diff --git a/terraform/provider/litellm/client.go b/terraform/provider/litellm/client.go
index 26e6a91a15c..b64c241c899 100644
--- a/terraform/provider/litellm/client.go
+++ b/terraform/provider/litellm/client.go
@@ -143,10 +143,10 @@ func (c *Client) UpdateKey(key *Key) (*Key, error) {
 		updateData["model_tpm_limit"] = key.ModelTPMLimit
 	}
 
-	// The proxy rejects an empty team_id with a 500 ("Team object not found"),
-	// so only send it when set.
 	if key.TeamID != "" {
 		updateData["team_id"] = key.TeamID
+	} else if key.clearTeamID {
+		updateData["team_id"] = nil
 	}
 
 	// The proxy rejects an empty-string budget_duration with a 400, so only
diff --git a/terraform/provider/litellm/resource_key.go b/terraform/provider/litellm/resource_key.go
index b471cab73e8..f1c38c33878 100644
--- a/terraform/provider/litellm/resource_key.go
+++ b/terraform/provider/litellm/resource_key.go
@@ -322,6 +322,7 @@ func resourceKeyUpdate(ctx context.Context, d *schema.ResourceData, m interface{
 
 	key := &Key{Key: d.Id()}
 	mapResourceDataToKey(d, key)
+	key.clearTeamID = d.HasChange("team_id") && key.TeamID == ""
 	if !d.HasChange("duration") {
 		key.Duration = ""
 	}
diff --git a/terraform/provider/litellm/resource_key_test.go b/terraform/provider/litellm/resource_key_test.go
index 8dd581a798e..431e7a2f784 100644
--- a/terraform/provider/litellm/resource_key_test.go
+++ b/terraform/provider/litellm/resource_key_test.go
@@ -321,8 +321,6 @@ func TestUpdateKeyOmitsEmptyBudgetDuration(t *testing.T) {
 	}
 }
 
-// The proxy 500s on team_id: "" with "Team object not found", so a teamless key
-// must omit it from the update payload entirely.
 func TestUpdateKeyOmitsEmptyTeamID(t *testing.T) {
 	var captured map[string]interface{}
 	srv := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
@@ -349,6 +347,72 @@ func TestUpdateKeyOmitsEmptyTeamID(t *testing.T) {
 	}
 }
 
+func TestResourceKeyTeamChangesConverge(t *testing.T) {
+	for _, tc := range []struct {
+		name           string
+		priorTeam      string
+		configuredTeam interface{}
+		wantTeam       string
+		wantPresent    bool
+		wantNull       bool
+	}{
+		{name: "teamless"},
+		{name: "remove", priorTeam: "team-1", wantPresent: true, wantNull: true},
+		{name: "blank", priorTeam: "team-1", configuredTeam: "", wantPresent: true, wantNull: true},
+		{name: "assign", configuredTeam: "team-1", wantTeam: "team-1", wantPresent: true},
+		{name: "move", priorTeam: "team-1", configuredTeam: "team-2", wantTeam: "team-2", wantPresent: true},
+		{name: "retain", priorTeam: "team-1", configuredTeam: "team-1", wantTeam: "team-1", wantPresent: true},
+	} {
+		t.Run(tc.name, func(t *testing.T) {
+			storedTeam := tc.priorTeam
+			updates := 0
+			srv := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, req *http.Request) {
+				w.Header().Set("Content-Type", "application/json")
+				if req.URL.Path == "/key/update" {
+					updates++
+					var payload map[string]interface{}
+					if err := json.NewDecoder(req.Body).Decode(&payload); err != nil {
+						t.Error(err)
+						w.WriteHeader(http.StatusBadRequest)
+						return
+					}
+					value, present := payload["team_id"]
+					if present != tc.wantPresent || (present && (value == nil) != tc.wantNull) {
+						t.Errorf("team_id = %#v, present = %v; want present = %v, null = %v", value, present, tc.wantPresent, tc.wantNull)
+					}
+					if present {
+						storedTeam, _ = value.(string)
+					}
+				}
+				json.NewEncoder(w).Encode(map[string]interface{}{
+					"key":  "hash-1",
+					"info": map[string]interface{}{"team_id": storedTeam, "key_alias": "test"},
+				})
+			}))
+			defer srv.Close()
+			res := resourceKey()
+			priorData := newKeyResourceData(t, map[string]interface{}{"team_id": tc.priorTeam, "key_alias": "test", "max_budget": 10.0})
+			priorData.SetId("hash-1")
+			config := terraform.NewResourceConfigRaw(map[string]interface{}{"team_id": tc.configuredTeam, "key_alias": "test", "max_budget": 25.0})
+			diff, err := res.Diff(context.Background(), priorData.State(), config, nil)
+			if err != nil {
+				t.Fatal(err)
+			}
+			state, diags := res.Apply(context.Background(), priorData.State(), diff, NewClient(srv.URL, "test-key", true))
+			if diags.HasError() {
+				t.Fatalf("apply failed: %v", diags)
+			}
+			if updates != 1 || storedTeam != tc.wantTeam || state.Attributes["team_id"] != tc.wantTeam {
+				t.Fatalf("updates = %d, stored team = %q, state team = %q; want %q", updates, storedTeam, state.Attributes["team_id"], tc.wantTeam)
+			}
+			nextDiff, err := res.Diff(context.Background(), state, config, nil)
+			if err != nil || (nextDiff != nil && !nextDiff.Empty()) {
+				t.Fatalf("subsequent plan not clean: diff = %v, error = %v", nextDiff, err)
+			}
+		})
+	}
+}
+
 func TestResourceKeyUpdateFailureKeepsPriorState(t *testing.T) {
 	srv := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
 		w.Header().Set("Content-Type", "application/json")
diff --git a/terraform/provider/litellm/types.go b/terraform/provider/litellm/types.go
index a8784b8a6a9..87115f39782 100644
--- a/terraform/provider/litellm/types.go
+++ b/terraform/provider/litellm/types.go
@@ -129,6 +129,7 @@ type ModelInfo struct {
 
 // Key represents a LiteLLM API key.
 type Key struct {
+	clearTeamID              bool
 	Key                      string                 `json:"key,omitempty"`
 	TokenID                  string                 `json:"token_id,omitempty"`
 	Models                   []string               `json:"models"`