diff --git a/internal/command/init_run.go b/internal/command/init_run.go
index 50b77a3141..4f189dd596 100644
--- a/internal/command/init_run.go
+++ b/internal/command/init_run.go
@@ -277,7 +277,29 @@ func (c *InitCommand) run(initArgs *arguments.Init, view views.Init) int {
 		var stateStoreProviderAuthResult *getproviders.PackageAuthenticationResult
 		var configProviderDiags tfdiags.Diagnostics
 
-		configProvidersOutput, pssLocks, safeInitAction, stateStoreProviderAuthResult, configProviderDiags = c.getProvidersFromPSSConfig(ctx, config, alteredPreviousLocks, initArgs.Upgrade, initArgs.PluginPath, initArgs.Lockfile, view)
+		// The init command is not allowed to upgrade the provider used for state storage
+		// We warn that upgrades will not impact the provider, and upgrades will only work via `terraform state migrate -upgrade`.
+		var allowUpgrade bool
+		if initArgs.Upgrade {
+			if initArgs.Reconfigure {
+				allowUpgrade = true // user is opting out of migrating state; whatever happens, happens
+			} else {
+				allowUpgrade = false // the installer will only be able to reuse the old version.
+				diags = diags.Append(tfdiags.Sourceless(
+					tfdiags.Warning,
+					"Cannot upgrade the provider used for state storage during \"terraform init -upgrade\"",
+					fmt.Sprintf(`Terraform will not upgrade the %s (%q) provider as part of this operation because it is used for state storage.
+
+Please use \"terraform state migrate -upgrade\" to upgrade the state store provider and navigate migrating your state between the two versions.`,
+						config.Module.StateStore.ProviderAddr.Type,
+						config.Module.StateStore.ProviderAddr.ForDisplay(),
+					),
+				),
+				)
+			}
+		}
+
+		configProvidersOutput, pssLocks, safeInitAction, stateStoreProviderAuthResult, configProviderDiags = c.getProvidersFromPSSConfig(ctx, config, alteredPreviousLocks, allowUpgrade, initArgs.PluginPath, initArgs.Lockfile, view)
 		diags = diags.Append(configProviderDiags)
 		if configProviderDiags.HasErrors() {
 			view.Diagnostics(diags)
@@ -322,41 +344,6 @@ func (c *InitCommand) run(initArgs *arguments.Init, view views.Init) int {
 		}
 	}
 
-	// The init command is not allowed to upgrade the provider used for state storage (unless we're reconfiguring the state store).
-	// Unless users choose to reconfigure, they must upgrade the state store provider separately using `terraform state migrate -upgrade`.
-	// We only check to see if the state store provider was upgraded if the provider supply mode is ManagedByTerraform; providers overridden
-	// using dev_override or unmanaged providers blocks any upgrade process impacting that provider.
-	// For more context, see: https://github.com/hashicorp/terraform/pull/38633
-	if initArgs.Upgrade &&
-		!initArgs.Reconfigure &&
-		config.Module.StateStore != nil &&
-		config.Module.StateStore.ProviderSupplyMode == getproviders.ManagedByTerraform {
-		pAddr := config.Module.StateStore.ProviderAddr
-		old := alteredPreviousLocks.Provider(pAddr)
-		new := pssLocks.Provider(pAddr)
-		if old == nil || new == nil {
-			panic(fmt.Sprintf(`Unexpected missing provider lock for %s during init -upgrade: 
-prior lock: %#v
-new lock: %#v`, pAddr.ForDisplay(), old, new))
-		}
-		if !new.Version().Same((old.Version())) {
-			// The upgrade has impacted the provider
-			diags = diags.Append(tfdiags.Sourceless(
-				tfdiags.Error,
-				"Cannot upgrade the provider used for state storage during \"terraform init -upgrade\"",
-				fmt.Sprintf(`While upgrading providers Terraform attempted to upgrade the %s (%q) provider, which is used by the state_store block in your configuration.
-Please use \"terraform state migrate -upgrade\" to upgrade the state store provider and navigate migrating your state between the two versions. You can then re-attempt \"terraform init -upgrade\" to upgrade the rest of your providers.
-
-If you do not intend to upgrade the state store provider, please update your configuration to pin to the current version (%s), and re-run \"terraform init -upgrade\" to upgrade the rest of your providers.
-`,
-					pAddr.Type, pAddr.ForDisplay(), old.Version()),
-			),
-			)
-			view.Diagnostics(diags)
-			return 1
-		}
-	}
-
 	// If we outputted information, then we need to output a newline
 	// so that our success message is nicely spaced out from prior text.
 	if header {
diff --git a/internal/command/init_test.go b/internal/command/init_test.go
index 4690fac5d4..8dd473fa93 100644
--- a/internal/command/init_test.go
+++ b/internal/command/init_test.go
@@ -2593,13 +2593,13 @@ terraform {
 			"-enable-pluggable-state-storage-experiment",
 		}
 		code := c.Run(args)
-		if code == 0 {
-			t.Fatalf("command was not expected to complete successfully, but it did:\n%s", done(t).All())
+		if code != 0 {
+			t.Fatalf("command was expected to complete successfully, but it did not:\n%s", done(t).All())
 		}
-		output := done(t).Stderr()
-		expectedError := "Error: Cannot upgrade the provider used for state storage during \"terraform init -upgrade\""
-		if !strings.Contains(output, expectedError) {
-			t.Fatalf("expected error message not found:\n%s", output)
+		output := done(t).Stdout()
+		expectedMsg := "Warning: Cannot upgrade the provider used for state storage during \"terraform init -upgrade\""
+		if !strings.Contains(output, expectedMsg) {
+			t.Fatalf("expected warning message not found:\n%s", output)
 		}
 
 		// Assert that no providers were upgraded.