diff --git a/pkg/config/resource.go b/pkg/config/resource.go
index 793ecddc..bc1b2cea 100644
--- a/pkg/config/resource.go
+++ b/pkg/config/resource.go
@@ -244,6 +244,12 @@ type Sensitive struct {
 	// fieldPaths keeps the mapping of sensitive fields in Terraform schema with
 	// terraform field path as key and xp field path as value.
 	fieldPaths map[string]string
+
+	// AllowPlaintextValue allows sensitive fields to be passed as plaintext
+	// in addition to secret references. When true, sensitive fields will be
+	// generated as both a regular field and a secret reference field, giving
+	// users the option to provide values directly or via secrets.
+	AllowPlaintextValue bool
 }
 
 // LateInitializer represents configurations that control
diff --git a/pkg/resource/sensitive.go b/pkg/resource/sensitive.go
index e10b73b8..bde568c4 100644
--- a/pkg/resource/sensitive.go
+++ b/pkg/resource/sensitive.go
@@ -182,6 +182,14 @@ func GetSensitiveParameters(ctx context.Context, client SecretClient, from resou
 			prefixes = []string{""}
 		}
 
+		// Check if plaintext value already exists in Terraform state
+		// This happens when AllowPlaintextValue is enabled and user provided plaintext
+		existingValue, err := pavedTF.GetValue(tfPath)
+		if err == nil && existingValue != nil {
+			// Plaintext value exists, skip secret reference handling
+			continue
+		}
+
 		// spec.forProvider secret references override the spec.initProvider
 		// references.
 		for _, p := range prefixes {
diff --git a/pkg/types/builder.go b/pkg/types/builder.go
index 18c1076d..037ce10b 100644
--- a/pkg/types/builder.go
+++ b/pkg/types/builder.go
@@ -165,6 +165,16 @@ func (g *Builder) buildResource(res *schema.Resource, cfg *config.Resource, tfPa
 			if drop {
 				continue
 			}
+			// If AllowPlaintextValue is enabled, also generate the regular field
+			if cfg.Sensitive.AllowPlaintextValue && !IsObservation(res.Schema[snakeFieldName]) {
+				regularField, err := NewField(g, cfg, r, res.Schema[snakeFieldName], snakeFieldName, tfPath, xpPath, names, asBlocksMode)
+				if err != nil {
+					return nil, nil, nil, err
+				}
+				// Track that these fields are alternatives for validation
+				regularField.AlternateFieldName = f.TransformedName
+				regularField.AddToResource(g, r, typeNames, ptr.Deref(cfg.SchemaElementOptions[cPath], config.SchemaElementOption{}))
+			}
 		case reference != nil:
 			f, err = NewReferenceField(g, cfg, r, res.Schema[snakeFieldName], reference, snakeFieldName, tfPath, xpPath, names, asBlocksMode)
 			if err != nil {
@@ -204,7 +214,16 @@ func (g *Builder) AddToBuilder(typeNames *TypeNames, r *resource) (*types.Named,
 	for _, p := range r.topLevelRequiredParams {
 		g.validationRules += "\n"
 		sp := sanitizePath(p.path)
-		if p.includeInit {
+		if p.alternateFieldPath != "" {
+			// When there's an alternate field path (e.g., AllowPlaintextValue),
+			// create an OR condition requiring at least one of the two fields
+			asp := sanitizePath(p.alternateFieldPath)
+			if p.includeInit {
+				g.validationRules += fmt.Sprintf(`// +kubebuilder:validation:XValidation:rule="!('*' in self.managementPolicies || 'Create' in self.managementPolicies || 'Update' in self.managementPolicies) || has(self.forProvider.%s) || has(self.forProvider.%s) || (has(self.initProvider) && (has(self.initProvider.%s) || has(self.initProvider.%s)))",message="spec.forProvider.%s or spec.forProvider.%s is a required parameter"`, sp, asp, sp, asp, p.path, p.alternateFieldPath)
+			} else {
+				g.validationRules += fmt.Sprintf(`// +kubebuilder:validation:XValidation:rule="!('*' in self.managementPolicies || 'Create' in self.managementPolicies || 'Update' in self.managementPolicies) || has(self.forProvider.%s) || has(self.forProvider.%s)",message="spec.forProvider.%s or spec.forProvider.%s is a required parameter"`, sp, asp, p.path, p.alternateFieldPath)
+			}
+		} else if p.includeInit {
 			g.validationRules += fmt.Sprintf(`// +kubebuilder:validation:XValidation:rule="!('*' in self.managementPolicies || 'Create' in self.managementPolicies || 'Update' in self.managementPolicies) || has(self.forProvider.%s) || (has(self.initProvider) && has(self.initProvider.%s))",message="spec.forProvider.%s is a required parameter"`, sp, sp, p.path)
 		} else {
 			g.validationRules += fmt.Sprintf(`// +kubebuilder:validation:XValidation:rule="!('*' in self.managementPolicies || 'Create' in self.managementPolicies || 'Update' in self.managementPolicies) || has(self.forProvider.%s)",message="spec.forProvider.%s is a required parameter"`, sp, p.path)
@@ -374,14 +393,19 @@ type resource struct {
 }
 
