diff --git a/go.mod b/go.mod
index 424f0341..678b4d7f 100644
--- a/go.mod
+++ b/go.mod
@@ -24,7 +24,7 @@ require (
 	github.com/fluxcd/pkg/chartutil v1.26.0
 	github.com/fluxcd/pkg/envsubst v1.7.0
 	github.com/fluxcd/pkg/git v0.50.0
-	github.com/fluxcd/pkg/kustomize v1.32.0
+	github.com/fluxcd/pkg/kustomize v1.35.0
 	github.com/fluxcd/pkg/oci v0.66.0
 	github.com/fluxcd/pkg/runtime v0.108.0
 	github.com/fluxcd/pkg/sourceignore v0.18.0
diff --git a/go.sum b/go.sum
index 03dd511d..408c07cc 100644
--- a/go.sum
+++ b/go.sum
@@ -206,8 +206,8 @@ github.com/fluxcd/pkg/git v0.50.0 h1:gbGmSTjQ6CxqFmT9ZkLfYh8kG7CHqc7gHoPqcygixK8
 github.com/fluxcd/pkg/git v0.50.0/go.mod h1:OgaHoS0iR0GuLl+f778X7NrGy1pDH7xcpF/nsCRgJ9g=
 github.com/fluxcd/pkg/gittestserver v0.29.0 h1:2j03zKVL6iVn6oiUuecG/O/3Q1pULWM9JrF/HSjkpnc=
 github.com/fluxcd/pkg/gittestserver v0.29.0/go.mod h1:O8151jV0ppBZTb9IUXMjxh6hZpkiuLq8JQHDBPOkZFw=
-github.com/fluxcd/pkg/kustomize v1.32.0 h1:5lLT2dgR+JrcoJHB7/K50o0AcJikKvXcRd3r7jIYZC8=
-github.com/fluxcd/pkg/kustomize v1.32.0/go.mod h1:Xz1QIUIKexXuSolRQY63843wSycPVuIsVhE9C+aJWl8=
+github.com/fluxcd/pkg/kustomize v1.35.0 h1:Hl3Y6WPPo1btDyUTrT+CS3b4GbAqCuE+bZebpIG2cxg=
+github.com/fluxcd/pkg/kustomize v1.35.0/go.mod h1:M1jIz03OQ86QmcsO+2W3y0+X4B0dbh2QLUF8h3gzyJE=
 github.com/fluxcd/pkg/oci v0.66.0 h1:nlBA3/MvJShjA+VFPKDRoXLUpH+e8THVvCMST+qUTlI=
 github.com/fluxcd/pkg/oci v0.66.0/go.mod h1:9Z4Juu/BhLLKHKOkOalfwIkZYsjTViD0YDHzW9w5R9c=
 github.com/fluxcd/pkg/runtime v0.108.0 h1:sSXz6FWcRT+tkfddiCmehrYaEKqkVFkcBWDhGMNJtH4=
diff --git a/internal/build/build.go b/internal/build/build.go
index 9a59c4bb..f94f54b4 100644
--- a/internal/build/build.go
+++ b/internal/build/build.go
@@ -620,6 +620,7 @@ func (b *Builder) do(ctx context.Context, kustomization kustomizev1.Kustomizatio
 			res,
 			kustomize.SubstituteWithDryRun(b.dryRun),
 			kustomize.SubstituteWithStrict(b.strictSubst),
+			kustomize.SubstituteWithAlways(kustomization.GetSubstituteStrategy() == kustomizev1.SubstituteStrategyAlways),
 		)
 		if err != nil {
 			return nil, fmt.Errorf("var substitution failed for '%s': %w", res.GetName(), err)
diff --git a/internal/build/build_test.go b/internal/build/build_test.go
index 800bb1f4..ed3ff5da 100644
--- a/internal/build/build_test.go
+++ b/internal/build/build_test.go
@@ -875,3 +875,58 @@ func Test_Build_preserveAllLabels(t *testing.T) {
 		t.Errorf("expected owner namespace label \"flux-system\", got %v", got)
 	}
 }
+
+func Test_Build_substituteStrategy(t *testing.T) {
+	tests := []struct {
+		name      string
+		ksFile    string
+		wantColor string
+		wantShape string
+	}{
+		{
+			// The default WithVariables strategy skips substitution when no
+			// variables are defined, leaving the defaulted expressions untouched.
+			name:      "WithVariables skips substitution without variables",
+			ksFile:    "testdata/substitute-strategy/with-variables.yaml",
+			wantColor: "${color:=blue}",
+			wantShape: "${shape:=square}",
+		},
+		{
+			// The Always strategy performs substitution even without variables,
+			// resolving the expressions to their defaults.
+			name:      "Always substitutes defaults without variables",
+			ksFile:    "testdata/substitute-strategy/always.yaml",
+			wantColor: "blue",
+			wantShape: "square",
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			b, err := NewBuilder("test-ks", "testdata/substitute-strategy/resources",
+				WithDryRun(true),
+				WithNamespace("flux-system"),
+				WithKustomizationFile(tt.ksFile),
+			)
+			if err != nil {
+				t.Fatalf("unable to create builder: %v", err)
+			}
+
+			objects, err := b.Build()
+			if err != nil {
+				t.Fatalf("build failed: %v", err)
+			}
+			if len(objects) == 0 {
+				t.Fatal("expected at least one object, got none")
+			}
+
+			data, _, _ := unstructured.NestedStringMap(objects[0].Object, "data")
+			if got := data["color"]; got != tt.wantColor {
+				t.Errorf("expected color=%q, got %q", tt.wantColor, got)
+			}
+			if got := data["shape"]; got != tt.wantShape {
+				t.Errorf("expected shape=%q, got %q", tt.wantShape, got)
+			}
+		})
+	}
+}
diff --git a/internal/build/testdata/substitute-strategy/always.yaml b/internal/build/testdata/substitute-strategy/always.yaml
new file mode 100644
index 00000000..c7fce66e
--- /dev/null
+++ b/internal/build/testdata/substitute-strategy/always.yaml
@@ -0,0 +1,9 @@
+apiVersion: kustomize.toolkit.fluxcd.io/v1
+kind: Kustomization
+metadata:
+  name: test-ks
+  namespace: flux-system
+spec:
+  path: "./resources"
+  postBuild:
+    substituteStrategy: Always
diff --git a/internal/build/testdata/substitute-strategy/resources/configmap.yaml b/internal/build/testdata/substitute-strategy/resources/configmap.yaml
new file mode 100644
index 00000000..bcca1157
--- /dev/null
+++ b/internal/build/testdata/substitute-strategy/resources/configmap.yaml
@@ -0,0 +1,7 @@
+apiVersion: v1
+kind: ConfigMap
+metadata:
+  name: test-config
+data:
+  color: "${color:=blue}"
+  shape: "${shape:=square}"
diff --git a/internal/build/testdata/substitute-strategy/resources/kustomization.yaml b/internal/build/testdata/substitute-strategy/resources/kustomization.yaml
new file mode 100644
index 00000000..9fb65fa6
--- /dev/null
+++ b/internal/build/testdata/substitute-strategy/resources/kustomization.yaml
@@ -0,0 +1,4 @@
+apiVersion: kustomize.config.k8s.io/v1beta1
+kind: Kustomization
+resources:
+  - configmap.yaml
diff --git a/internal/build/testdata/substitute-strategy/with-variables.yaml b/internal/build/testdata/substitute-strategy/with-variables.yaml
new file mode 100644
index 00000000..ea9dd735
--- /dev/null
+++ b/internal/build/testdata/substitute-strategy/with-variables.yaml
@@ -0,0 +1,8 @@
+apiVersion: kustomize.toolkit.fluxcd.io/v1
+kind: Kustomization
+metadata:
+  name: test-ks
+  namespace: flux-system
+spec:
+  path: "./resources"
+  postBuild: {}