diff --git a/config/common/common.go b/config/common/common.go
index 05d864e004..08e43f25ed 100644
--- a/config/common/common.go
+++ b/config/common/common.go
@@ -16,6 +16,7 @@ import (
 	xpresource "github.com/crossplane/crossplane-runtime/pkg/resource"
 	"github.com/crossplane/upjet/pkg/config"
 	"github.com/crossplane/upjet/pkg/resource"
+	jsoniter "github.com/json-iterator/go"
 	"github.com/pkg/errors"
 	corev1 "k8s.io/api/core/v1"
 	"k8s.io/apimachinery/pkg/types"
@@ -126,3 +127,18 @@ func PasswordGenerator(secretRefFieldPath, toggleFieldPath string) config.NewIni
 		})
 	}
 }
+
+// RemovePolicyVersion removes the "Version" field from a JSON-encoded policy string.
+func RemovePolicyVersion(p string) (string, error) {
+	var policy any
+	if err := jsoniter.ConfigCompatibleWithStandardLibrary.Unmarshal([]byte(p), &policy); err != nil {
+		return "", errors.Wrap(err, "failed to unmarshal the policy from JSON")
+	}
+	m, ok := policy.(map[string]any)
+	if !ok {
+		return p, nil
+	}
+	delete(m, "Version")
+	r, err := jsoniter.ConfigCompatibleWithStandardLibrary.Marshal(m)
+	return string(r), errors.Wrap(err, "failed to marshal the policy map as JSON")
+}
diff --git a/config/sns/config.go b/config/sns/config.go
index 3913cd0103..702a1e028c 100644
--- a/config/sns/config.go
+++ b/config/sns/config.go
@@ -8,7 +8,6 @@ import (
 	"github.com/crossplane/upjet/pkg/config"
 	awspolicy "github.com/hashicorp/awspolicyequivalence"
 	"github.com/hashicorp/terraform-plugin-sdk/v2/terraform"
-	jsoniter "github.com/json-iterator/go"
 	"github.com/pkg/errors"
 
 	"github.com/upbound/provider-aws/config/common"
@@ -35,11 +34,11 @@ func Configure(p *config.Provider) {
 				return diff, nil
 			}
 
-			vOld, err := removePolicyVersion(diff.Attributes["policy"].Old)
+			vOld, err := common.RemovePolicyVersion(diff.Attributes["policy"].Old)
 			if err != nil {
 				return nil, errors.Wrap(err, "failed to remove Version from the old AWS policy document")
 			}
-			vNew, err := removePolicyVersion(diff.Attributes["policy"].New)
+			vNew, err := common.RemovePolicyVersion(diff.Attributes["policy"].New)
 			if err != nil {
 				return nil, errors.Wrap(err, "failed to remove Version from the new AWS policy document")
 			}
@@ -55,17 +54,3 @@ func Configure(p *config.Provider) {
 		}
 	})
 }
-
-func removePolicyVersion(p string) (string, error) {
-	var policy any
-	if err := jsoniter.ConfigCompatibleWithStandardLibrary.Unmarshal([]byte(p), &policy); err != nil {
-		return "", errors.Wrap(err, "failed to unmarshal the policy from JSON")
-	}
-	m, ok := policy.(map[string]any)
-	if !ok {
-		return p, nil
-	}
-	delete(m, "Version")
-	r, err := jsoniter.ConfigCompatibleWithStandardLibrary.Marshal(m)
-	return string(r), errors.Wrap(err, "failed to marshal the policy map as JSON")
-}
diff --git a/config/sqs/config.go b/config/sqs/config.go
index 2c6e190fa9..6ececc5a39 100644
--- a/config/sqs/config.go
+++ b/config/sqs/config.go
@@ -6,6 +6,9 @@ package sqs
 
 import (
 	"github.com/crossplane/upjet/pkg/config"
+	awspolicy "github.com/hashicorp/awspolicyequivalence"
+	"github.com/hashicorp/terraform-plugin-sdk/v2/terraform"
+	"github.com/pkg/errors"
 
 	"github.com/upbound/provider-aws/config/common"
 )
@@ -30,6 +33,30 @@ func Configure(p *config.Provider) {
 		// If the key policy is unset on the Queue resource, don't late initialize it, to avoid conflicts with the policy
 		// managed by a QueuePolicy resource.
 		r.LateInitializer.IgnoredFields = append(r.LateInitializer.IgnoredFields, "name_prefix", "policy")
+		r.TerraformCustomDiff = func(diff *terraform.InstanceDiff, _ *terraform.InstanceState, _ *terraform.ResourceConfig) (*terraform.InstanceDiff, error) {
+			if diff == nil || diff.Attributes["policy"] == nil || diff.Attributes["policy"].Old == "" || diff.Attributes["policy"].New == "" {
+				return diff, nil
+			}
+
+			vOld, err := common.RemovePolicyVersion(diff.Attributes["policy"].Old)
+			if err != nil {
+				return nil, errors.Wrap(err, "failed to remove Version from the old AWS policy document")
+			}
+			vNew, err := common.RemovePolicyVersion(diff.Attributes["policy"].New)
+			if err != nil {
+				return nil, errors.Wrap(err, "failed to remove Version from the new AWS policy document")
+			}
+
+			ok, err := awspolicy.PoliciesAreEquivalent(vOld, vNew)
+			if err != nil {
+				return nil, errors.Wrap(err, "failed to compare the old and the new AWS policy documents")
+			}
+			if ok {
+				delete(diff.Attributes, "policy")
+			}
+			return diff, nil
+		}
+
 	})
 
 	p.AddResourceConfigurator("aws_sqs_queue_redrive_policy", func(r *config.Resource) {
diff --git a/examples/sqs/v1beta1/queue-with-policy.yaml b/examples/sqs/v1beta1/queue-with-policy.yaml
new file mode 100644
index 0000000000..c4f31d1d05
--- /dev/null
+++ b/examples/sqs/v1beta1/queue-with-policy.yaml
@@ -0,0 +1,37 @@
+# SPDX-FileCopyrightText: 2024 The Crossplane Authors <https://crossplane.io>
+#
+# SPDX-License-Identifier: CC0-1.0
+
+apiVersion: sqs.aws.upbound.io/v1beta1
+kind: Queue
+metadata:
+  name: example-with-policy
+  labels:
+    testing.upbound.io/example-name: example
+spec:
+  forProvider:
+    name: upbound-sqs-with-policy
+    policy: |
+      {
+        "Statement": [
+          {
+            "Sid": "example",
+            "Effect": "Allow",
+            "Principal": {
+              "Service": "s3.amazonaws.com"
+            },
+            "Action": "sqs:SendMessage",
+            "Resource": "arn:aws:sqs:us-west-1:*:queue-policy"
+          }
+        ]
+      }
+    delaySeconds: 90
+    maxMessageSize: 2048
+    messageRetentionSeconds: 86400
+    receiveWaitTimeSeconds: 10
+    region: us-west-1
+    tags:
+      Environment: production
+  writeConnectionSecretToRef:
+    name: "upbound-sqs-with-policy"
+    namespace: "upbound-system"