diff --git a/homeassistant/components/mobile_app/const.py b/homeassistant/components/mobile_app/const.py
index a2a4e15ee72..ba81a0484cf 100644
--- a/homeassistant/components/mobile_app/const.py
+++ b/homeassistant/components/mobile_app/const.py
@@ -28,6 +28,7 @@ ATTR_CONFIG_ENTRY_ID = "entry_id"
 ATTR_DEVICE_NAME = "device_name"
 ATTR_MANUFACTURER = "manufacturer"
 ATTR_MODEL = "model"
+ATTR_NO_LEGACY_ENCRYPTION = "no_legacy_encryption"
 ATTR_OS_NAME = "os_name"
 ATTR_OS_VERSION = "os_version"
 ATTR_PUSH_WEBSOCKET_CHANNEL = "push_websocket_channel"
diff --git a/homeassistant/components/mobile_app/helpers.py b/homeassistant/components/mobile_app/helpers.py
index b7d38357a78..545c3511fc9 100644
--- a/homeassistant/components/mobile_app/helpers.py
+++ b/homeassistant/components/mobile_app/helpers.py
@@ -7,7 +7,7 @@ import json
 import logging
 
 from aiohttp.web import Response, json_response
-from nacl.encoding import Base64Encoder
+from nacl.encoding import Base64Encoder, HexEncoder, RawEncoder
 from nacl.secret import SecretBox
 
 from homeassistant.const import ATTR_DEVICE_ID, CONTENT_TYPE_JSON
@@ -23,6 +23,7 @@ from .const import (
     ATTR_DEVICE_NAME,
     ATTR_MANUFACTURER,
     ATTR_MODEL,
+    ATTR_NO_LEGACY_ENCRYPTION,
     ATTR_OS_VERSION,
     ATTR_SUPPORTS_ENCRYPTION,
     CONF_SECRET,
@@ -34,7 +35,7 @@ from .const import (
 _LOGGER = logging.getLogger(__name__)
 
 
-def setup_decrypt() -> tuple[int, Callable]:
+def setup_decrypt(key_encoder) -> tuple[int, Callable]:
     """Return decryption function and length of key.
 
     Async friendly.
@@ -42,12 +43,14 @@ def setup_decrypt() -> tuple[int, Callable]:
 
     def decrypt(ciphertext, key):
         """Decrypt ciphertext using key."""
-        return SecretBox(key).decrypt(ciphertext, encoder=Base64Encoder)
+        return SecretBox(key, encoder=key_encoder).decrypt(
+            ciphertext, encoder=Base64Encoder
+        )
 
     return (SecretBox.KEY_SIZE, decrypt)
 
 
-def setup_encrypt() -> tuple[int, Callable]:
+def setup_encrypt(key_encoder) -> tuple[int, Callable]:
     """Return encryption function and length of key.
 
     Async friendly.
@@ -55,15 +58,22 @@ def setup_encrypt() -> tuple[int, Callable]:
 
     def encrypt(ciphertext, key):
         """Encrypt ciphertext using key."""
-        return SecretBox(key).encrypt(ciphertext, encoder=Base64Encoder)
+        return SecretBox(key, encoder=key_encoder).encrypt(
+            ciphertext, encoder=Base64Encoder
+        )
 
     return (SecretBox.KEY_SIZE, encrypt)
 
 
-def _decrypt_payload(key: str | None, ciphertext: str) -> dict[str, str] | None:
+def _decrypt_payload_helper(
+    key: str | None,
+    ciphertext: str,
+    get_key_bytes: Callable[[str, int], str | bytes],
+    key_encoder,
+) -> dict[str, str] | None:
     """Decrypt encrypted payload."""
     try:
-        keylen, decrypt = setup_decrypt()
+        keylen, decrypt = setup_decrypt(key_encoder)
     except OSError:
         _LOGGER.warning("Ignoring encrypted payload because libsodium not installed")
         return None
@@ -72,18 +82,33 @@ def _decrypt_payload(key: str | None, ciphertext: str) -> dict[str, str] | None:
         _LOGGER.warning("Ignoring encrypted payload because no decryption key known")
         return None
 
