diff --git a/esphome/__main__.py b/esphome/__main__.py
index 48fee1e97e..1062df7167 100644
--- a/esphome/__main__.py
+++ b/esphome/__main__.py
@@ -1488,12 +1488,29 @@ _LEGACY_REDACTION_REMOVAL = "2026.12.0"
 
 def _redact_with_legacy_fallback(output: str) -> str:
     unmarked: set[str] = set()
+    # Track the top-level ``substitutions:`` block. Its keys are arbitrary
+    # user-chosen names with no schema validator, so the ``cv.sensitive(...)``
+    # migration named in the warning can't be applied to them. Their values are
+    # still redacted, but emitting the (unactionable) deprecation warning would
+    # only confuse users.
+    in_substitutions = False
 
-    def _replace(m: re.Match[str]) -> str:
-        unmarked.add(m.group("key"))
-        return f"{m.group('key')}: \\033[8m{m.group('val')}\\033[28m"
-
-    output = _LEGACY_REDACTION_RE.sub(_replace, output)
+    lines = output.split("\n")
+    for i, line in enumerate(lines):
+        # A non-indented, non-blank line is a top-level key that opens or
+        # closes the substitutions block.
+        if line and not line[0].isspace():
+            in_substitutions = line.startswith(f"{CONF_SUBSTITUTIONS}:")
+        m = _LEGACY_REDACTION_RE.search(line)
+        if m is None:
+            continue
+        if not in_substitutions:
+            unmarked.add(m.group("key"))
+        lines[i] = (
+            f"{line[: m.start()]}{m.group('key')}: "
+            f"\\033[8m{m.group('val')}\\033[28m{line[m.end() :]}"
+        )
+    output = "\n".join(lines)
     for key in sorted(unmarked):
         _LOGGER.warning(
             "Field '%s' is being redacted by a legacy substring heuristic. "
diff --git a/tests/unit_tests/test_main.py b/tests/unit_tests/test_main.py
index b2011259c1..65bf4a583e 100644
--- a/tests/unit_tests/test_main.py
+++ b/tests/unit_tests/test_main.py
@@ -442,6 +442,36 @@ def test_redact_with_legacy_fallback__does_not_match_fragment_as_suffix(
     assert not any("legacy substring" in rec.message for rec in caplog.records)
 
 
+def test_redact_with_legacy_fallback__substitutions_redacted_without_warning(
+    caplog: pytest.LogCaptureFixture,
+) -> None:
+    """Substitution keys have no schema validator, so their values are still
+    redacted but the unactionable cv.sensitive migration warning is suppressed
+    (see issue #17225)."""
+    text = "substitutions:\n  ota_password: apolloautomation\nesphome:\n  name: x\n"
+    with caplog.at_level(logging.WARNING, logger="esphome.__main__"):
+        out = _redact_with_legacy_fallback(text)
+    assert "ota_password: \\033[8mapolloautomation\\033[28m" in out
+    assert not any("legacy substring" in rec.message for rec in caplog.records)
+
+
+def test_redact_with_legacy_fallback__warns_after_substitutions_block(
+    caplog: pytest.LogCaptureFixture,
+) -> None:
+    """The suppression ends at the next top-level key; a sensitive-shaped field
+    in a later block (a real schema field) still warns, while the substitution
+    above it does not."""
+    text = (
+        "substitutions:\n  ota_password: apolloautomation\nwifi:\n  password: hunter2\n"
+    )
+    with caplog.at_level(logging.WARNING, logger="esphome.__main__"):
+        out = _redact_with_legacy_fallback(text)
+    assert "ota_password: \\033[8mapolloautomation\\033[28m" in out
+    assert "password: \\033[8mhunter2\\033[28m" in out
+    assert any("'password'" in rec.message for rec in caplog.records)
+    assert not any("ota_password" in rec.message for rec in caplog.records)
+
+
 def test_command_config__invokes_legacy_fallback_when_redacting(
     tmp_path: Path, capfd: CaptureFixture[str]
 ) -> None: