diff --git a/x-pack/plugins/fleet/common/services/validate_package_policy.ts b/x-pack/plugins/fleet/common/services/validate_package_policy.ts
index 84abdce15c645..5107cbf8121d7 100644
--- a/x-pack/plugins/fleet/common/services/validate_package_policy.ts
+++ b/x-pack/plugins/fleet/common/services/validate_package_policy.ts
@@ -97,12 +97,14 @@ export const validatePackagePolicy = (
   >((varDefs, policyTemplate) => {
     (policyTemplate.inputs || []).forEach((input) => {
       const varDefKey = hasIntegrations ? `${policyTemplate.name}-${input.type}` : input.type;
+
       if ((input.vars || []).length) {
         varDefs[varDefKey] = keyBy(input.vars || [], 'name');
       }
     });
     return varDefs;
   }, {});
+
   const streamsByDatasetAndInput = (packageInfo.data_streams || []).reduce<
     Record<string, RegistryStream>
   >((streams, dataStream) => {
@@ -149,6 +151,7 @@ export const validatePackagePolicy = (
     if (input.streams.length) {
       input.streams.forEach((stream) => {
         const streamValidationResults: PackagePolicyConfigValidationResults = {};
+
         const streamVarDefs =
           streamVarDefsByDatasetAndInput[`${stream.data_stream.dataset}-${input.type}`];
 
@@ -157,7 +160,7 @@ export const validatePackagePolicy = (
           streamValidationResults.vars = Object.entries(stream.vars).reduce(
             (results, [name, configEntry]) => {
               results[name] =
-                streamVarDefs[name] && input.enabled && stream.enabled
+                streamVarDefs && streamVarDefs[name] && input.enabled && stream.enabled
                   ? validatePackagePolicyConfig(configEntry, streamVarDefs[name])
                   : null;
               return results;
diff --git a/x-pack/plugins/fleet/server/services/package_policy.ts b/x-pack/plugins/fleet/server/services/package_policy.ts
index 23dffe78acd28..966fb3a08cb8d 100644
--- a/x-pack/plugins/fleet/server/services/package_policy.ts
+++ b/x-pack/plugins/fleet/server/services/package_policy.ts
@@ -890,41 +890,51 @@ export function overridePackageInputs(
 ): DryRunPackagePolicy {
   if (!inputsOverride) return basePackagePolicy;
 
-  const inputs = [...basePackagePolicy.inputs];
-  const packageName = basePackagePolicy.package!.name;
-  let errors = [];
+  const availablePolicyTemplates = packageInfo.policy_templates ?? [];
+
+  const inputs = [
+    ...basePackagePolicy.inputs.filter((input) => {
+      if (!input.policy_template) {
+        return true;
+      }
+
+      const policyTemplate = availablePolicyTemplates.find(
+        ({ name }) => name === input.policy_template
+      );
+
+      // Ignore any policy template removes in the new package version
+      if (!policyTemplate) {
+        return false;
+      }
+
+      // Ignore any inputs removed from this policy template in the new package version
+      const policyTemplateStillIncludesInput =
+        policyTemplate.inputs?.some(
+          (policyTemplateInput) => policyTemplateInput.type === input.type
+        ) ?? false;
+
+      return policyTemplateStillIncludesInput;
+    }),
+  ];
 
   for (const override of inputsOverride) {
     let originalInput = inputs.find((i) => i.type === override.type);
 
+    // If there's no corresponding input on the original package policy, just
+    // take the override value from the new package as-is. This case typically
+    // occurs when inputs or package policies are added/removed between versions.
     if (!originalInput) {
-      const e = {
-        error: new IngestManagerError(
-          i18n.translate('xpack.fleet.packagePolicyInputOverrideError', {
-            defaultMessage: 'Input type {inputType} does not exist on package {packageName}',
-            values: {
-              inputType: override.type,
-              packageName,
-            },
-          })
-        ),
-        package: { name: packageName, version: basePackagePolicy.package!.version },
-      };
+      inputs.push(override as NewPackagePolicyInput);
+      continue;
+    }
 
