Instagram Mentions are not allowed in the target user's settings

This error occurs when an Instagram user has banned mentions via @.

Each Instagram user has the option to customize who can mention them via @:

If your reply gives the error "Mentions are not allowed in the target user's settings. Remove invalid mentions" - it means that the user you are replying to has banned it via @.
In this case, you can remove the mention of the user via @ at the beginning of the reply text and try submitting a reply without explicitly mentioning the user.