-    key_bytes = key.encode("utf-8")
-    key_bytes = key_bytes[:keylen]
-    key_bytes = key_bytes.ljust(keylen, b"\0")
+    key_bytes = get_key_bytes(key, keylen)
 
-    try:
-        msg_bytes = decrypt(ciphertext, key_bytes)
-        message = json.loads(msg_bytes.decode("utf-8"))
-        _LOGGER.debug("Successfully decrypted mobile_app payload")
-        return message
-    except ValueError:
-        _LOGGER.warning("Ignoring encrypted payload because unable to decrypt")
-        return None
+    msg_bytes = decrypt(ciphertext, key_bytes)
+    message = json.loads(msg_bytes.decode("utf-8"))
+    _LOGGER.debug("Successfully decrypted mobile_app payload")
+    return message
+
+
+def _decrypt_payload(key: str | None, ciphertext: str) -> dict[str, str] | None:
+    """Decrypt encrypted payload."""
+
+    def get_key_bytes(key: str, keylen: int) -> str:
+        return key
+
+    return _decrypt_payload_helper(key, ciphertext, get_key_bytes, HexEncoder)
+
+
+def _decrypt_payload_legacy(key: str | None, ciphertext: str) -> dict[str, str] | None:
+    """Decrypt encrypted payload."""
+
+    def get_key_bytes(key: str, keylen: int) -> bytes:
+        key_bytes = key.encode("utf-8")
+        key_bytes = key_bytes[:keylen]
+        key_bytes = key_bytes.ljust(keylen, b"\0")
+        return key_bytes
+
+    return _decrypt_payload_helper(key, ciphertext, get_key_bytes, RawEncoder)
 
 
 def registration_context(registration: dict) -> Context:
@@ -158,11 +183,16 @@ def webhook_response(
     data = json.dumps(data, cls=JSONEncoder)
 
     if registration[ATTR_SUPPORTS_ENCRYPTION]:
-        keylen, encrypt = setup_encrypt()
+        keylen, encrypt = setup_encrypt(
+            HexEncoder if ATTR_NO_LEGACY_ENCRYPTION in registration else RawEncoder
+        )
 
-        key = registration[CONF_SECRET].encode("utf-8")
-        key = key[:keylen]
-        key = key.ljust(keylen, b"\0")
+        if ATTR_NO_LEGACY_ENCRYPTION in registration:
+            key = registration[CONF_SECRET]
+        else:
+            key = registration[CONF_SECRET].encode("utf-8")
+            key = key[:keylen]
+            key = key.ljust(keylen, b"\0")
 
         enc_data = encrypt(data.encode("utf-8"), key).decode("utf-8")
         data = json.dumps({"encrypted": True, "encrypted_data": enc_data})
diff --git a/homeassistant/components/mobile_app/webhook.py b/homeassistant/components/mobile_app/webhook.py
index 221c4eef733..860b8ef7b53 100644
--- a/homeassistant/components/mobile_app/webhook.py
+++ b/homeassistant/components/mobile_app/webhook.py
@@ -7,6 +7,7 @@ import logging
 import secrets
 
 from aiohttp.web import HTTPBadRequest, Request, Response, json_response
+from nacl.exceptions import CryptoError
 from nacl.secret import SecretBox
 import voluptuous as vol
 
