diff --git a/internal/controller/argo.go b/internal/controller/argo.go
index 6fbede7c7..8e1deba26 100644
--- a/internal/controller/argo.go
+++ b/internal/controller/argo.go
@@ -83,6 +83,7 @@ const (
 	ParamVpArgoNamespace           = "global.vpArgoNamespace"
 	ParamMultiSourceTargetRevision = "global.multiSourceTargetRevision"
 	ParamDeletePattern             = "global.deletePattern"
+	ParamVpNewFolderDir            = "global.vpNewFolderDir"
 )
 
 // ConsoleLink constants
@@ -751,6 +752,12 @@ func newApplicationParameters(p *api.Pattern) []argoapi.HelmParameter {
 		Name:  ParamMultiSourceTargetRevision,
 		Value: getClusterGroupChartVersion(p),
 	})
+	if HasVariantsFolderLayout(p.Status.LocalCheckoutPath) {
+		parameters = append(parameters, argoapi.HelmParameter{
+			Name:  ParamVpNewFolderDir,
+			Value: boolTrue,
+		})
+	}
 	for _, extra := range p.Spec.ExtraParameters {
 		if !updateHelmParameter(extra, parameters) {
 			log.Printf("Parameter %q = %q added", extra.Name, extra.Value)
@@ -805,15 +812,29 @@ func convertArgoHelmParametersToMap(params []argoapi.HelmParameter) map[string]a
 	return result
 }
 
-func newApplicationValueFiles(p *api.Pattern, prefix string) []string {
-	files := []string{
-		fmt.Sprintf("%s/values-global.yaml", prefix),
-		fmt.Sprintf("%s/values-%s.yaml", prefix, p.Spec.ClusterGroupName),
-		fmt.Sprintf("%s/values-%s.yaml", prefix, p.Status.ClusterPlatform),
-		fmt.Sprintf("%s/values-%s-%s.yaml", prefix, p.Status.ClusterPlatform, p.Status.ClusterVersion),
-		fmt.Sprintf("%s/values-%s-%s.yaml", prefix, p.Status.ClusterPlatform, p.Spec.ClusterGroupName),
-		fmt.Sprintf("%s/values-%s-%s.yaml", prefix, p.Status.ClusterVersion, p.Spec.ClusterGroupName),
-		fmt.Sprintf("%s/values-%s.yaml", prefix, p.Status.ClusterName),
+func newApplicationValueFiles(p *api.Pattern, prefix string, useVariantsDir bool) []string {
+	variant := p.Spec.ClusterGroupName
+	var files []string
+	if useVariantsDir {
+		files = []string{
+			fmt.Sprintf("%s/values-global.yaml", prefix),
+			fmt.Sprintf("%s/variants/%s/values-%s.yaml", prefix, variant, variant),
+			fmt.Sprintf("%s/variants/%s/values-%s.yaml", prefix, variant, p.Status.ClusterPlatform),
+			fmt.Sprintf("%s/variants/%s/values-%s-%s.yaml", prefix, variant, p.Status.ClusterPlatform, p.Status.ClusterVersion),
+			fmt.Sprintf("%s/variants/%s/values-%s-%s.yaml", prefix, variant, p.Status.ClusterPlatform, variant),
+			fmt.Sprintf("%s/variants/%s/values-%s-%s.yaml", prefix, variant, p.Status.ClusterVersion, variant),
+			fmt.Sprintf("%s/variants/%s/values-%s.yaml", prefix, variant, p.Status.ClusterName),
+		}
+	} else {
+		files = []string{
+			fmt.Sprintf("%s/values-global.yaml", prefix),
+			fmt.Sprintf("%s/values-%s.yaml", prefix, variant),
+			fmt.Sprintf("%s/values-%s.yaml", prefix, p.Status.ClusterPlatform),
+			fmt.Sprintf("%s/values-%s-%s.yaml", prefix, p.Status.ClusterPlatform, p.Status.ClusterVersion),
+			fmt.Sprintf("%s/values-%s-%s.yaml", prefix, p.Status.ClusterPlatform, variant),
+			fmt.Sprintf("%s/values-%s-%s.yaml", prefix, p.Status.ClusterVersion, variant),
+			fmt.Sprintf("%s/values-%s.yaml", prefix, p.Status.ClusterName),
+		}
 	}
 
 	for _, extra := range p.Spec.ExtraValueFiles {
@@ -846,7 +867,8 @@ func getSharedValueFiles(p *api.Pattern, prefix string) ([]string, error) {
 		return nil, fmt.Errorf("%s path does not exist", gitDir)
 	}
 
