 
 [tests/functional/cli_root/zfs_rename]
diff --git a/tests/zfs-tests/tests/functional/cli_root/zfs_receive/Makefile.am b/tests/zfs-tests/tests/functional/cli_root/zfs_receive/Makefile.am
index f13a955d83..2b281e71c2 100644
--- a/tests/zfs-tests/tests/functional/cli_root/zfs_receive/Makefile.am
+++ b/tests/zfs-tests/tests/functional/cli_root/zfs_receive/Makefile.am
@@ -21,6 +21,7 @@ dist_pkgdata_SCRIPTS = \
 	receive-o-x_props_override.ksh \
 	zfs_receive_from_encrypted.ksh \
 	zfs_receive_from_zstd.ksh \
+	zfs_receive_new_props.ksh \
 	zfs_receive_to_encrypted.ksh \
 	zfs_receive_raw.ksh \
 	zfs_receive_raw_incremental.ksh \
diff --git a/tests/zfs-tests/tests/functional/cli_root/zfs_receive/zfs_receive_new_props.ksh b/tests/zfs-tests/tests/functional/cli_root/zfs_receive/zfs_receive_new_props.ksh
new file mode 100755
index 0000000000..54f13355f5
--- /dev/null
+++ b/tests/zfs-tests/tests/functional/cli_root/zfs_receive/zfs_receive_new_props.ksh
@@ -0,0 +1,77 @@
+#!/bin/ksh -p
+#
+# CDDL HEADER START
+#
+# This file and its contents are supplied under the terms of the
+# Common Development and Distribution License ("CDDL"), version 1.0.
+# You may only use this file in accordance with the terms of version
+# 1.0 of the CDDL.
+#
+# A full copy of the text of the CDDL should have accompanied this
+# source.  A copy of the CDDL is also available via the Internet at
+# http://www.illumos.org/license/CDDL.
+#
+# CDDL HEADER END
+#
+
+#
+# Copyright (c) 2020 by Delphix. All rights reserved.
+#
+
+. $STF_SUITE/include/libtest.shlib
+
+#
+# DESCRIPTION:
+# ZFS receive test to handle Issue #10698
+#
+# STRATEGY:
+# 1. Create a pool with filesystem_limits disabled
+# 2. Create a filesystem on that pool
+# 3. Enable filesystem limits on that pool
+# 4. On a pool with filesystem limits enabled, create a filesystem and set a
+#    limit
+# 5. Snapshot limited filesystem
+# 6. send -R limited filesystem and receive over filesystem with limits disabled
+#
+
+verify_runnable "both"
+
+function cleanup
+{
+	destroy_pool "$poolname"
+	destroy_pool "$rpoolname"
+	log_must rm -f "$vdevfile"
+	log_must rm -f "$rvdevfile"
+	log_must rm -f "$streamfile"
+}
+
+log_onexit cleanup
+
+log_assert "ZFS should handle receiving streams with filesystem limits on \
+	pools where the feature was recently enabled"
+
+poolname=sendpool
+rpoolname=recvpool
+vdevfile="$TEST_BASE_DIR/vdevfile.$$"
+rvdevfile="$TEST_BASE_DIR/rvdevfile.$$"
+sendfs="$poolname/fs"
+recvfs="$rpoolname/rfs"
+streamfile="$TEST_BASE_DIR/streamfile.$$"
+
+log_must truncate -s $MINVDEVSIZE "$rvdevfile"
+log_must truncate -s $MINVDEVSIZE "$vdevfile"
+log_must zpool create -O mountpoint=none -o feature@filesystem_limits=disabled \
+	 "$rpoolname" "$rvdevfile"
+log_must zpool create -O mountpoint=none "$poolname" "$vdevfile"
+
+log_must zfs create "$recvfs"
+log_must zpool set feature@filesystem_limits=enabled "$rpoolname"
+
+log_must zfs create -o filesystem_limit=100 "$sendfs"
+log_must zfs snapshot "$sendfs@a"
+
+log_must zfs send -R "$sendfs@a" >"$streamfile"
+log_must eval "zfs recv -svuF $recvfs <$streamfile"
+
+log_pass "ZFS can handle receiving streams with filesystem limits on \
+	pools where the feature was recently enabled"