diff --git a/aws_lambda_powertools/utilities/parameters/base.py b/aws_lambda_powertools/utilities/parameters/base.py
index 5a6706776ce..05067cb46b8 100644
--- a/aws_lambda_powertools/utilities/parameters/base.py
+++ b/aws_lambda_powertools/utilities/parameters/base.py
@@ -334,9 +334,6 @@ def transform_value(
 
     err_msg = "Unable to transform value using '{transform}' transform: {exc}"
 
-    if isinstance(value, bytes):
-        value = value.decode("utf-8")
-
     if isinstance(value, dict):
         # NOTE: We must handle partial failures when receiving multiple values
         # where one of the keys might fail during transform, e.g. `{"a": "valid", "b": "{"}`
@@ -353,14 +350,14 @@ def transform_value(
                 transformed_values[dict_key] = None
         return transformed_values
 
-    if transform == "auto":
-        # key="a.json", value='{"a": "b"}', or key="a.binary", value="b64_encoded"
-        transform_method = get_transform_method(value=key, transform=transform)
-    else:
-        # value='{"key": "value"}
-        transform_method = get_transform_method(value=value, transform=transform)
+    # Auto transforms inspect the parameter name; explicit transforms ignore it.
+    transform_method = get_transform_method(value=key, transform=transform)
 
     try:
+        # Identity transforms must preserve raw bytes. Decode failures belong to
+        # the same error policy as JSON/base64 failures.
+        if isinstance(value, bytes) and transform_method is not TRANSFORM_METHOD_MAPPING[None]:
+            value = value.decode("utf-8")
         return transform_method(value)
     except Exception as exc:
         if raise_on_transform_error:
diff --git a/tests/functional/parameters/_boto3/test_utilities_parameters.py b/tests/functional/parameters/_boto3/test_utilities_parameters.py
index 8442e4c9113..1c0b054fb47 100644
--- a/tests/functional/parameters/_boto3/test_utilities_parameters.py
+++ b/tests/functional/parameters/_boto3/test_utilities_parameters.py
@@ -3162,6 +3162,39 @@ def _get_multiple(self, path: str, **kwargs) -> dict[str, str]:
     assert value == mock_value
 
 
+@pytest.mark.parametrize(
+    "transform,key",
+    [("binary", "secret"), ("json", "secret"), ("auto", "secret.binary"), ("auto", "secret.json")],
+)
+def test_transform_value_invalid_utf8_obeys_error_policy(transform, key):
+    value = b"\xff\xfe"
+
+    with pytest.raises(parameters.TransformParameterError) as excinfo:
+        parameters.base.transform_value(value, transform=transform, key=key)
+
+    assert isinstance(excinfo.value.__cause__, UnicodeDecodeError)
+    assert parameters.base.transform_value(value, transform=transform, key=key, raise_on_transform_error=False) is None
+
+
+@pytest.mark.parametrize("value", [b"\xff\xfe", b"valid UTF-8"])
+@pytest.mark.parametrize("key", ["secret", "secret.bin"])
+def test_secret_provider_auto_preserves_unmatched_binary(value, key, config):
+    provider = parameters.SecretsProvider(boto_config=config)
+    with stub.Stubber(provider.client) as stubber:
+        stubber.add_response("get_secret_value", {"SecretBinary": value}, {"SecretId": key})
+        assert provider.get(key, transform="auto") == value
+        stubber.assert_no_pending_responses()
+
+
+def test_secret_provider_invalid_utf8_raises_transform_error(config):
+    provider = parameters.SecretsProvider(boto_config=config)
+    with stub.Stubber(provider.client) as stubber:
+        stubber.add_response("get_secret_value", {"SecretBinary": b"\xff\xfe"}, {"SecretId": "secret"})
+        with pytest.raises(parameters.TransformParameterError):
+            provider.get("secret", transform="binary")
+        stubber.assert_no_pending_responses()
+
+
 def test_appconf_get_app_config_different_environment_and_application(monkeypatch, mock_name):
     # GIVEN a provider that reports which environment/application it was built for
     class TestProvider(BaseProvider):