diff --git a/.changes/v1.15/BUG FIXES-20260106-120000.yaml b/.changes/v1.15/BUG FIXES-20260106-120000.yaml
new file mode 100644
index 000000000000..7158526dbed5
--- /dev/null
+++ b/.changes/v1.15/BUG FIXES-20260106-120000.yaml	
@@ -0,0 +1,6 @@
+kind: BUG FIXES
+body: 'backend/s3: `AWS_USE_FIPS_ENDPOINT` and `AWS_USE_DUALSTACK_ENDPOINT` environment variables are now properly parsed as booleans, allowing values like "false" to correctly disable FIPS/DualStack endpoints'
+time: 2026-01-06T12:00:00.000000Z
+custom:
+    Issue: "37601"
+
diff --git a/internal/backend/remote-state/s3/backend.go b/internal/backend/remote-state/s3/backend.go
index be1af3f6fd19..ef1e5d40cb4f 100644
--- a/internal/backend/remote-state/s3/backend.go
+++ b/internal/backend/remote-state/s3/backend.go
@@ -9,6 +9,7 @@ import (
 	"fmt"
 	"os"
 	"regexp"
+	"strconv"
 	"strings"
 	"time"
 	"unicode"
@@ -1331,14 +1332,16 @@ func boolAttrOk(obj cty.Value, name string) (bool, bool) {
 	}
 }
 
-// boolAttrDefaultEnvVarOk checks for a configured bool argument or a non-empty
-// value in any of the provided environment variables. If any of the environment
-// variables are non-empty, to boolean is considered true.
+// boolAttrDefaultEnvVarOk checks for a configured bool argument or a boolean
+// value in any of the provided environment variables. Environment variable
+// values are parsed using strconv.ParseBool. Invalid values are ignored.
 func boolAttrDefaultEnvVarOk(obj cty.Value, name string, envvars ...string) (bool, bool) {
 	if val := obj.GetAttr(name); val.IsNull() {
 		for _, envvar := range envvars {
 			if v := os.Getenv(envvar); v != "" {
-				return true, true
+				if b, err := strconv.ParseBool(v); err == nil {
+					return b, true
+				}
 			}
 		}
 		return false, false
diff --git a/internal/backend/remote-state/s3/backend_test.go b/internal/backend/remote-state/s3/backend_test.go
index ace878f21933..3368d80dcf01 100644
--- a/internal/backend/remote-state/s3/backend_test.go
+++ b/internal/backend/remote-state/s3/backend_test.go
@@ -3963,3 +3963,85 @@ func objectLockPreCheck(t *testing.T) {
 		t.Skip("s3 backend tests using object lock enabled buckets require setting TF_S3_OBJECT_LOCK_TEST")
 	}
 }
+
+func TestBoolAttrDefaultEnvVarOk(t *testing.T) {
+	cases := map[string]struct {
+		envValue     string
+		expectedBool bool
+		expectedOk   bool
+	}{
+		"true": {
+			envValue:     "true",
+			expectedBool: true,
+			expectedOk:   true,
+		},
+		"TRUE": {
+			envValue:     "TRUE",
+			expectedBool: true,
+			expectedOk:   true,
+		},
+		"True": {
+			envValue:     "True",
+			expectedBool: true,
+			expectedOk:   true,
+		},
+		"1": {
+			envValue:     "1",
+			expectedBool: true,
+			expectedOk:   true,
+		},
+		"false": {
+			envValue:     "false",
+			expectedBool: false,
+			expectedOk:   true,
+		},
+		"FALSE": {
+			envValue:     "FALSE",
+			expectedBool: false,
+			expectedOk:   true,
+		},
+		"False": {
+			envValue:     "False",
+			expectedBool: false,
+			expectedOk:   true,
+		},
+		"0": {
+			envValue:     "0",
+			expectedBool: false,
+			expectedOk:   true,
+		},
+		"invalid value": {
+			envValue:     "invalid",
+			expectedBool: false,
+			expectedOk:   false,
+		},
+		"empty string": {
+			envValue:     "",
+			expectedBool: false,
+			expectedOk:   false,
+		},
+	}
+
+	for name, tc := range cases {
+		t.Run(name, func(t *testing.T) {
+			servicemocks.StashEnv(t)
+
+			if tc.envValue != "" {
+				os.Setenv("TEST_BOOL_ENV_VAR", tc.envValue)
+			}
+
+			obj := cty.ObjectVal(map[string]cty.Value{
+				"test_bool": cty.NullVal(cty.Bool),
+			})
+
+			gotBool, gotOk := boolAttrDefaultEnvVarOk(obj, "test_bool", "TEST_BOOL_ENV_VAR")
+
+			if gotBool != tc.expectedBool {
+				t.Errorf("expected bool %v, got %v", tc.expectedBool, gotBool)
+			}
+			if gotOk != tc.expectedOk {
+				t.Errorf("expected ok %v, got %v", tc.expectedOk, gotOk)
+			}
+		})
+	}
+}