diff --git a/.changes/unreleased/BUG FIXES-20250123-150746.yaml b/.changes/unreleased/BUG FIXES-20250123-150746.yaml
new file mode 100644
index 0000000000..1003a3ec9b
--- /dev/null
+++ b/.changes/unreleased/BUG FIXES-20250123-150746.yaml	
@@ -0,0 +1,5 @@
+kind: BUG FIXES
+body: Refreshed state was not used in the plan for orphaned resource instances
+time: 2025-01-23T15:07:46.789595-05:00
+custom:
+    Issue: "36394"
diff --git a/internal/terraform/context_plan2_test.go b/internal/terraform/context_plan2_test.go
index 77cad9e845..f1c5efc976 100644
--- a/internal/terraform/context_plan2_test.go
+++ b/internal/terraform/context_plan2_test.go
@@ -6315,3 +6315,47 @@ resource "aws_instance" "foo" {
 		t.Errorf("unexpected error message\ngot: %s\nwant substring: %s", got, want)
 	}
 }
+
+func TestContext2Plan_orphanUpdateInstance(t *testing.T) {
+	// ean orphaned instance should still reflect the refreshed state in the plan
+	m := testModuleInline(t, map[string]string{
+		"main.tf": `
+resource "test_object" "a" {
+  for_each = {}
+}
+`,
+	})
+
+	p := simpleMockProvider()
+	p.ReadResourceFn = func(req providers.ReadResourceRequest) (resp providers.ReadResourceResponse) {
+		state := req.PriorState.AsValueMap()
+		state["test_string"] = cty.StringVal("new")
+		resp.NewState = cty.ObjectVal(state)
+		return resp
+	}
+
+	state := states.BuildState(func(s *states.SyncState) {
+		s.SetResourceInstanceCurrent(mustResourceInstanceAddr(`test_object.a["old"]`), &states.ResourceInstanceObjectSrc{
+			AttrsJSON: []byte(`{"test_string":"old"}`),
+			Status:    states.ObjectReady,
+		}, mustProviderConfig(`provider["registry.terraform.io/hashicorp/test"]`))
+	})
+
+	ctx := testContext2(t, &ContextOpts{
+		Providers: map[addrs.Provider]providers.Factory{
+			addrs.NewDefaultProvider("test"): testProviderFuncFixed(p),
+		},
+	})
+
+	plan, diags := ctx.Plan(m, state, DefaultPlanOpts)
+	assertNoErrors(t, diags)
+
+	resourceType := p.GetProviderSchemaResponse.ResourceTypes["test_object"].Block.ImpliedType()
+	change, err := plan.Changes.ResourceInstance(mustResourceInstanceAddr(`test_object.a["old"]`)).Decode(resourceType)
+	if err != nil {
+		t.Fatal(err)
+	}
+	if change.Before.GetAttr("test_string").AsString() != "new" {
+		t.Fatalf("resource before value not refreshed in plan: %#v\n", change.Before)
+	}
+}
diff --git a/internal/terraform/node_resource_plan_orphan.go b/internal/terraform/node_resource_plan_orphan.go
index 9e64977c19..51364049f2 100644
--- a/internal/terraform/node_resource_plan_orphan.go
+++ b/internal/terraform/node_resource_plan_orphan.go
@@ -122,22 +122,6 @@ func (n *NodePlannableResourceInstanceOrphan) managedResourceExecute(ctx EvalCon
 		}
 	}
 
-	shouldDefer := ctx.Deferrals().ShouldDeferResourceInstanceChanges(n.Addr, n.Dependencies)
-
-	var change *plans.ResourceInstanceChange
-	var pDiags tfdiags.Diagnostics
-	var deferred *providers.Deferred
-	if forget {
-		change, pDiags = n.planForget(ctx, oldState, "")
-		diags = diags.Append(pDiags)
-	} else {
-		change, deferred, pDiags = n.planDestroy(ctx, oldState, "")
-		diags = diags.Append(pDiags)
-	}
-	if diags.HasErrors() {
-		return diags
-	}
-
 	if !n.skipRefresh && !forget {
 		// Refresh this instance even though it is going to be destroyed, in
 		// order to catch missing resources. If this is a normal plan,
@@ -153,12 +137,7 @@ func (n *NodePlannableResourceInstanceOrphan) managedResourceExecute(ctx EvalCon
 
 		oldState = refreshedState
 
-		if deferred == nil {
-			// set the overall deferred status if it wasn't already set.
-			deferred = refreshDeferred
-		}
-
-		if deferred == nil && !shouldDefer {
+		if refreshDeferred == nil {
 			// only update the state if we're not deferring the change
 			diags = diags.Append(n.writeResourceInstanceState(ctx, refreshedState, refreshState))
 			if diags.HasErrors() {
@@ -167,6 +146,22 @@ func (n *NodePlannableResourceInstanceOrphan) managedResourceExecute(ctx EvalCon
 		}
 	}
 
+	shouldDefer := ctx.Deferrals().ShouldDeferResourceInstanceChanges(n.Addr, n.Dependencies)
+
+	var change *plans.ResourceInstanceChange
+	var pDiags tfdiags.Diagnostics
+	var deferred *providers.Deferred
+	if forget {
+		change, pDiags = n.planForget(ctx, oldState, "")
+		diags = diags.Append(pDiags)
+	} else {
+		change, deferred, pDiags = n.planDestroy(ctx, oldState, "")
+		diags = diags.Append(pDiags)
+	}
+	if diags.HasErrors() {
+		return diags
+	}
+
 	// We might be able to offer an approximate reason for why we are
 	// planning to delete this object. (This is best-effort; we might
 	// sometimes not have a reason.)