diff --git a/.changelog/365.txt b/.changelog/365.txt
new file mode 100644
index 00000000..15d518cc
--- /dev/null
+++ b/.changelog/365.txt
@@ -0,0 +1,3 @@
+```release-note:bug
+`resource/davinci_variable`: Fix "Value Conversion Error" when defining variables with unknown values.
+```
diff --git a/internal/service/davinci/resource_variable.go b/internal/service/davinci/resource_variable.go
index 3a5ef02a..eddbe3df 100644
--- a/internal/service/davinci/resource_variable.go
+++ b/internal/service/davinci/resource_variable.go
@@ -20,6 +20,7 @@ import (
 	"github.com/hashicorp/terraform-plugin-framework/resource/schema/stringplanmodifier"
 	"github.com/hashicorp/terraform-plugin-framework/schema/validator"
 	"github.com/hashicorp/terraform-plugin-framework/types"
+	"github.com/hashicorp/terraform-plugin-framework/types/basetypes"
 	"github.com/pingidentity/terraform-provider-davinci/internal/framework"
 	stringvalidatorinternal "github.com/pingidentity/terraform-provider-davinci/internal/framework/stringvalidator"
 	"github.com/pingidentity/terraform-provider-davinci/internal/sdk"
@@ -278,26 +279,30 @@ func (p *VariableResource) ModifyPlan(ctx context.Context, req resource.ModifyPl
 		return
 	}
 
-	var varValuePlan *string
+	var varValuePlan basetypes.StringValue
 	resp.Diagnostics.Append(resp.Plan.GetAttribute(ctx, path.Root("value"), &varValuePlan)...)
 	if resp.Diagnostics.HasError() {
 		return
 	}
 
-	var varEmptyValuePlan *bool
+	var varEmptyValuePlan basetypes.BoolValue
 	resp.Diagnostics.Append(resp.Plan.GetAttribute(ctx, path.Root("empty_value"), &varEmptyValuePlan)...)
 	if resp.Diagnostics.HasError() {
 		return
 	}
 
-	if varEmptyValuePlan != nil && *varEmptyValuePlan {
+	if !varEmptyValuePlan.IsNull() && !varEmptyValuePlan.IsUnknown() {
 		resp.Plan.SetAttribute(ctx, path.Root("value_service"), types.StringNull())
 	} else {
 
-		if varValuePlan != nil {
-			resp.Plan.SetAttribute(ctx, path.Root("value_service"), types.StringValue(*varValuePlan))
+		if !varValuePlan.IsNull() && !varValuePlan.IsUnknown() {
+			resp.Plan.SetAttribute(ctx, path.Root("value_service"), varValuePlan)
 		}
 	}
+
+	if varEmptyValuePlan.IsUnknown() || varValuePlan.IsUnknown() {
+		resp.Plan.SetAttribute(ctx, path.Root("value_service"), types.StringUnknown())
+	}
 }
 
 func (r *VariableResource) Configure(ctx context.Context, req resource.ConfigureRequest, resp *resource.ConfigureResponse) {
diff --git a/internal/service/davinci/resource_variable_test.go b/internal/service/davinci/resource_variable_test.go
index cf0c618d..c219a865 100644
--- a/internal/service/davinci/resource_variable_test.go
+++ b/internal/service/davinci/resource_variable_test.go
@@ -615,6 +615,50 @@ func testAccResourceVariable_Values(t *testing.T, context, variableName string)
 	})
 }
 
+func TestAccResourceVariable_UnknownValue(t *testing.T) {
+
+	resourceBase := "davinci_variable"
+	resourceName := acctest.ResourceNameGen()
+	resourceFullName := fmt.Sprintf("%s.%s", resourceBase, resourceName)
+
+	name := resourceName
+
+	withBootstrapConfig := false
+
+	step1 := resource.TestStep{
+		Config: testAccResourceVariable_UnknownValue1_Hcl(resourceName, name, withBootstrapConfig),
+		Check: resource.ComposeTestCheckFunc(
+			resource.TestCheckResourceAttr(resourceFullName, "value", "testVariable##SK##company"),
+			resource.TestCheckNoResourceAttr(resourceFullName, "empty_value"),
+			resource.TestCheckResourceAttr(resourceFullName, "value_service", "testVariable##SK##company"),
+		),
+	}
+
+	step2 := resource.TestStep{
+		Config: testAccResourceVariable_UnknownValue2_Hcl(resourceName, name, withBootstrapConfig),
+		Check: resource.ComposeTestCheckFunc(
+			resource.TestCheckResourceAttr(resourceFullName, "value", "testVariable3##SK##company"),
+			resource.TestCheckNoResourceAttr(resourceFullName, "empty_value"),
+			resource.TestCheckResourceAttr(resourceFullName, "value_service", "testVariable3##SK##company"),
+		),
+	}
+
+	resource.ParallelTest(t, resource.TestCase{
+		PreCheck: func() {
+			acctest.PreCheckClient(t)
+			acctest.PreCheckNewEnvironment(t)
+		},
+		ProtoV6ProviderFactories: acctest.ProtoV6ProviderFactories,
+		ExternalProviders:        acctest.ExternalProviders,
+		ErrorCheck:               acctest.ErrorCheck(t),
+		CheckDestroy:             davinci.Variable_CheckDestroy(),
+		Steps: []resource.TestStep{
+			step1,
+			step2,
+		},
+	})
+}
+
 func TestAccResourceVariable_BadParameters(t *testing.T) {
 
 	resourceBase := "davinci_variable"
@@ -845,6 +889,49 @@ resource "davinci_variable" "%[1]s-flow" {
 	return hcl
 }
 
+func testAccResourceVariable_UnknownValue1_Hcl(resourceName, name string, withBootstrapConfig bool) (hcl string) {
+	hcl = fmt.Sprintf(`
+resource "davinci_variable" "%[1]s" {
+  environment_id = pingone_environment.%[1]s.id
+
+  name        = "testVariable2"
+  context     = "company"
+  description = "testVariable2 description"
+  type        = "string"
+  value       = davinci_variable.%[1]s-company.id
+}
+
+%s`, resourceName, testAccResourceVariable_StaticValue_Hcl(resourceName, name, withBootstrapConfig, "myVal123"))
+
+	return
+}
+
+func testAccResourceVariable_UnknownValue2_Hcl(resourceName, name string, withBootstrapConfig bool) (hcl string) {
+	hcl = fmt.Sprintf(`
+resource "davinci_variable" "%[1]s" {
+  environment_id = pingone_environment.%[1]s.id
+
+  name        = "testVariable2"
+  context     = "company"
+  description = "testVariable2 description"
+  type        = "string"
+  value       = davinci_variable.%[1]s-test.id
+}
+
+resource "davinci_variable" "%[1]s-test" {
+  environment_id = pingone_environment.%[1]s.id
+
+  name        = "testVariable3"
+  context     = "company"
+  description = "testVariable3 description"
+  type        = "string"
+}
+
+%s`, resourceName, testAccResourceVariable_StaticValue_Hcl(resourceName, name, withBootstrapConfig, "myVal123"))
+
+	return
+}
+
 func testAccResourceVariable_EmptyValue_Hcl(resourceName, name string, withBootstrapConfig bool) (hcl string) {
 	mainFlowJson, err := acctest.ReadFlowJsonFile("flows/full-basic-vars.json")
 	if err != nil {