-      if (dryRun) {
-        errors.push({
-          key: override.type,
-          message: String(e.error),
-        });
-        continue;
-      } else {
-        throw e;
-      }
+    if (typeof override.enabled !== 'undefined') {
+      originalInput.enabled = override.enabled;
     }
 
-    if (typeof override.enabled !== 'undefined') originalInput.enabled = override.enabled;
-    if (typeof override.keep_enabled !== 'undefined')
+    if (typeof override.keep_enabled !== 'undefined') {
       originalInput.keep_enabled = override.keep_enabled;
+    }
 
     if (override.vars) {
       originalInput = deepMergeVars(originalInput, override);
@@ -936,36 +946,7 @@ export function overridePackageInputs(
           (s) => s.data_stream.dataset === stream.data_stream.dataset
         );
 
-        if (!originalStream) {
-          const streamSet = stream.data_stream.dataset;
-          const e = {
-            error: new IngestManagerError(
-              i18n.translate('xpack.fleet.packagePolicyStreamOverrideError', {
-                defaultMessage:
-                  'Data stream {streamSet} does not exist on {inputType} of package {packageName}',
-                values: {
-                  streamSet,
-                  inputType: override.type,
-                  packageName,
-                },
-              })
-            ),
-            package: { name: packageName, version: basePackagePolicy.package!.version },
-          };
-
-          if (dryRun) {
-            errors.push({
-              key: `${override.type}.streams.${streamSet}`,
-              message: String(e.error),
-            });
-
-            continue;
-          } else {
-            throw e;
-          }
-        }
-
-        if (typeof stream.enabled !== 'undefined') {
+        if (typeof stream.enabled !== 'undefined' && originalStream) {
           originalStream.enabled = stream.enabled;
         }
 
@@ -991,20 +972,22 @@ export function overridePackageInputs(
       }))
       .filter(({ message }) => !!message);
 
-    errors = [...errors, ...responseFormattedValidationErrors];
-  }
+    if (responseFormattedValidationErrors.length) {
+      if (dryRun) {
+        return { ...resultingPackagePolicy, errors: responseFormattedValidationErrors };
+      }
 
-  if (errors.length) {
-    if (dryRun) {
-      return { ...resultingPackagePolicy, errors };
+      throw new IngestManagerError(
+        i18n.translate('xpack.fleet.packagePolicyInvalidError', {
+          defaultMessage: 'Package policy is invalid: {errors}',
+          values: {
+            errors: responseFormattedValidationErrors
+              .map(({ key, message }) => `${key}: ${message}`)
+              .join('\n'),
+          },
+        })
+      );
     }
-
-    throw new IngestManagerError(
-      i18n.translate('xpack.fleet.packagePolicyInvalidError', {
-        defaultMessage: 'Package policy is invalid: {errors}',
-        values: { errors: errors.map(({ key, message }) => `${key}: ${message}`).join('\n') },
-      })
-    );
   }
 