@@ -58,6 +59,7 @@ from .const import (
     ATTR_EVENT_TYPE,
     ATTR_MANUFACTURER,
     ATTR_MODEL,
+    ATTR_NO_LEGACY_ENCRYPTION,
     ATTR_OS_VERSION,
     ATTR_SENSOR_ATTRIBUTES,
     ATTR_SENSOR_DEVICE_CLASS,
@@ -97,6 +99,7 @@ from .const import (
 )
 from .helpers import (
     _decrypt_payload,
+    _decrypt_payload_legacy,
     empty_okay_response,
     error_response,
     registration_context,
@@ -191,7 +194,27 @@ async def handle_webhook(
 
     if req_data[ATTR_WEBHOOK_ENCRYPTED]:
         enc_data = req_data[ATTR_WEBHOOK_ENCRYPTED_DATA]
-        webhook_payload = _decrypt_payload(config_entry.data[CONF_SECRET], enc_data)
+        try:
+            webhook_payload = _decrypt_payload(config_entry.data[CONF_SECRET], enc_data)
+            if ATTR_NO_LEGACY_ENCRYPTION not in config_entry.data:
+                data = {**config_entry.data, ATTR_NO_LEGACY_ENCRYPTION: True}
+                hass.config_entries.async_update_entry(config_entry, data=data)
+        except CryptoError:
+            if ATTR_NO_LEGACY_ENCRYPTION not in config_entry.data:
+                try:
+                    webhook_payload = _decrypt_payload_legacy(
+                        config_entry.data[CONF_SECRET], enc_data
+                    )
+                except CryptoError:
+                    _LOGGER.warning(
+                        "Ignoring encrypted payload because unable to decrypt"
+                    )
+                except ValueError:
+                    _LOGGER.warning("Ignoring invalid encrypted payload")
+            else:
+                _LOGGER.warning("Ignoring encrypted payload because unable to decrypt")
+        except ValueError:
+            _LOGGER.warning("Ignoring invalid encrypted payload")
 
     if webhook_type not in WEBHOOK_COMMANDS:
         _LOGGER.error(
diff --git a/tests/components/mobile_app/test_http_api.py b/tests/components/mobile_app/test_http_api.py
index 5d92418bba2..4c4e9b54ccf 100644
--- a/tests/components/mobile_app/test_http_api.py
+++ b/tests/components/mobile_app/test_http_api.py
@@ -1,4 +1,5 @@
 """Tests for the mobile_app HTTP API."""
+from binascii import unhexlify
 from http import HTTPStatus
 import json
 from unittest.mock import patch
@@ -75,6 +76,49 @@ async def test_registration_encryption(hass, hass_client):
     assert resp.status == HTTPStatus.CREATED
     register_json = await resp.json()
 
+    key = unhexlify(register_json[CONF_SECRET])
+
+    payload = json.dumps(RENDER_TEMPLATE["data"]).encode("utf-8")
+
+    data = SecretBox(key).encrypt(payload, encoder=Base64Encoder).decode("utf-8")
+
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+
+    resp = await api_client.post(
+        f"/api/webhook/{register_json[CONF_WEBHOOK_ID]}", json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+
+    webhook_json = await resp.json()
+    assert "encrypted_data" in webhook_json
+
+    decrypted_data = SecretBox(key).decrypt(
+        webhook_json["encrypted_data"], encoder=Base64Encoder
+    )
+    decrypted_data = decrypted_data.decode("utf-8")
+
+    assert json.loads(decrypted_data) == {"one": "Hello world"}
+
+
+async def test_registration_encryption_legacy(hass, hass_client):
+    """Test that registrations happen."""
+    try:
+        from nacl.encoding import Base64Encoder
+        from nacl.secret import SecretBox
+    except (ImportError, OSError):
+        pytest.skip("libnacl/libsodium is not installed")
+        return
+
+    await async_setup_component(hass, DOMAIN, {DOMAIN: {}})
+
+    api_client = await hass_client()
+
+    resp = await api_client.post("/api/mobile_app/registrations", json=REGISTER)
+
+    assert resp.status == HTTPStatus.CREATED
+    register_json = await resp.json()
+
     keylen = SecretBox.KEY_SIZE
     key = register_json[CONF_SECRET].encode("utf-8")
     key = key[:keylen]
diff --git a/tests/components/mobile_app/test_webhook.py b/tests/components/mobile_app/test_webhook.py
index 48b61988de2..5f220cf0ebe 100644
--- a/tests/components/mobile_app/test_webhook.py
+++ b/tests/components/mobile_app/test_webhook.py
@@ -1,4 +1,5 @@
 """Webhook tests for mobile_app."""
+from binascii import unhexlify
 from http import HTTPStatus
 from unittest.mock import patch
 
