diff --git a/mmv1/products/datastream/Stream.yaml b/mmv1/products/datastream/Stream.yaml
index 2164d85e5ed5..451f1f44e339 100644
--- a/mmv1/products/datastream/Stream.yaml
+++ b/mmv1/products/datastream/Stream.yaml
@@ -716,7 +716,10 @@ properties:
                 name: 'datasetId'
                 required: true
                 description: |
-                  Dataset ID in the format projects/{project}/datasets/{dataset_id}
+                  Dataset ID in the format projects/{project}/datasets/{dataset_id} or
+                  {project}:{dataset_id}
+                custom_expand: 'templates/terraform/custom_expand/datastream_stream_dataset_id.go.erb'
+                diff_suppress_func: resourceDatastreamStreamDatabaseIdDiffSuppress
           - !ruby/object:Api::Type::NestedObject
             name: 'sourceHierarchyDatasets'
             exactly_one_of:
diff --git a/mmv1/products/datastream/terraform.yaml b/mmv1/products/datastream/terraform.yaml
index 4ec6f080c87a..cf73207c75be 100644
--- a/mmv1/products/datastream/terraform.yaml
+++ b/mmv1/products/datastream/terraform.yaml
@@ -193,6 +193,12 @@ overrides: !ruby/object:Overrides::ResourceOverrides
           stream_id: "my-stream"
           source_connection_profile_id: "source-profile"
           destination_connection_profile_id: "destination-profile"
+      - !ruby/object:Provider::Terraform::Examples
+        name: "datastream_stream_postgresql_bigquery_dataset_id"
+        primary_resource_id: "default"
+        pull_external: true
+        # Random provider
+        skip_vcr: true
       - !ruby/object:Provider::Terraform::Examples
         name: "datastream_stream_bigquery"
         pull_external: true
diff --git a/mmv1/templates/terraform/constants/datastream_stream.go.erb b/mmv1/templates/terraform/constants/datastream_stream.go.erb
index 7f4cebc715dc..58ce5dd546de 100644
--- a/mmv1/templates/terraform/constants/datastream_stream.go.erb
+++ b/mmv1/templates/terraform/constants/datastream_stream.go.erb
@@ -63,4 +63,19 @@ func waitForDatastreamStreamReady(d *schema.ResourceData, config *Config, timeou
 		}
 	})
 }
+
+func resourceDatastreamStreamDatabaseIdDiffSuppress(_, old, new string, _ *schema.ResourceData) bool {
+	re := regexp.MustCompile(`projects/(.+)/datasets/([^\.\?\#]+)`)
+	paths := re.FindStringSubmatch(new)
+
+	// db returns value in form <project>:<dataset_id>
+	if len(paths) == 3 {
+		project := paths[1]
+		datasetId := paths[2]
+		new = fmt.Sprintf("%s:%s", project, datasetId)
+	}
+
+	return old == new
+}
+
 <% end -%>
diff --git a/mmv1/templates/terraform/custom_expand/datastream_stream_dataset_id.go.erb b/mmv1/templates/terraform/custom_expand/datastream_stream_dataset_id.go.erb
new file mode 100644
index 000000000000..504d9eeb9de9
--- /dev/null
+++ b/mmv1/templates/terraform/custom_expand/datastream_stream_dataset_id.go.erb
@@ -0,0 +1,26 @@
+<%# # the license inside this if block pertains to this file
+		# Copyright 2023 Google Inc.
+		# Licensed under the Apache License, Version 2.0 (the "License");
+		# you may not use this file except in compliance with the License.
+		# You may obtain a copy of the License at
+		#
+		#     http://www.apache.org/licenses/LICENSE-2.0
+		#
+		# Unless required by applicable law or agreed to in writing, software
+		# distributed under the License is distributed on an "AS IS" BASIS,
+		# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+		# See the License for the specific language governing permissions and
+		# limitations under the License.