-	valueFiles := newApplicationValueFiles(p, gitDir)
+	useVariantsDir := HasVariantsFolderLayout(gitDir)
+	valueFiles := newApplicationValueFiles(p, gitDir, useVariantsDir)
 
 	helmValues, err := mergeHelmValues(valueFiles...)
 	if err != nil {
@@ -949,7 +971,8 @@ func commonApplicationSpec(p *api.Pattern, sources []argoapi.ApplicationSource)
 }
 
 func commonApplicationSourceHelm(p *api.Pattern, prefix string) *argoapi.ApplicationSourceHelm {
-	valueFiles := newApplicationValueFiles(p, prefix)
+	useVariantsDir := HasVariantsFolderLayout(p.Status.LocalCheckoutPath)
+	valueFiles := newApplicationValueFiles(p, prefix, useVariantsDir)
 	sharedValueFiles, err := getSharedValueFiles(p, prefix)
 	if err != nil {
 		log.Printf("Could not fetch sharedValueFiles: %s", err)
@@ -1130,7 +1153,8 @@ func countVPApplications(p *api.Pattern) (appCount, appSetsCount int, err error)
 	if _, err := os.Stat(gitDir); err != nil {
 		return -1, -1, fmt.Errorf("%s path does not exist", gitDir)
 	}
-	valueFiles := newApplicationValueFiles(p, gitDir)
+	useVariantsDir := HasVariantsFolderLayout(gitDir)
+	valueFiles := newApplicationValueFiles(p, gitDir, useVariantsDir)
 	helmValues, helmErr := mergeHelmValues(valueFiles...)
 	if helmErr != nil {
 		return -2, -2, fmt.Errorf("error reading value file: %s", helmErr)
diff --git a/internal/controller/argo_test.go b/internal/controller/argo_test.go
index 9ee3696cf..bde5ad00f 100644
--- a/internal/controller/argo_test.go
+++ b/internal/controller/argo_test.go
@@ -96,7 +96,7 @@ var _ = Describe("Argo Pattern", func() {
 			Path:           "common/clustergroup",
 			TargetRevision: pattern.Spec.GitConfig.TargetRevision,
 			Helm: &argoapi.ApplicationSourceHelm{
-				ValueFiles:              newApplicationValueFiles(pattern, ""),
+				ValueFiles:              newApplicationValueFiles(pattern, "", false),
 				Parameters:              newApplicationParameters(pattern),
 				Values:                  newApplicationValues(pattern),
 				IgnoreMissingValueFiles: true,
@@ -167,7 +167,7 @@ var _ = Describe("Argo Pattern", func() {
 					},
 					*appSource,
 				}
-				multiSourceArgoApp.Spec.Sources[1].Helm.ValueFiles = newApplicationValueFiles(pattern, "$patternref")
+				multiSourceArgoApp.Spec.Sources[1].Helm.ValueFiles = newApplicationValueFiles(pattern, "$patternref", false)
 				Expect(newMultiSourceApplication(pattern)).To(Equal(multiSourceArgoApp))
 			})
 		})
@@ -191,7 +191,7 @@ var _ = Describe("Argo Pattern", func() {
 					},
 					*appSource,
 				}
-				multiSourceArgoApp.Spec.Sources[1].Helm.ValueFiles = newApplicationValueFiles(pattern, "$patternref")
+				multiSourceArgoApp.Spec.Sources[1].Helm.ValueFiles = newApplicationValueFiles(pattern, "$patternref", false)
 				Expect(newMultiSourceApplication(pattern)).To(Equal(multiSourceArgoApp))
 			})
 		})
@@ -200,11 +200,11 @@ var _ = Describe("Argo Pattern", func() {
 	Describe("Testing newApplicationValueFiles function", func() {
 		Context("Default", func() {
 			It("Returns a default set of values", func() {
-				valueFiles := newApplicationValueFiles(pattern, "")
