diff --git a/.changeset/gentle-coats-drum.md b/.changeset/gentle-coats-drum.md
new file mode 100644
index 0000000000..a0d6025f54
--- /dev/null
+++ b/.changeset/gentle-coats-drum.md
@@ -0,0 +1,7 @@
+---
+'@backstage/ui': patch
+---
+
+Updated `PasswordField` to visually match `TextField`, including consistent focus rings, error states, disabled appearance, and background colour behaviour.
+
+**Affected components:** PasswordField
diff --git a/packages/ui/report.api.md b/packages/ui/report.api.md
index ac6c9f13a2..1bd3022cd4 100644
--- a/packages/ui/report.api.md
+++ b/packages/ui/report.api.md
@@ -2361,6 +2361,7 @@ export const PasswordFieldDefinition: {
     readonly inputIcon: 'bui-PasswordFieldIcon';
     readonly inputVisibility: 'bui-PasswordFieldVisibility';
   };
+  readonly bg: 'consumer';
   readonly propDefs: {
     readonly size: {
       readonly dataAttribute: true;
diff --git a/packages/ui/src/components/PasswordField/PasswordField.module.css b/packages/ui/src/components/PasswordField/PasswordField.module.css
index 8ede1212a0..9fdbcd8ef1 100644
--- a/packages/ui/src/components/PasswordField/PasswordField.module.css
+++ b/packages/ui/src/components/PasswordField/PasswordField.module.css
@@ -24,33 +24,38 @@
     width: 100%;
     flex-shrink: 0;
 
-    &[data-size='small'] {
-      --password-field-item-height: 2rem;
+    &[data-on-bg='neutral-1'] .bui-PasswordFieldInput {
+      background-color: var(--bui-bg-neutral-2);
     }
 
-    &[data-size='medium'] {
-      --password-field-item-height: 2.5rem;
+    &[data-on-bg='neutral-2'] .bui-PasswordFieldInput {
+      background-color: var(--bui-bg-neutral-3);
+    }
+
+    &[data-on-bg='neutral-3'] .bui-PasswordFieldInput {
+      background-color: var(--bui-bg-neutral-4);
     }
   }
 
   .bui-PasswordFieldInputWrapper {
-    display: flex;
-    align-items: center;
-    border-radius: var(--bui-radius-2);
-    border: 1px solid var(--bui-border-2);
-    background-color: var(--bui-bg-neutral-1);
-    transition: border-color 0.2s ease-in-out, outline-color 0.2s ease-in-out;
+    position: relative;
 
-    &[data-size='small'] {
+    &[data-size='small'] .bui-PasswordFieldInput {
       height: 2rem;
+      padding-right: 2rem;
     }
 
-    &[data-size='medium'] {
+    &[data-size='medium'] .bui-PasswordFieldInput {
       height: 2.5rem;
+      padding-right: 2.5rem;
     }
 
-    &:has([data-invalid]) {
-      border-color: var(--bui-fg-danger);
+    &[data-size='small'] .bui-PasswordFieldInput[data-icon] {
+      padding-left: var(--bui-space-8);
+    }
+
+    &[data-size='medium'] .bui-PasswordFieldInput[data-icon] {
+      padding-left: var(--bui-space-9);
     }
 
     &:has([data-disabled]) {
@@ -60,41 +65,47 @@
   }
 
   .bui-PasswordFieldIcon {
-    flex: 0 0 auto;
-    display: grid;
-    place-content: center;
+    position: absolute;
+    left: var(--bui-space-3);
+    top: 50%;
+    transform: translateY(-50%);
     color: var(--bui-fg-primary);
+    flex-shrink: 0;
     pointer-events: none;
-    width: var(--password-field-item-height);
-    height: var(--password-field-item-height);
 
-    & svg {
-      .bui-PasswordField[data-size='small'] & {
-        width: 1rem;
-        height: 1rem;
-      }
+    &[data-size='small'],
+    &[data-size='small'] svg {
+      width: 1rem;
+      height: 1rem;
+    }
 
-      .bui-PasswordField[data-size='medium'] & {
-        width: 1.25rem;
-        height: 1.25rem;
-      }
+    &[data-size='medium'],
+    &[data-size='medium'] svg {
+      width: 1.25rem;
+      height: 1.25rem;
     }
   }
 
   .bui-PasswordFieldInput {
-    flex: 1;
     display: flex;
     align-items: center;
-    padding: 0;
+    padding: 0 var(--bui-space-3);
+    border-radius: var(--bui-radius-2);
     border: none;
-    background-color: transparent;
+    background-color: var(--bui-bg-neutral-1);
     font-size: var(--bui-font-size-3);
     font-family: var(--bui-font-regular);
     font-weight: var(--bui-font-weight-regular);
     color: var(--bui-fg-primary);
+    transition: box-shadow 0.2s ease-in-out;
     width: 100%;
     height: 100%;
-    outline: none;
+    cursor: inherit;
+
+    &[data-focused] {
+      outline: none;
+      box-shadow: inset 0 0 0 1px var(--bui-ring);
+    }
 
     &::-webkit-search-cancel-button,
     &::-webkit-search-decoration {
@@ -105,23 +116,20 @@
       color: var(--bui-fg-secondary);
     }
 
-    &[data-disabled] {
-      cursor: not-allowed;
+    &[data-invalid] {
+      box-shadow: inset 0 0 0 1px var(--bui-border-danger);
     }
 
-    &:first-child {
-      .bui-PasswordField[data-size='small'] & {
-        padding-inline: var(--bui-space-3) 0;
-      }
-
-      .bui-PasswordField[data-size='medium'] & {
-        padding-inline: var(--bui-space-4) 0;
-      }
+    &[data-disabled] {
+      cursor: not-allowed;
     }
   }
 
   .bui-PasswordFieldVisibility {
-    flex: 0 0 auto;
+    position: absolute;
+    right: 0;
+    top: 50%;
+    transform: translateY(-50%);
     display: grid;
     place-content: center;
     background-color: transparent;
@@ -130,16 +138,22 @@
     padding: 0;
     margin: 0;
     color: var(--bui-fg-primary);
-    width: var(--password-field-item-height);
-    height: var(--password-field-item-height);
 
-    & svg {
-      .bui-PasswordField[data-size='small'] & {
+    &[data-size='small'] {
+      width: 2rem;
+      height: 2rem;
+
+      & svg {
         width: 1rem;
         height: 1rem;
       }
+    }
 
-      .bui-PasswordField[data-size='medium'] & {
+    &[data-size='medium'] {
+      width: 2.5rem;
+      height: 2.5rem;
+
+      & svg {
         width: 1.25rem;
         height: 1.25rem;
       }
diff --git a/packages/ui/src/components/PasswordField/definition.ts b/packages/ui/src/components/PasswordField/definition.ts
index 7133969eff..1a3be04c76 100644
--- a/packages/ui/src/components/PasswordField/definition.ts
+++ b/packages/ui/src/components/PasswordField/definition.ts
@@ -32,6 +32,7 @@ export const PasswordFieldDefinition = defineComponent<PasswordFieldOwnProps>()(
       inputIcon: 'bui-PasswordFieldIcon',
       inputVisibility: 'bui-PasswordFieldVisibility',
     },
+    bg: 'consumer',
     propDefs: {
       size: { dataAttribute: true, default: 'small' },
       className: {},