   return resultingPackagePolicy;
diff --git a/x-pack/plugins/translations/translations/ja-JP.json b/x-pack/plugins/translations/translations/ja-JP.json
index d4bac4baaa498..f106bdcae5550 100644
--- a/x-pack/plugins/translations/translations/ja-JP.json
+++ b/x-pack/plugins/translations/translations/ja-JP.json
@@ -9980,8 +9980,6 @@
     "xpack.fleet.oldAppTitle": "Ingest Manager",
     "xpack.fleet.overviewPageSubtitle": "ElasticElasticエージェントの集中管理",
     "xpack.fleet.overviewPageTitle": "Fleet",
-    "xpack.fleet.packagePolicyInputOverrideError": "パッケージ{packageName}には入力タイプ{inputType}が存在しません。",
-    "xpack.fleet.packagePolicyStreamOverrideError": "パッケージ{packageName}の{inputType}にはデータストリーム{streamSet}が存在しません",
     "xpack.fleet.packagePolicyValidation.invalidArrayErrorMessage": "無効なフォーマット",
     "xpack.fleet.packagePolicyValidation.invalidYamlFormatErrorMessage": "YAML形式が無効です",
     "xpack.fleet.packagePolicyValidation.nameRequiredErrorMessage": "名前が必要です",
diff --git a/x-pack/plugins/translations/translations/zh-CN.json b/x-pack/plugins/translations/translations/zh-CN.json
index 00488cc0516a5..70d7ae71690fc 100644
--- a/x-pack/plugins/translations/translations/zh-CN.json
+++ b/x-pack/plugins/translations/translations/zh-CN.json
@@ -10068,8 +10068,6 @@
     "xpack.fleet.oldAppTitle": "采集管理器",
     "xpack.fleet.overviewPageSubtitle": "Elastic 代理的集中管理",
     "xpack.fleet.overviewPageTitle": "Fleet",
-    "xpack.fleet.packagePolicyInputOverrideError": "输入类型 {inputType} 在软件包 {packageName} 上不存在",
-    "xpack.fleet.packagePolicyStreamOverrideError": "数据流 {streamSet} 在软件包 {packageName} 的 {inputType} 上不存在",
     "xpack.fleet.packagePolicyValidation.invalidArrayErrorMessage": "格式无效",
     "xpack.fleet.packagePolicyValidation.invalidYamlFormatErrorMessage": "YAML 格式无效",
     "xpack.fleet.packagePolicyValidation.nameRequiredErrorMessage": "“名称”必填",
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.1.0/data_stream/test_stream/agent/stream/test_stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.1.0/data_stream/test_stream/agent/stream/stream.yml.hbs
similarity index 100%
rename from x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.1.0/data_stream/test_stream/agent/stream/test_stream.yml.hbs
rename to x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.1.0/data_stream/test_stream/agent/stream/stream.yml.hbs
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.2.0-add-non-required-test-var/data_stream/test_stream/agent/stream/test_stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.2.0-add-non-required-test-var/data_stream/test_stream/agent/stream/stream.yml.hbs
similarity index 100%
rename from x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.2.0-add-non-required-test-var/data_stream/test_stream/agent/stream/test_stream.yml.hbs
rename to x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.2.0-add-non-required-test-var/data_stream/test_stream/agent/stream/stream.yml.hbs
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.3.0-remove-test-var/data_stream/test_stream/agent/stream/test_stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.3.0-remove-test-var/data_stream/test_stream/agent/stream/stream.yml.hbs
similarity index 100%
rename from x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.3.0-remove-test-var/data_stream/test_stream/agent/stream/test_stream.yml.hbs
rename to x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.3.0-remove-test-var/data_stream/test_stream/agent/stream/stream.yml.hbs
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.4.0-add-test-var-as-bool/data_stream/test_stream/agent/stream/test_stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.4.0-add-test-var-as-bool/data_stream/test_stream/agent/stream/stream.yml.hbs
similarity index 100%
rename from x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.4.0-add-test-var-as-bool/data_stream/test_stream/agent/stream/test_stream.yml.hbs
rename to x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.4.0-add-test-var-as-bool/data_stream/test_stream/agent/stream/stream.yml.hbs
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/agent/stream/stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/agent/stream/stream.yml.hbs
new file mode 100644
index 0000000000000..2870385f21f95
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/agent/stream/stream.yml.hbs
@@ -0,0 +1 @@
+config.version: "2"
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/fields/fields.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/fields/fields.yml
new file mode 100644
index 0000000000000..6e003ed0ad147