+				valueFiles := newApplicationValueFiles(pattern, "", false)
 				Expect(valueFiles).To(Equal(defaultValueFiles))
 			})
 			It("Returns a default set of values with prefix", func() {
-				valueFiles := newApplicationValueFiles(pattern, "myprefix")
+				valueFiles := newApplicationValueFiles(pattern, "myprefix", false)
 				Expect(valueFiles).To(Equal(prefixArray(defaultValueFiles, "myprefix")))
 			})
 		})
@@ -217,13 +217,13 @@ var _ = Describe("Argo Pattern", func() {
 				}
 			})
 			It("Returns a default set of values and extravaluefiles without prefix", func() {
-				valueFiles := newApplicationValueFiles(pattern, "")
+				valueFiles := newApplicationValueFiles(pattern, "", false)
 				Expect(valueFiles).To(Equal(append(defaultValueFiles,
 					"/test1.yaml",
 					"/test2.yaml")))
 			})
 			It("Returns a default set of values and extravaluefiles with prefix", func() {
-				valueFiles := newApplicationValueFiles(pattern, "myprefix")
+				valueFiles := newApplicationValueFiles(pattern, "myprefix", false)
 				Expect(valueFiles).To(Equal(append(prefixArray(defaultValueFiles, "myprefix"),
 					"myprefix/test1.yaml",
 					"myprefix/test2.yaml")))
@@ -238,18 +238,48 @@ var _ = Describe("Argo Pattern", func() {
 				}
 			})
 			It("Returns a default set of values and extravaluefiles", func() {
-				valueFiles := newApplicationValueFiles(pattern, "")
+				valueFiles := newApplicationValueFiles(pattern, "", false)
 				Expect(valueFiles).To(Equal(append(defaultValueFiles,
 					"/test1.yaml",
 					"/test2.yaml")))
 			})
 			It("Returns a default set of values and extravaluefiles with prefix", func() {
-				valueFiles := newApplicationValueFiles(pattern, "myprefix")
+				valueFiles := newApplicationValueFiles(pattern, "myprefix", false)
 				Expect(valueFiles).To(Equal(append(prefixArray(defaultValueFiles, "myprefix"),
 					"myprefix/test1.yaml",
 					"myprefix/test2.yaml")))
 			})
 		})
+
+		Context("With variants directory layout", func() {
+			var variantsDirFiles []string
+			BeforeEach(func() {
+				variantsDirFiles = []string{
+					"/values-global.yaml",
+					"/variants/foogroup/values-foogroup.yaml",
+					"/variants/foogroup/values-AWS.yaml",
+					"/variants/foogroup/values-AWS-4.12.yaml",
+					"/variants/foogroup/values-AWS-foogroup.yaml",
+					"/variants/foogroup/values-4.12-foogroup.yaml",
+					"/variants/foogroup/values-barcluster.yaml",
+				}
+			})
+			It("Returns variants dir layout paths without prefix", func() {
+				valueFiles := newApplicationValueFiles(pattern, "", true)
+				Expect(valueFiles).To(Equal(variantsDirFiles))
+			})
+			It("Returns variants dir layout paths with prefix", func() {
+				valueFiles := newApplicationValueFiles(pattern, "$patternref", true)
+				Expect(valueFiles).To(Equal(prefixArray(variantsDirFiles, "$patternref")))
+			})
+			It("Appends extra value files unchanged", func() {
+				pattern.Spec.ExtraValueFiles = []string{"extra.yaml", "/leading.yaml"}
+				valueFiles := newApplicationValueFiles(pattern, "", true)
+				Expect(valueFiles).To(Equal(append(variantsDirFiles,
+					"/extra.yaml",
+					"/leading.yaml")))
+			})
+		})
 	})
 
