The text entered for lookup isn't an item from the list. Select an item from the list, or enter text that matches one of the listed items. Sharepoint Datasheet Error

Issue

Create a Custom List

Add a Lookup Column

Create a New Item , leave the Lookup column blank.

Once the item is created try to edit the same item in Datasheet view.

Once you try to edit the Column in datasheet view it will throw the following error message

"The text entered for lookup isn't an item from the list. Select an item from the list, or enter text that matches one of the listed items."

Resolution

Install the following Hotfix on Client compute to resolve this issue

http://support.microsoft.com/kb/948952