diff --git a/app/controllers/api/users.php b/app/controllers/api/users.php
index 8ff7c12cae..ac8938273f 100644
--- a/app/controllers/api/users.php
+++ b/app/controllers/api/users.php
@@ -117,14 +117,19 @@ function createUser(Hash $hash, string $userId, ?string $email, ?string $passwor
         $hashedPassword = null;
 
         $isHashed = !$hash instanceof Plaintext;
+
+        $defaultHash = new ProofsPassword();
         if (!empty($password)) {
             if (!$isHashed) { // Password was never hashed, hash it with the default hash
-                $defaultHash = new ProofsPassword();
                 $hashedPassword = $defaultHash->hash($password);
                 $hash = $defaultHash->getHash();
             } else {
                 $hashedPassword = $password;
             }
+        } else {
+            // when password is not provided, plaintext was set as the default hash causing the issue
+            $hash = $defaultHash->getHash();
+            $isHashed = !$hash instanceof Plaintext;
         }
 
         $user = new Document([
@@ -160,7 +165,7 @@ function createUser(Hash $hash, string $userId, ?string $email, ?string $passwor
             'emailIsFree' => $emailCanonical?->isFree(),
         ]);
 
-        if (!$isHashed) {
+        if (!$isHashed && !empty($password)) {
             $hooks->trigger('passwordValidator', [$dbForProject, $project, $plaintextPassword, &$user, true]);
         }
 
@@ -2627,7 +2632,8 @@ App::post('/v1/users/:userId/jwts')
             $session = \count($sessions) > 0 ? $sessions[\count($sessions) - 1] : new Document();
         } else {
             // Find by ID
-            foreach ($sessions as $loopSession) { /** @var Utopia\Database\Document $loopSession */
+            foreach ($sessions as $loopSession) {
+                /** @var Utopia\Database\Document $loopSession */
                 if ($loopSession->getId() == $sessionId) {
                     $session = $loopSession;
                     break;
diff --git a/tests/e2e/Services/Users/UsersConsoleClientTest.php b/tests/e2e/Services/Users/UsersConsoleClientTest.php
index 967104f5db..24e0f6868b 100644
--- a/tests/e2e/Services/Users/UsersConsoleClientTest.php
+++ b/tests/e2e/Services/Users/UsersConsoleClientTest.php
@@ -6,6 +6,7 @@ use Tests\E2E\Client;
 use Tests\E2E\Scopes\ProjectCustom;
 use Tests\E2E\Scopes\Scope;
 use Tests\E2E\Scopes\SideConsole;
+use Utopia\Database\Helpers\ID;
 
 class UsersConsoleClientTest extends Scope
 {
@@ -45,4 +46,39 @@ class UsersConsoleClientTest extends Scope
         $this->assertIsArray($response['body']['users']);
         $this->assertIsArray($response['body']['sessions']);
     }
+
+    public function testCreateUserWithoutPasswordThenSetPassword()
+    {
+        // Create a user with email but without password
+        $userId = ID::unique();
+        $email = $userId . '@example.com';
+
+        $response = $this->client->call(Client::METHOD_POST, '/users', array_merge([
+            'content-type' => 'application/json',
+            'x-appwrite-project' => $this->getProject()['$id']
+        ], $this->getHeaders()), [
+            'userId' => $userId,
+            'email' => $email,
+            // no password provided
+        ]);
+
+        $this->assertEquals(201, $response['headers']['status-code']);
+        $this->assertEquals($userId, $response['body']['$id']);
+        $this->assertEquals($email, $response['body']['email']);
+        $this->assertEmpty($response['body']['password']);
+
+        // Now set the password for that user (console-side)
+        $newPassword = 'NewPass123!';
+
+        $set = $this->client->call(Client::METHOD_PATCH, '/users/' . $userId . '/password', array_merge([
+            'content-type' => 'application/json',
+            'x-appwrite-project' => $this->getProject()['$id']
+        ], $this->getHeaders()), [
+            'password' => $newPassword,
+        ]);
+
+        $this->assertEquals(200, $set['headers']['status-code']);
+        $this->assertEquals($userId, $set['body']['$id']);
+        $this->assertNotEmpty($set['body']['password']);
+    }
 }