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/fields/fields.yml
@@ -0,0 +1,16 @@
+- name: data_stream.type
+  type: constant_keyword
+  description: >
+    Data stream type.
+- name: data_stream.dataset
+  type: constant_keyword
+  description: >
+    Data stream dataset.
+- name: data_stream.namespace
+  type: constant_keyword
+  description: >
+    Data stream namespace.
+- name: '@timestamp'
+  type: date
+  description: >
+    Event timestamp.
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/manifest.yml
new file mode 100644
index 0000000000000..42b5d8641c6cd
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new/manifest.yml
@@ -0,0 +1,17 @@
+title: Test stream
+type: logs
+streams:
+  - input: test_input_new
+    vars:
+    - name: test_var_new
+      type: text
+      title: Test Var New
+      default: Test Var New
+      required: true
+      show_user: true
+    - name: test_var_new_2
+      type: text
+      title: Test Var New 2
+      default: Test Var New 2
+      required: true
+      show_user: true
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/agent/stream/stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/agent/stream/stream.yml.hbs
new file mode 100644
index 0000000000000..2870385f21f95
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/agent/stream/stream.yml.hbs
@@ -0,0 +1 @@
+config.version: "2"
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/fields/fields.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/fields/fields.yml
new file mode 100644
index 0000000000000..6e003ed0ad147
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/fields/fields.yml
@@ -0,0 +1,16 @@
+- name: data_stream.type
+  type: constant_keyword
+  description: >
+    Data stream type.
+- name: data_stream.dataset
+  type: constant_keyword
+  description: >
+    Data stream dataset.
+- name: data_stream.namespace
+  type: constant_keyword
+  description: >
+    Data stream namespace.
+- name: '@timestamp'
+  type: date
+  description: >
+    Event timestamp.
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/manifest.yml
new file mode 100644
index 0000000000000..af942e7b6413a
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/data_stream/test_stream_new_2/manifest.yml
@@ -0,0 +1,17 @@
+title: Test stream
+type: logs
+streams:
+  - input: test_input_new_2
+    vars:
+    - name: test_input_new_2_var_1
+      type: text
+      title: Test Input New 2 Var 1
+      default: Test Input New 2 Var 1
+      required: true
+      show_user: true
+    - name: test_input_new_2_var_2
+      type: text
+      title: Test Input New 2 Var 2
+      default: Test Input New 2 Var 2
+      required: true
+      show_user: true
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/docs/README.md b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/docs/README.md
new file mode 100644
index 0000000000000..0b9b18421c9dc
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/docs/README.md
@@ -0,0 +1,3 @@
+# Test package
+
+This is a test package for testing automated upgrades for package policies
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/manifest.yml
new file mode 100644
index 0000000000000..6c26bb545424d
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.5.0-restructure-inputs/manifest.yml
@@ -0,0 +1,27 @@
+format_version: 1.0.0
+name: package_policy_upgrade
+title: Tests package policy upgrades
+description: This is a test package for upgrading package policies
+version: 0.5.0-restructure-inputs
+categories: []
+release: beta
+type: integration
+license: basic
+requirement:
+  elasticsearch:
+    versions: '>7.7.0'
+  kibana:
+    versions: '>7.7.0'
+policy_templates:
+  - name: package_policy_upgrade
+    title: Package Policy Upgrade
+    description: Test Package for Upgrading Package Policies
+    inputs:
+      - type: test_input_new
+        title: Test Input New
+        description: Test Input New
+        enabled: true
+      - type: test_input_new_2
+        title: Test Input New 2
+        description: Test Input New 2
+        enabled: true
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/agent/stream/stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/agent/stream/stream.yml.hbs
new file mode 100644
index 0000000000000..2870385f21f95
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/agent/stream/stream.yml.hbs
@@ -0,0 +1 @@
+config.version: "2"
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/fields/fields.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/fields/fields.yml
new file mode 100644
index 0000000000000..6e003ed0ad147
