diff --git a/terraform/lib/dependabot/terraform/requirements_updater.rb b/terraform/lib/dependabot/terraform/requirements_updater.rb
index 250e8145cc39..6ffaaf9bb4e6 100644
--- a/terraform/lib/dependabot/terraform/requirements_updater.rb
+++ b/terraform/lib/dependabot/terraform/requirements_updater.rb
@@ -190,17 +190,19 @@ def update_greatest_version(requirement, version_to_be_permitted)
         op, version = requirement.requirements.first
         version = version.release if version.prerelease?
 
-        index_to_update =
-          version.segments.map.with_index { |seg, i| seg.zero? ? 0 : i }.max
-
-        new_segments = version.segments.map.with_index do |_, index|
-          if index < index_to_update
+        # When 'less than'/'<', increment the last available segment only
+        if op == "<"
+          new_segments = version.segments.map.with_index do |_, index|
             version_to_be_permitted.segments[index]
-          elsif index == index_to_update
-            version_to_be_permitted.segments[index].to_i + 1
-          else
-            0
           end
+          new_segments[-1] += 1
+        # When 'less-than/equal'/'<=', use the new version as-is
+        # Terraform treats shortened versions the same as a version with remaining segments as 0
+        # Example: '0.2' is equavalent to '0.2.0' | '1' is equivalent to '1.0.0'
+        elsif op == "<="
+          new_segments = version_to_be_permitted.segments
+        else
+          raise "Unexpected operation: #{op}"
         end
 
         requirement_class.new("#{op} #{new_segments.join('.')}")