+#%>
+func expand<%= prefix -%><%= titlelize_property(property) -%>(v interface{}, d TerraformResourceData, config *Config) (interface{}, error) {
+	s := v.(string)
+	re := regexp.MustCompile(`projects/(.+)/datasets/([^\.\?\#]+)`)
+	paths := re.FindStringSubmatch(s)
+	if len(paths) == 3 {
+		project := paths[1]
+		datasetId := paths[2]
+		return fmt.Sprintf("%s:%s", project, datasetId), nil
+	}
+
+	return s, nil
+}
diff --git a/mmv1/templates/terraform/examples/datastream_stream_postgresql_bigquery_dataset_id.tf.erb b/mmv1/templates/terraform/examples/datastream_stream_postgresql_bigquery_dataset_id.tf.erb
new file mode 100644
index 000000000000..cfbc21d7252c
--- /dev/null
+++ b/mmv1/templates/terraform/examples/datastream_stream_postgresql_bigquery_dataset_id.tf.erb
@@ -0,0 +1,106 @@
+
+resource "google_bigquery_dataset" "postgres" {
+  dataset_id    = "postgres%{random_suffix}"
+  friendly_name = "postgres"
+  description   = "Database of postgres"
+  location      = "us-central1"
+}
+
+resource "google_datastream_stream" "default" {
+  display_name  = "postgres to bigQuery"
+  location      = "us-central1"
+  stream_id     = "postgres-to-big-query%{random_suffix}"
+
+   source_config {
+    source_connection_profile = google_datastream_connection_profile.source_connection_profile.id
+    mysql_source_config {}
+  }
+
+  destination_config {
+    destination_connection_profile = google_datastream_connection_profile.destination_connection_profile2.id
+    bigquery_destination_config {
+      data_freshness = "900s"
+      single_target_dataset {
+        dataset_id = google_bigquery_dataset.postgres.id
+      }
+    }
+  }
+
+  backfill_all {
+  }
+
+}
+
+resource "google_datastream_connection_profile" "destination_connection_profile2" {
+    display_name          = "Connection profile"
+    location              = "us-central1"
+    connection_profile_id = "tf-test-destination-profile%{random_suffix}"
+    bigquery_profile {}
+}
+
+resource "google_sql_database_instance" "instance" {
+    name             = "tf-test-my-instance%{random_suffix}"
+    database_version = "MYSQL_8_0"
+    region           = "us-central1"
+    settings {
+        tier = "db-f1-micro"
+        backup_configuration {
+            enabled            = true
+            binary_log_enabled = true
+        }
+
+        ip_configuration {
+            // Datastream IPs will vary by region.
+            authorized_networks {
+                value = "34.71.242.81"
+            }
+
+            authorized_networks {
+                value = "34.72.28.29"
+            }
+
+            authorized_networks {
+                value = "34.67.6.157"
+            }
+
+            authorized_networks {
+                value = "34.67.234.134"
+            }
+
+            authorized_networks {
+                value = "34.72.239.218"
+            }
+        }
+    }
+
+    deletion_protection  = false
+}
+
+resource "google_sql_database" "db" {
+    instance = google_sql_database_instance.instance.name
+    name     = "db"
+}
+
+resource "random_password" "pwd" {
+    length = 16
+    special = false
+}
+
+resource "google_sql_user" "user" {
+    name     = "user%{random_suffix}"
+    instance = google_sql_database_instance.instance.name
+    host     = "%"
+    password = random_password.pwd.result
+}
+
+resource "google_datastream_connection_profile" "source_connection_profile" {
+    display_name          = "Source connection profile"
+    location              = "us-central1"
+    connection_profile_id = "tf-test-source-profile%{random_suffix}"
+
+    mysql_profile {
+        hostname = google_sql_database_instance.instance.public_ip_address
+        username = google_sql_user.user.name
+        password = google_sql_user.user.password
+    }
+}