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/fields/fields.yml
@@ -0,0 +1,16 @@
+- name: data_stream.type
+  type: constant_keyword
+  description: >
+    Data stream type.
+- name: data_stream.dataset
+  type: constant_keyword
+  description: >
+    Data stream dataset.
+- name: data_stream.namespace
+  type: constant_keyword
+  description: >
+    Data stream namespace.
+- name: '@timestamp'
+  type: date
+  description: >
+    Event timestamp.
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/manifest.yml
new file mode 100644
index 0000000000000..42b5d8641c6cd
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new/manifest.yml
@@ -0,0 +1,17 @@
+title: Test stream
+type: logs
+streams:
+  - input: test_input_new
+    vars:
+    - name: test_var_new
+      type: text
+      title: Test Var New
+      default: Test Var New
+      required: true
+      show_user: true
+    - name: test_var_new_2
+      type: text
+      title: Test Var New 2
+      default: Test Var New 2
+      required: true
+      show_user: true
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/agent/stream/stream.yml.hbs b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/agent/stream/stream.yml.hbs
new file mode 100644
index 0000000000000..2870385f21f95
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/agent/stream/stream.yml.hbs
@@ -0,0 +1 @@
+config.version: "2"
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/fields/fields.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/fields/fields.yml
new file mode 100644
index 0000000000000..6e003ed0ad147
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/fields/fields.yml
@@ -0,0 +1,16 @@
+- name: data_stream.type
+  type: constant_keyword
+  description: >
+    Data stream type.
+- name: data_stream.dataset
+  type: constant_keyword
+  description: >
+    Data stream dataset.
+- name: data_stream.namespace
+  type: constant_keyword
+  description: >
+    Data stream namespace.
+- name: '@timestamp'
+  type: date
+  description: >
+    Event timestamp.
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/manifest.yml
new file mode 100644
index 0000000000000..af942e7b6413a
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/data_stream/test_stream_new_2/manifest.yml
@@ -0,0 +1,17 @@
+title: Test stream
+type: logs
+streams:
+  - input: test_input_new_2
+    vars:
+    - name: test_input_new_2_var_1
+      type: text
+      title: Test Input New 2 Var 1
+      default: Test Input New 2 Var 1
+      required: true
+      show_user: true
+    - name: test_input_new_2_var_2
+      type: text
+      title: Test Input New 2 Var 2
+      default: Test Input New 2 Var 2
+      required: true
+      show_user: true
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/docs/README.md b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/docs/README.md
new file mode 100644
index 0000000000000..0b9b18421c9dc
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/docs/README.md
@@ -0,0 +1,3 @@
+# Test package
+
+This is a test package for testing automated upgrades for package policies
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/manifest.yml
new file mode 100644
index 0000000000000..82c9d7059e2a6
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/package_policy_upgrade/0.6.0-restructure-policy-templates/manifest.yml
@@ -0,0 +1,27 @@
+format_version: 1.0.0
+name: package_policy_upgrade
+title: Tests package policy upgrades
+description: This is a test package for upgrading package policies
+version: 0.6.0-restructure-policy-templates
+categories: []
+release: beta
+type: integration
+license: basic
+requirement:
+  elasticsearch:
+    versions: '>7.7.0'
+  kibana:
+    versions: '>7.7.0'
+policy_templates:
+  - name: package_policy_upgrade_new
+    title: Package Policy Upgrade New
+    description: Test Package for Upgrading Package Policies
+    inputs:
+      - type: test_input_new
+        title: Test Input New
+        description: Test Input New
+        enabled: true
+      - type: test_input_new_2
+        title: Test Input New 2
+        description: Test Input New 2
+        enabled: true
diff --git a/x-pack/test/fleet_api_integration/apis/package_policy/upgrade.ts b/x-pack/test/fleet_api_integration/apis/package_policy/upgrade.ts
index 3470da940f3c5..e75bcfaf75142 100644
--- a/x-pack/test/fleet_api_integration/apis/package_policy/upgrade.ts
+++ b/x-pack/test/fleet_api_integration/apis/package_policy/upgrade.ts
@@ -357,7 +357,7 @@ export default function (providerContext: FtrProviderContext) {
       });
 
