diff --git a/CHANGELOG.md b/CHANGELOG.md
index 045bfa92a9dee..fdbff5c42d975 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -39,6 +39,7 @@ The format is based on [Keep a Changelog](https://keepachangelog.com/en/1.0.0/),
 - Create and attach interclusterTest and yamlRestTest code coverage reports to gradle check task([#19165](https://github.com/opensearch-project/OpenSearch/pull/19165))
 - Optimized date histogram aggregations by preventing unnecessary object allocations in date rounding utils ([19088](https://github.com/opensearch-project/OpenSearch/pull/19088))
 - Optimize source conversion in gRPC search hits using zero-copy BytesRef ([#19280](https://github.com/opensearch-project/OpenSearch/pull/19280))
+- Allow plugins to copy folders into their config dir during installation ([#19343](https://github.com/opensearch-project/OpenSearch/pull/19343))
 - Add failureaccess as runtime dependency to transport-grpc module  ([#19339](https://github.com/opensearch-project/OpenSearch/pull/19339))
 
 ### Fixed
diff --git a/distribution/tools/plugin-cli/src/main/java/org/opensearch/tools/cli/plugin/InstallPluginCommand.java b/distribution/tools/plugin-cli/src/main/java/org/opensearch/tools/cli/plugin/InstallPluginCommand.java
index c71728056b4c4..4f69157545a22 100644
--- a/distribution/tools/plugin-cli/src/main/java/org/opensearch/tools/cli/plugin/InstallPluginCommand.java
+++ b/distribution/tools/plugin-cli/src/main/java/org/opensearch/tools/cli/plugin/InstallPluginCommand.java
@@ -960,16 +960,13 @@ private void installConfig(PluginInfo info, Path tmpConfigDir, Path destConfigDi
 
         try (DirectoryStream<Path> stream = Files.newDirectoryStream(tmpConfigDir)) {
             for (Path srcFile : stream) {
-                if (Files.isDirectory(srcFile)) {
-                    throw new UserException(PLUGIN_MALFORMED, "Directories not allowed in config dir for plugin " + info.getName());
-                }
-
                 Path destFile = destConfigDir.resolve(tmpConfigDir.relativize(srcFile));
                 if (Files.exists(destFile) == false) {
-                    Files.copy(srcFile, destFile);
-                    setFileAttributes(destFile, CONFIG_FILES_PERMS);
-                    if (destConfigDirAttributes != null) {
-                        setOwnerGroup(destFile, destConfigDirAttributes);
+                    if (Files.isDirectory(srcFile)) {
+                        copyWithPermissions(srcFile, destFile, CONFIG_DIR_PERMS, destConfigDirAttributes);
+                        copyDirectoryRecursively(srcFile, destFile, destConfigDirAttributes);
+                    } else {
+                        copyWithPermissions(srcFile, destFile, CONFIG_FILES_PERMS, destConfigDirAttributes);
                     }
                 }
             }
@@ -995,6 +992,42 @@ private static void setFileAttributes(final Path path, final Set<PosixFilePermis
         }
     }
 
+    /**
+     * Copies a file and sets permissions and ownership
+     */
+    private static void copyWithPermissions(
+        Path srcFile,
+        Path destFile,
+        Set<PosixFilePermission> permissions,
+        PosixFileAttributes attributes
+    ) throws IOException {
+        Files.copy(srcFile, destFile);
+        setFileAttributes(destFile, permissions);
+        if (attributes != null) {
+            setOwnerGroup(destFile, attributes);
+        }
+    }
+
+    /**
+     * Recursively copies directory contents from source to destination.
+     */
+    private static void copyDirectoryRecursively(Path srcDir, Path destDir, PosixFileAttributes destConfigDirAttributes)
+        throws IOException {
+        try (DirectoryStream<Path> stream = Files.newDirectoryStream(srcDir)) {
+            for (Path srcFile : stream) {
+                Path destFile = destDir.resolve(srcDir.relativize(srcFile));
+                if (Files.exists(destFile) == false) {
+                    if (Files.isDirectory(srcFile)) {
+                        copyWithPermissions(srcFile, destFile, CONFIG_DIR_PERMS, destConfigDirAttributes);
+                        copyDirectoryRecursively(srcFile, destFile, destConfigDirAttributes);
+                    } else {
+                        copyWithPermissions(srcFile, destFile, CONFIG_FILES_PERMS, destConfigDirAttributes);
+                    }
+                }
+            }
+        }
+    }
+
     private final List<Path> pathsToDeleteOnShutdown = new ArrayList<>();
 
     @Override
diff --git a/distribution/tools/plugin-cli/src/test/java/org/opensearch/tools/cli/plugin/InstallPluginCommandTests.java b/distribution/tools/plugin-cli/src/test/java/org/opensearch/tools/cli/plugin/InstallPluginCommandTests.java
index 57cf65a4a2c51..e2cd36f7bb8b9 100644
--- a/distribution/tools/plugin-cli/src/test/java/org/opensearch/tools/cli/plugin/InstallPluginCommandTests.java
+++ b/distribution/tools/plugin-cli/src/test/java/org/opensearch/tools/cli/plugin/InstallPluginCommandTests.java
@@ -433,8 +433,6 @@ void assertConfigAndBin(String name, Path original, Environment env) throws IOEx
 
             try (DirectoryStream<Path> stream = Files.newDirectoryStream(configDir)) {
                 for (Path file : stream) {
-                    assertFalse("not a dir", Files.isDirectory(file));
-
                     if (isPosix) {
                         PosixFileAttributes attributes = Files.readAttributes(file, PosixFileAttributes.class);
                         if (user != null) {
@@ -803,9 +801,14 @@ public void testConfigContainsDir() throws Exception {
         Files.createDirectories(dirInConfigDir);
         Files.createFile(dirInConfigDir.resolve("myconfig.yml"));
         String pluginZip = createPluginUrl("fake", pluginDir);
-        UserException e = expectThrows(UserException.class, () -> installPlugin(pluginZip, env.v1()));
-        assertTrue(e.getMessage(), e.getMessage().contains("Directories not allowed in config dir for plugin"));
-        assertInstallCleaned(env.v2());
+        installPlugin(pluginZip, env.v1());
+        assertPlugin("fake", pluginDir, env.v2());
+
+        // Verify the directory and file were installed
+        Path installedConfigDir = env.v2().configDir().resolve("fake").resolve("foo");
+        assertTrue(Files.exists(installedConfigDir));
+        assertTrue(Files.isDirectory(installedConfigDir));
+        assertTrue(Files.exists(installedConfigDir.resolve("myconfig.yml")));
     }
 
     public void testMissingDescriptor() throws Exception {