 	Describe("Argo Helm Functions", func() {
@@ -547,6 +577,35 @@ var _ = Describe("Argo Pattern", func() {
 						Value: "0.0.*",
 					})))
 			})
+
+			It("Test newApplicationParameters includes vpNewFolderDir when values/ dir exists", func() {
+				td, err := os.MkdirTemp("", "vp-param-test")
+				Expect(err).ToNot(HaveOccurred())
+				defer os.RemoveAll(td)
+				Expect(os.MkdirAll(filepath.Join(td, "variants"), 0755)).To(Succeed())
+				pattern.Status.LocalCheckoutPath = td
+				params := newApplicationParameters(pattern)
+				found := false
+				for _, p := range params {
+					if p.Name == ParamVpNewFolderDir {
+						Expect(p.Value).To(Equal("true"))
+						found = true
+						break
+					}
+				}
+				Expect(found).To(BeTrue())
+			})
+
+			It("Test newApplicationParameters omits vpNewFolderDir when no values/ dir", func() {
+				td, err := os.MkdirTemp("", "vp-param-test")
+				Expect(err).ToNot(HaveOccurred())
+				defer os.RemoveAll(td)
+				pattern.Status.LocalCheckoutPath = td
+				params := newApplicationParameters(pattern)
+				for _, p := range params {
+					Expect(p.Name).ToNot(Equal(ParamVpNewFolderDir))
+				}
+			})
 		})
 
 		Context("Compare Sources", func() {
diff --git a/internal/controller/pattern_controller.go b/internal/controller/pattern_controller.go
index 437e59d10..7b264ab8c 100644
--- a/internal/controller/pattern_controller.go
+++ b/internal/controller/pattern_controller.go
@@ -590,11 +590,20 @@ func (r *PatternReconciler) preValidation(input *api.Pattern) error {
 
 	// Validate that the required values file exists for the cluster group
 	if input.Spec.ClusterGroupName != "" && input.Status.LocalCheckoutPath != "" {
-		valuesFile := filepath.Join(input.Status.LocalCheckoutPath,
-			fmt.Sprintf("values-%s.yaml", input.Spec.ClusterGroupName))
+		var valuesFile, displayName string
+		if HasVariantsFolderLayout(input.Status.LocalCheckoutPath) {
+			valuesFile = filepath.Join(input.Status.LocalCheckoutPath,
+				"variants", input.Spec.ClusterGroupName,
+				fmt.Sprintf("values-%s.yaml", input.Spec.ClusterGroupName))
+			displayName = fmt.Sprintf("variants/%s/values-%s.yaml",
+				input.Spec.ClusterGroupName, input.Spec.ClusterGroupName)
+		} else {
+			valuesFile = filepath.Join(input.Status.LocalCheckoutPath,
+				fmt.Sprintf("values-%s.yaml", input.Spec.ClusterGroupName))
+			displayName = fmt.Sprintf("values-%s.yaml", input.Spec.ClusterGroupName)
+		}
 		if _, err := os.Stat(valuesFile); os.IsNotExist(err) {
-			return fmt.Errorf("required values file not found: values-%s.yaml",
-				input.Spec.ClusterGroupName)
+			return fmt.Errorf("required values file not found: %s", displayName)
 		}
 	}
 
diff --git a/internal/controller/pattern_controller_test.go b/internal/controller/pattern_controller_test.go
index 838c36fce..0e78e3fb7 100644
--- a/internal/controller/pattern_controller_test.go
+++ b/internal/controller/pattern_controller_test.go
@@ -19,6 +19,7 @@ package controllers
 import (
 	"context"
 	"os"
+	"path/filepath"
 