       describe('upgrade', function () {
-        it('successfully upgrade package policy', async function () {
+        it('successfully upgrades package policy', async function () {
           const { body }: { body: UpgradePackagePolicyResponse } = await supertest
             .post(`/api/fleet/package_policies/upgrade`)
             .set('kbn-xsrf', 'xxxx')
@@ -573,6 +573,236 @@ export default function (providerContext: FtrProviderContext) {
       });
     });
 
+    describe('when upgrading to a version where inputs have been restructured', function () {
+      withTestPackageVersion('0.5.0-restructure-inputs');
+
+      beforeEach(async function () {
+        const { body: agentPolicyResponse } = await supertest
+          .post(`/api/fleet/agent_policies`)
+          .set('kbn-xsrf', 'xxxx')
+          .send({
+            name: 'Test policy',
+            namespace: 'default',
+          })
+          .expect(200);
+
+        agentPolicyId = agentPolicyResponse.item.id;
+
+        const { body: packagePolicyResponse } = await supertest
+          .post(`/api/fleet/package_policies`)
+          .set('kbn-xsrf', 'xxxx')
+          .send({
+            name: 'package_policy_upgrade_1',
+            description: '',
+            namespace: 'default',
+            policy_id: agentPolicyId,
+            enabled: true,
+            output_id: '',
+            inputs: [
+              {
+                policy_template: 'package_policy_upgrade',
+                type: 'test_input',
+                enabled: true,
+                streams: [
+                  {
+                    id: 'test-package_policy_upgrade-xxxx',
+                    enabled: true,
+                    data_stream: {
+                      type: 'test_stream',
+                      dataset: 'package_policy_upgrade.test_stream',
+                    },
+                    vars: {
+                      test_var: {
+                        value: 'Test value',
+                      },
+                    },
+                  },
+                ],
+              },
+            ],
+            package: {
+              name: 'package_policy_upgrade',
+              title: 'This is a test package for upgrading package policies',
+              version: '0.2.0-add-non-required-test-var',
+            },
+          });
+
+        packagePolicyId = packagePolicyResponse.item.id;
+      });
+
+      afterEach(async function () {
+        await supertest
+          .post(`/api/fleet/package_policies/delete`)
+          .set('kbn-xsrf', 'xxxx')
+          .send({ packagePolicyIds: [packagePolicyId] })
+          .expect(200);
+
+        await supertest
+          .post('/api/fleet/agent_policies/delete')
+          .set('kbn-xsrf', 'xxxx')
+          .send({ agentPolicyId })
+          .expect(200);
+      });
+
+      describe('dry run', function () {
+        it('returns a valid diff', async function () {
+          const { body }: { body: UpgradePackagePolicyDryRunResponse } = await supertest
+            .post(`/api/fleet/package_policies/upgrade`)
+            .set('kbn-xsrf', 'xxxx')
+            .send({
+              packagePolicyIds: [packagePolicyId],
+              dryRun: true,
+            })
+            .expect(200);
+
+          expect(body[0].hasErrors).to.be(false);
+        });
+      });
+
+      describe('upgrade', function () {
+        it('successfully upgrades package policy', async function () {
+          const { body }: { body: UpgradePackagePolicyResponse } = await supertest
+            .post(`/api/fleet/package_policies/upgrade`)
+            .set('kbn-xsrf', 'xxxx')
+            .send({
+              packagePolicyIds: [packagePolicyId],
+              dryRun: false,
+            })
+            .expect(200);
+
+          expect(body[0].success).to.be(true);
+        });
+      });
+    });
+
+    describe('when upgrading to a version where policy templates have been restructured', function () {
+      withTestPackageVersion('0.6.0-restructure-policy-templates');
+
+      beforeEach(async function () {
+        const { body: agentPolicyResponse } = await supertest
+          .post(`/api/fleet/agent_policies`)
+          .set('kbn-xsrf', 'xxxx')
+          .send({