@@ -22,7 +23,29 @@ from .const import CALL_SERVICE, FIRE_EVENT, REGISTER_CLEARTEXT, RENDER_TEMPLATE
 from tests.common import async_mock_service
 
 
-def encrypt_payload(secret_key, payload):
+def encrypt_payload(secret_key, payload, encode_json=True):
+    """Return a encrypted payload given a key and dictionary of data."""
+    try:
+        from nacl.encoding import Base64Encoder
+        from nacl.secret import SecretBox
+    except (ImportError, OSError):
+        pytest.skip("libnacl/libsodium is not installed")
+        return
+
+    import json
+
+    prepped_key = unhexlify(secret_key)
+
+    if encode_json:
+        payload = json.dumps(payload)
+    payload = payload.encode("utf-8")
+
+    return (
+        SecretBox(prepped_key).encrypt(payload, encoder=Base64Encoder).decode("utf-8")
+    )
+
+
+def encrypt_payload_legacy(secret_key, payload, encode_json=True):
     """Return a encrypted payload given a key and dictionary of data."""
     try:
         from nacl.encoding import Base64Encoder
@@ -38,7 +61,9 @@ def encrypt_payload(secret_key, payload):
     prepped_key = prepped_key[:keylen]
     prepped_key = prepped_key.ljust(keylen, b"\0")
 
-    payload = json.dumps(payload).encode("utf-8")
+    if encode_json:
+        payload = json.dumps(payload)
+    payload = payload.encode("utf-8")
 
     return (
         SecretBox(prepped_key).encrypt(payload, encoder=Base64Encoder).decode("utf-8")
@@ -56,6 +81,27 @@ def decrypt_payload(secret_key, encrypted_data):
 
     import json
 
+    prepped_key = unhexlify(secret_key)
+
+    decrypted_data = SecretBox(prepped_key).decrypt(
+        encrypted_data, encoder=Base64Encoder
+    )
+    decrypted_data = decrypted_data.decode("utf-8")
+
+    return json.loads(decrypted_data)
+
+
+def decrypt_payload_legacy(secret_key, encrypted_data):
+    """Return a decrypted payload given a key and a string of encrypted data."""
+    try:
+        from nacl.encoding import Base64Encoder
+        from nacl.secret import SecretBox
+    except (ImportError, OSError):
+        pytest.skip("libnacl/libsodium is not installed")
+        return
+
+    import json
+
     keylen = SecretBox.KEY_SIZE
     prepped_key = secret_key.encode("utf-8")
     prepped_key = prepped_key[:keylen]
@@ -273,6 +319,181 @@ async def test_webhook_handle_decryption(webhook_client, create_registrations):
     assert decrypted_data == {"one": "Hello world"}
 