 	"github.com/go-git/go-git/v5"
 	"github.com/go-logr/logr"
@@ -333,6 +334,45 @@ var _ = Describe("pattern controller - preValidation", func() {
 			err := reconciler.preValidation(p)
 			Expect(err).ToNot(HaveOccurred())
 		})
+
+		It("should pass when variants dir layout exists and variant file is present", func() {
+			Expect(os.MkdirAll(filepath.Join(tempDir, "variants", "hub"), 0755)).To(Succeed())
+			Expect(os.WriteFile(filepath.Join(tempDir, "variants", "hub", "values-hub.yaml"),
+				[]byte("clusterGroup:\n  name: hub\n"), 0600)).To(Succeed())
+
+			p := &api.Pattern{
+				Spec: api.PatternSpec{
+					ClusterGroupName: "hub",
+					GitConfig: api.GitConfig{
+						TargetRepo: "https://github.com/test/repo",
+					},
+				},
+				Status: api.PatternStatus{
+					LocalCheckoutPath: tempDir,
+				},
+			}
+			err := reconciler.preValidation(p)
+			Expect(err).ToNot(HaveOccurred())
+		})
+
+		It("should fail when variants dir layout exists but variant file is missing", func() {
+			Expect(os.MkdirAll(filepath.Join(tempDir, "variants"), 0755)).To(Succeed())
+
+			p := &api.Pattern{
+				Spec: api.PatternSpec{
+					ClusterGroupName: "hub",
+					GitConfig: api.GitConfig{
+						TargetRepo: "https://github.com/test/repo",
+					},
+				},
+				Status: api.PatternStatus{
+					LocalCheckoutPath: tempDir,
+				},
+			}
+			err := reconciler.preValidation(p)
+			Expect(err).To(HaveOccurred())
+			Expect(err.Error()).To(ContainSubstring("required values file not found: variants/hub/values-hub.yaml"))
+		})
 	})
 })
 
diff --git a/internal/controller/utils.go b/internal/controller/utils.go
index 13e304269..87557e1d6 100644
--- a/internal/controller/utils.go
+++ b/internal/controller/utils.go
@@ -480,6 +480,13 @@ func IsCommonSlimmed(patternPath string) bool {
 	return true
 }
 
+// HasVariantsFolderLayout returns true if the pattern repo has a top-level "variants" directory,
+// indicating the new organized layout for values files.
+func HasVariantsFolderLayout(patternPath string) bool {
+	info, err := os.Stat(filepath.Join(patternPath, "variants"))
+	return err == nil && info.IsDir()
+}
+
 // IntOrZero retrieves an integer value from a map by key.
 func IntOrZero(secret map[string][]byte, key string) (int64, error) {
 	val, present := secret[key]
diff --git a/internal/controller/utils_test.go b/internal/controller/utils_test.go
index cfde9d7a0..d95a3a297 100644
--- a/internal/controller/utils_test.go
+++ b/internal/controller/utils_test.go
@@ -1647,6 +1647,45 @@ var _ = Describe("IsCommonSlimmed", func() {
 	})
 })
 
+var _ = Describe("HasVariantsFolderLayout", func() {
+	var td string
+
+	BeforeEach(func() {
+		td = createTempDir("vp-variants-layout-test")
+	})
+	AfterEach(func() {
+		cleanupTempDir(td)
+	})
+
+	Context("when variants/ directory exists", func() {
+		It("should return true", func() {
+			err := os.MkdirAll(filepath.Join(td, "variants"), 0755)
+			Expect(err).ToNot(HaveOccurred())
+			Expect(HasVariantsFolderLayout(td)).To(BeTrue())
+		})
+	})
+
+	Context("when variants/ directory does not exist", func() {
+		It("should return false", func() {
+			Expect(HasVariantsFolderLayout(td)).To(BeFalse())
+		})
+	})
+
+	Context("when variants is a file not a directory", func() {
+		It("should return false", func() {
+			err := os.WriteFile(filepath.Join(td, "variants"), []byte("not a dir"), 0600)
+			Expect(err).ToNot(HaveOccurred())
+			Expect(HasVariantsFolderLayout(td)).To(BeFalse())
+		})
+	})
+
+	Context("when path does not exist", func() {
+		It("should return false", func() {
+			Expect(HasVariantsFolderLayout("/nonexistent/path")).To(BeFalse())
+		})
+	})
+})
+
 var _ = Describe("IntOrZero", func() {
 	Context("when key exists with valid integer", func() {
 		It("should return the integer value", func() {