diff --git a/internal/command/format/diff.go b/internal/command/format/diff.go
index b87b11c184..67aec91154 100644
--- a/internal/command/format/diff.go
+++ b/internal/command/format/diff.go
@@ -471,8 +471,28 @@ func (p *blockBodyDiffPrinter) writeAttrDiff(name string, attrS *configschema.At
 	}
 
 	if attrS.NestedType != nil {
-		p.writeNestedAttrDiff(name, attrS.NestedType, old, new, nameLen, indent, path, action, showJustNew)
-		return false
+		renderNested := true
+
+		// If the collection values are empty or null, we render them as single attributes
+		switch attrS.NestedType.Nesting {
+		case configschema.NestingList, configschema.NestingSet, configschema.NestingMap:
+			var oldLen, newLen int
+			if !old.IsNull() && old.IsKnown() {
+				oldLen = old.LengthInt()
+			}
+			if !new.IsNull() && new.IsKnown() {
+				newLen = new.LengthInt()
+			}
+
+			if oldLen+newLen == 0 {
+				renderNested = false
+			}
+		}
+
+		if renderNested {
+			p.writeNestedAttrDiff(name, attrS.NestedType, old, new, nameLen, indent, path, action, showJustNew)
+			return false
+		}
 	}
 
 	p.buf.WriteString("\n")
@@ -613,6 +633,7 @@ func (p *blockBodyDiffPrinter) writeNestedAttrDiff(
 		allItems := make([]cty.Value, 0, len(oldItems)+len(newItems))
 		allItems = append(allItems, oldItems...)
 		allItems = append(allItems, newItems...)
+
 		all := cty.SetVal(allItems)
 
 		p.buf.WriteString(" = [")
diff --git a/internal/command/format/diff_test.go b/internal/command/format/diff_test.go
index 2b4ece8d2e..9775e7cbf5 100644
--- a/internal/command/format/diff_test.go
+++ b/internal/command/format/diff_test.go
@@ -2861,6 +2861,41 @@ func TestResourceChange_nestedSet(t *testing.T) {
           - volume_type = "gp2" -> null
         }
     }
+`,
+		},
+		"in-place update - empty nested sets": {
+			Action: plans.Update,
+			Mode:   addrs.ManagedResourceMode,
+			Before: cty.ObjectVal(map[string]cty.Value{
+				"id":  cty.StringVal("i-02ae66f368e8518a9"),
+				"ami": cty.StringVal("ami-BEFORE"),
+				"disks": cty.NullVal(cty.Set(cty.Object(map[string]cty.Type{
+					"mount_point": cty.String,
+					"size":        cty.String,
+				}))),
+				"root_block_device": cty.SetValEmpty(cty.Object(map[string]cty.Type{
+					"volume_type": cty.String,
+				})),
+			}),
+			After: cty.ObjectVal(map[string]cty.Value{
+				"id":  cty.StringVal("i-02ae66f368e8518a9"),
+				"ami": cty.StringVal("ami-AFTER"),
+				"disks": cty.SetValEmpty(cty.Object(map[string]cty.Type{
+					"mount_point": cty.String,
+					"size":        cty.String,
+				})),
+				"root_block_device": cty.SetValEmpty(cty.Object(map[string]cty.Type{
+					"volume_type": cty.String,
+				})),
+			}),
+			RequiredReplace: cty.NewPathSet(),
+			Schema:          testSchema(configschema.NestingSet),
+			ExpectedOutput: `  # test_instance.example will be updated in-place
+  ~ resource "test_instance" "example" {
+      ~ ami   = "ami-BEFORE" -> "ami-AFTER"
+      + disks = []
+        id    = "i-02ae66f368e8518a9"
+    }
 `,
 		},
 	}