+            name: 'Test policy',
+            namespace: 'default',
+          })
+          .expect(200);
+
+        agentPolicyId = agentPolicyResponse.item.id;
+
+        const { body: packagePolicyResponse } = await supertest
+          .post(`/api/fleet/package_policies`)
+          .set('kbn-xsrf', 'xxxx')
+          .send({
+            name: 'package_policy_upgrade_1',
+            description: '',
+            namespace: 'default',
+            policy_id: agentPolicyId,
+            enabled: true,
+            output_id: '',
+            inputs: [
+              {
+                policy_template: 'package_policy_upgrade',
+                type: 'test_input_new',
+                enabled: true,
+                streams: [
+                  {
+                    id: 'test-package_policy_upgrade-xxxx',
+                    enabled: true,
+                    data_stream: {
+                      type: 'test_stream_new',
+                      dataset: 'package_policy_upgrade.test_stream_new',
+                    },
+                    vars: {
+                      test_var_new: {
+                        value: 'Test value 1',
+                      },
+                      test_var_new_2: {
+                        value: 'Test value 2',
+                      },
+                    },
+                  },
+                ],
+              },
+              {
+                policy_template: 'package_policy_upgrade',
+                type: 'test_input_new_2',
+                enabled: true,
+                streams: [
+                  {
+                    id: 'test-package_policy_upgrade-xxxx',
+                    enabled: true,
+                    data_stream: {
+                      type: 'test_stream_new_2',
+                      dataset: 'package_policy_upgrade.test_stream_new_2',
+                    },
+                    vars: {
+                      test_var_new_2_var_1: {
+                        value: 'Test value 1',
+                      },
+                      test_var_new_2_var_2: {
+                        value: 'Test value 2',
+                      },
+                    },
+                  },
+                ],
+              },
+            ],
+            package: {
+              name: 'package_policy_upgrade',
+              title: 'This is a test package for upgrading package policies',
+              version: '0.5.0-restructure-inputs',
+            },
+          });
+
+        packagePolicyId = packagePolicyResponse.item.id;
+      });
+
+      afterEach(async function () {
+        await supertest
+          .post(`/api/fleet/package_policies/delete`)
+          .set('kbn-xsrf', 'xxxx')
+          .send({ packagePolicyIds: [packagePolicyId] })
+          .expect(200);
+
+        await supertest
+          .post('/api/fleet/agent_policies/delete')
+          .set('kbn-xsrf', 'xxxx')
+          .send({ agentPolicyId })
+          .expect(200);
+      });
+
+      describe('dry run', function () {
+        it('returns a valid diff', async function () {
+          const { body }: { body: UpgradePackagePolicyDryRunResponse } = await supertest
+            .post(`/api/fleet/package_policies/upgrade`)
+            .set('kbn-xsrf', 'xxxx')
+            .send({
+              packagePolicyIds: [packagePolicyId],
+              dryRun: true,
+            })
+            .expect(200);
+
+          expect(body[0].hasErrors).to.be(false);
+        });
+      });
+
+      describe('upgrade', function () {
+        it('successfully upgrades package policy', async function () {
+          const { body }: { body: UpgradePackagePolicyResponse } = await supertest
+            .post(`/api/fleet/package_policies/upgrade`)
+            .set('kbn-xsrf', 'xxxx')
+            .send({
+              packagePolicyIds: [packagePolicyId],
+              dryRun: false,
+            })
+            .expect(200);
+
+          expect(body[0].success).to.be(true);
+        });
+      });
+    });
+
     describe('when package policy is not found', function () {
       it('should return an 200 with errors when "dryRun:true" is provided', async function () {
         const { body }: { body: UpgradePackagePolicyDryRunResponse } = await supertest