 
+async def test_webhook_handle_decryption_legacy(webhook_client, create_registrations):
+    """Test that we can encrypt/decrypt properly."""
+    key = create_registrations[0]["secret"]
+    data = encrypt_payload_legacy(key, RENDER_TEMPLATE["data"])
+
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+
+    webhook_json = await resp.json()
+    assert "encrypted_data" in webhook_json
+
+    decrypted_data = decrypt_payload_legacy(key, webhook_json["encrypted_data"])
+
+    assert decrypted_data == {"one": "Hello world"}
+
+
+async def test_webhook_handle_decryption_fail(
+    webhook_client, create_registrations, caplog
+):
+    """Test that we can encrypt/decrypt properly."""
+    key = create_registrations[0]["secret"]
+
+    # Send valid data
+    data = encrypt_payload(key, RENDER_TEMPLATE["data"])
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+    webhook_json = await resp.json()
+    decrypted_data = decrypt_payload(key, webhook_json["encrypted_data"])
+    assert decrypted_data == {"one": "Hello world"}
+    caplog.clear()
+
+    # Send invalid JSON data
+    data = encrypt_payload(key, "{not_valid", encode_json=False)
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+    webhook_json = await resp.json()
+    assert decrypt_payload(key, webhook_json["encrypted_data"]) == {}
+    assert "Ignoring invalid encrypted payload" in caplog.text
+    caplog.clear()
+
+    # Break the key, and send JSON data
+    data = encrypt_payload(key[::-1], RENDER_TEMPLATE["data"])
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+    webhook_json = await resp.json()
+    assert decrypt_payload(key, webhook_json["encrypted_data"]) == {}
+    assert "Ignoring encrypted payload because unable to decrypt" in caplog.text
+
+
+async def test_webhook_handle_decryption_legacy_fail(
+    webhook_client, create_registrations, caplog
+):
+    """Test that we can encrypt/decrypt properly."""
+    key = create_registrations[0]["secret"]
+
+    # Send valid data using legacy method
+    data = encrypt_payload_legacy(key, RENDER_TEMPLATE["data"])
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+    webhook_json = await resp.json()
+    decrypted_data = decrypt_payload_legacy(key, webhook_json["encrypted_data"])
+    assert decrypted_data == {"one": "Hello world"}
+    caplog.clear()
+
+    # Send invalid JSON data
+    data = encrypt_payload_legacy(key, "{not_valid", encode_json=False)
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+    webhook_json = await resp.json()
+    assert decrypt_payload_legacy(key, webhook_json["encrypted_data"]) == {}
+    assert "Ignoring invalid encrypted payload" in caplog.text
+    caplog.clear()
+
+    # Break the key, and send JSON data
+    data = encrypt_payload_legacy(key[::-1], RENDER_TEMPLATE["data"])
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+    webhook_json = await resp.json()
+    assert decrypt_payload_legacy(key, webhook_json["encrypted_data"]) == {}
+    assert "Ignoring encrypted payload because unable to decrypt" in caplog.text
+
+
+async def test_webhook_handle_decryption_legacy_upgrade(
+    webhook_client, create_registrations
+):
+    """Test that we can encrypt/decrypt properly."""
+    key = create_registrations[0]["secret"]
+
+    # Send using legacy method
+    data = encrypt_payload_legacy(key, RENDER_TEMPLATE["data"])
+
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+
+    webhook_json = await resp.json()
+    assert "encrypted_data" in webhook_json
+
+    decrypted_data = decrypt_payload_legacy(key, webhook_json["encrypted_data"])
+
+    assert decrypted_data == {"one": "Hello world"}
+
+    # Send using new method
+    data = encrypt_payload(key, RENDER_TEMPLATE["data"])
+
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+
+    webhook_json = await resp.json()
+    assert "encrypted_data" in webhook_json
+
+    decrypted_data = decrypt_payload(key, webhook_json["encrypted_data"])
+
+    assert decrypted_data == {"one": "Hello world"}
+
+    # Send using legacy method - no longer possible
+    data = encrypt_payload_legacy(key, RENDER_TEMPLATE["data"])
+
+    container = {"type": "render_template", "encrypted": True, "encrypted_data": data}
+
+    resp = await webhook_client.post(
+        "/api/webhook/{}".format(create_registrations[0]["webhook_id"]), json=container
+    )
+
+    assert resp.status == HTTPStatus.OK
+
+    webhook_json = await resp.json()
+    assert "encrypted_data" in webhook_json
+
+    # The response should be empty, encrypted with the new method
+    with pytest.raises(Exception):
+        decrypt_payload_legacy(key, webhook_json["encrypted_data"])
+    decrypted_data = decrypt_payload(key, webhook_json["encrypted_data"])
+
+    assert decrypted_data == {}
+
+
 async def test_webhook_requires_encryption(webhook_client, create_registrations):
     """Test that encrypted registrations only accept encrypted data."""
     resp = await webhook_client.post(