 type topLevelRequiredParam struct {
-	path        string
-	includeInit bool
+	path          string
+	includeInit   bool
+	alternateFieldPath string // Alternative field path (e.g., for AllowPlaintextValue)
 }
 
 func newTopLevelRequiredParam(path string, includeInit bool) *topLevelRequiredParam {
 	return &topLevelRequiredParam{path: path, includeInit: includeInit}
 }
 
+func newTopLevelRequiredParamWithAlternate(path string, includeInit bool, alternatePath string) *topLevelRequiredParam {
+	return &topLevelRequiredParam{path: path, includeInit: includeInit, alternateFieldPath: alternatePath}
+}
+
 func (r *resource) addParameterField(f *Field, field *types.Var) {
 	requiredBySchema := (!f.Schema.Optional && !f.Schema.Computed) || f.Required
 	// Note(turkenh): We are collecting the top level required parameters that
@@ -401,7 +425,12 @@ func (r *resource) addParameterField(f *Field, field *types.Var) {
 		requiredBySchema = false
 		// If the field is not a terraform field, we should not require it in init,
 		// as it is not an initProvider field.
-		r.topLevelRequiredParams = append(r.topLevelRequiredParams, newTopLevelRequiredParam(f.TransformedName, !f.TFTag.AlwaysOmitted()))
+		if f.AlternateFieldName != "" {
+			// This field has an alternate (e.g., AllowPlaintextValue scenario)
+			r.topLevelRequiredParams = append(r.topLevelRequiredParams, newTopLevelRequiredParamWithAlternate(f.TransformedName, !f.TFTag.AlwaysOmitted(), f.AlternateFieldName))
+		} else {
+			r.topLevelRequiredParams = append(r.topLevelRequiredParams, newTopLevelRequiredParam(f.TransformedName, !f.TFTag.AlwaysOmitted()))
+		}
 	}
 
 	// Note(lsviben): Only fields which are not also initProvider fields should have a required kubebuilder comment.
diff --git a/pkg/types/field.go b/pkg/types/field.go
index b492a309..983b0d31 100644
--- a/pkg/types/field.go
+++ b/pkg/types/field.go
@@ -56,6 +56,9 @@ type Field struct {
 	// Sensitive is set if this Field holds sensitive data and is thus
 	// generated as a secret reference.
 	Sensitive bool
+	// AlternateFieldName is set when this field has an alternative field
+	// (e.g., clientId and clientIdSecretRef when AllowPlaintextValue is true)
+	AlternateFieldName string
 }
 
 // getDocString tries to extract the documentation string for the specified
@@ -288,6 +291,19 @@ func NewSensitiveField(g *Builder, cfg *config.Resource, r *resource, sch *schem
 		// Data will be stored in connection details secret
 		return nil, true, nil
 	}
+	
+	// When AllowPlaintextValue is true, the secret ref field is not required
+	// by itself since the plaintext field can be used instead.
+	// We need to mark the schema as optional to prevent it from being added
+	// to topLevelRequiredParams.
+	if cfg.Sensitive.AllowPlaintextValue {
+		f.Required = false
+		// Create a copy of the schema and mark it as optional
+		schemaCopy := *f.Schema
+		schemaCopy.Optional = true
+		f.Schema = &schemaCopy
+	}
+	
 	sfx := "SecretRef"
 	switch f.FieldType.(type) {
 	case *types.Slice: