diff --git a/sdk/core/Azure.Core.TestFramework/src/TestEnvironment.cs b/sdk/core/Azure.Core.TestFramework/src/TestEnvironment.cs
index c2af55787c28..948fbc9249c2 100644
--- a/sdk/core/Azure.Core.TestFramework/src/TestEnvironment.cs
+++ b/sdk/core/Azure.Core.TestFramework/src/TestEnvironment.cs
@@ -177,10 +177,6 @@ protected string GetRecordedOptionalVariable(string name, Action<RecordedVariabl
 
             string value = GetOptionalVariable(name);
 
-            var optionsInstance = new RecordedVariableOptions();
-            options?.Invoke(optionsInstance);
-            var sanitizedValue = optionsInstance.Apply(value);
-
             if (!Mode.HasValue)
             {
                 return value;
@@ -191,6 +187,17 @@ protected string GetRecordedOptionalVariable(string name, Action<RecordedVariabl
                 throw new InvalidOperationException("Recorded value should not be set outside the test method invocation");
             }
 
+            // If the value was populated, sanitize before recording it.
+
+            string sanitizedValue = value;
+
+            if (!string.IsNullOrEmpty(value))
+            {
+                var optionsInstance = new RecordedVariableOptions();
+                options?.Invoke(optionsInstance);
+                sanitizedValue = optionsInstance.Apply(sanitizedValue);
+            }
+
             _recording?.SetVariable(name, sanitizedValue);
             return value;
         }
diff --git a/sdk/core/Azure.Core/tests/TestEnvironmentTests.cs b/sdk/core/Azure.Core/tests/TestEnvironmentTests.cs
index f8151d4abd83..5a52cc0ec84b 100644
--- a/sdk/core/Azure.Core/tests/TestEnvironmentTests.cs
+++ b/sdk/core/Azure.Core/tests/TestEnvironmentTests.cs
@@ -79,6 +79,23 @@ public void RecordedVariableSanitized()
             Assert.AreEqual("endpoint=1;key=Sanitized", testRecording.GetVariable("ConnectionStringWithSecret", ""));
         }
 
+        [Test]
+        public void RecordedOptionalVariableNotSanitizedIfMissing()
+        {
+            var tempFile = Path.GetTempFileName();
+            var env = new MockTestEnvironment();
+            var testRecording = new TestRecording(RecordedTestMode.Record, tempFile, new RecordedTestSanitizer(), new RecordMatcher());
+            env.Mode = RecordedTestMode.Record;
+            env.SetRecording(testRecording);
+
+            Assert.IsNull(env.MissingOptionalSecret);
+
+            testRecording.Dispose();
+            testRecording = new TestRecording(RecordedTestMode.Playback, tempFile, new RecordedTestSanitizer(), new RecordMatcher());
+
+            Assert.IsNull(testRecording.GetVariable(nameof(env.MissingOptionalSecret), null));
+        }
+
         private class RecordedVariableMisuse : RecordedTestBase<MockTestEnvironment>
         {
             // To make NUnit happy
@@ -114,8 +131,9 @@ public MockTestEnvironment(): base("core")
             public string Base64Secret => GetRecordedVariable("Base64Secret", option => option.IsSecret(SanitizedValue.Base64));
             public string DefaultSecret => GetRecordedVariable("DefaultSecret", option => option.IsSecret(SanitizedValue.Default));
             public string CustomSecret => GetRecordedVariable("CustomSecret", option => option.IsSecret("Custom"));
+            public string MissingOptionalSecret => GetRecordedOptionalVariable("MissingOptionalSecret", option => option.IsSecret("INVALID"));
             public string ConnectionStringWithSecret => GetRecordedVariable("ConnectionStringWithSecret", option => option.HasSecretConnectionStringParameter("key"));
 
         }
     }
-}
\ No newline at end of file
+}