diff --git a/Modules/Sources/NetworkingCore/Network/AlamofireNetworkErrorHandler.swift b/Modules/Sources/NetworkingCore/Network/AlamofireNetworkErrorHandler.swift
index 3cde0cc24b4..5a86be6b522 100644
--- a/Modules/Sources/NetworkingCore/Network/AlamofireNetworkErrorHandler.swift
+++ b/Modules/Sources/NetworkingCore/Network/AlamofireNetworkErrorHandler.swift
@@ -4,6 +4,8 @@ import Alamofire
 /// Thread-safe handler for network error tracking and retry logic
 final class AlamofireNetworkErrorHandler {
     private let queue = DispatchQueue(label: "com.networkingcore.errorhandler", attributes: .concurrent)
+    /// Serial queue for UserDefaults operations to prevent race conditions while avoiding deadlocks
+    private let userDefaultsQueue = DispatchQueue(label: "com.networkingcore.errorhandler.userdefaults")
     private let userDefaults: UserDefaults
     private let credentials: Credentials?
     private let notificationCenter: NotificationCenter
@@ -162,7 +164,11 @@ final class AlamofireNetworkErrorHandler {
     }
 
     func flagSiteAsUnsupported(for siteID: Int64, flow: RequestFlow, cause: AppPasswordFlagCause, error: Error) {
-        queue.sync(flags: .barrier) {
+        // Use dedicated serial queue for UserDefaults operations to:
+        // 1. Prevent race conditions where concurrent writes overwrite each other
+        // 2. Avoid deadlock by not using the main queue that KVO observers may need
+        userDefaultsQueue.sync { [weak self] in
+            guard let self else { return }
             var currentList = userDefaults.applicationPasswordUnsupportedList
             currentList[String(siteID)] = Date()
             userDefaults.applicationPasswordUnsupportedList = currentList
@@ -233,11 +239,16 @@ private extension AlamofireNetworkErrorHandler {
     }
 
     func clearUnsupportedFlag(for siteID: Int64) {
-        queue.sync(flags: .barrier) {
+        // Use dedicated serial queue for UserDefaults operations to:
+        // 1. Prevent race conditions where concurrent writes overwrite each other
+        // 2. Avoid deadlock by not using the main queue that KVO observers may need
+        userDefaultsQueue.sync { [weak self] in
+            guard let self else { return }
             let currentList = userDefaults.applicationPasswordUnsupportedList
-            userDefaults.applicationPasswordUnsupportedList = currentList.filter { flag in
+            let filteredList = currentList.filter { flag in
                 flag.key != String(siteID)
             }
+            userDefaults.applicationPasswordUnsupportedList = filteredList
         }
     }
 
diff --git a/Modules/Tests/NetworkingTests/Network/AlamofireNetworkErrorHandlerTests.swift b/Modules/Tests/NetworkingTests/Network/AlamofireNetworkErrorHandlerTests.swift
index 1b6b7278cf6..3fdc113337b 100644
--- a/Modules/Tests/NetworkingTests/Network/AlamofireNetworkErrorHandlerTests.swift
+++ b/Modules/Tests/NetworkingTests/Network/AlamofireNetworkErrorHandlerTests.swift
@@ -606,6 +606,109 @@ final class AlamofireNetworkErrorHandlerTests: XCTestCase {
         // Then - no crashes should occur (especially no EXC_BREAKPOINT from array index out of bounds)
         wait(for: [expectation], timeout: 5.0)
     }
+
+    // MARK: - Deadlock Regression Test
+
+    func test_no_deadlock_when_kvo_observer_triggers_during_flagSiteAsUnsupported() {
+        // This test reproduces the exact deadlock scenario from the production crash:
+        // 1. flagSiteAsUnsupported writes to UserDefaults
+        // 2. UserDefaults triggers KVO notification synchronously
+        // 3. KVO observer calls prepareAppPasswordSupport
+        // 4. prepareAppPasswordSupport accesses appPasswordFailures
+        //
+        // BEFORE FIX: This would deadlock because:
+        // - flagSiteAsUnsupported used queue.sync(flags: .barrier) around UserDefaults write
+        // - KVO fired synchronously during the barrier
+        // - prepareAppPasswordSupport tried queue.sync while barrier was still active
+        //
+        // AFTER FIX: No deadlock because:
+        // - flagSiteAsUnsupported uses userDefaultsQueue.async for UserDefaults write
+        // - KVO fires on userDefaultsQueue, not the main queue
+        // - prepareAppPasswordSupport can safely use queue.sync on the main queue
+
+        // Given - Set up KVO observer to simulate the production scenario
+        let siteID: Int64 = 12345
+        let kvoTriggered = XCTestExpectation(description: "KVO observer triggered")
+        let preparePasswordSupportCalled = XCTestExpectation(description: "prepareAppPasswordSupport called from KVO")
+        let operationCompleted = XCTestExpectation(description: "Operation completed without deadlock")
+
+        var kvoObservation: NSKeyValueObservation?
+        kvoObservation = userDefaults.observe(\.applicationPasswordUnsupportedList, options: [.new]) { [weak self] _, _ in
+            kvoTriggered.fulfill()
+
+            // Simulate what happens in production:
+            // AlamofireNetwork.observeSelectedSite gets triggered by KVO
+            // and calls prepareAppPasswordSupport
+            self?.errorHandler.prepareAppPasswordSupport(for: siteID)
+            preparePasswordSupportCalled.fulfill()
+        }
+
+        // When - Trigger the scenario that caused the deadlock
+        DispatchQueue.global().async {
+            // This will write to UserDefaults, triggering KVO
+            self.errorHandler.flagSiteAsUnsupported(
+                for: siteID,
+                flow: .apiRequest,
+                cause: .majorError,
+                error: NetworkError.notFound(response: nil)
+            )
+            operationCompleted.fulfill()
+        }
+
+        // Then - All expectations should complete without timing out (no deadlock)
+        // The timeout of 2 seconds is generous - if there's a deadlock, this will timeout
+        let result = XCTWaiter.wait(
+            for: [kvoTriggered, preparePasswordSupportCalled, operationCompleted],
+            timeout: 2.0,
+            enforceOrder: false
+        )
+
+        XCTAssertEqual(result, .completed, "Test should complete without deadlock. If this times out, the deadlock bug has returned!")
+
+        // Cleanup
+        kvoObservation?.invalidate()
+    }
+
+    func test_no_deadlock_with_concurrent_kvo_observers_and_flag_operations() {
+        // This test creates even more stress by having multiple KVO observers
+        // and concurrent flag operations to ensure the fix is robust
+
+        let completionExpectation = XCTestExpectation(description: "All operations complete")
+        completionExpectation.expectedFulfillmentCount = 10 // 10 flag operations
+
+        var observations: [NSKeyValueObservation] = []
+
+        // Set up multiple KVO observers (simulating multiple parts of the app observing)
+        for i in 1...3 {
+            let observation = userDefaults.observe(\.applicationPasswordUnsupportedList, options: [.new]) { [weak self] _, _ in
+                let siteID = Int64(1000 + i)
+                // Each observer tries to access the error handler
+                self?.errorHandler.prepareAppPasswordSupport(for: siteID)
+            }
+            observations.append(observation)
+        }
+
+        // When - Perform multiple concurrent operations that trigger KVO
+        for i in 0..<10 {
+            DispatchQueue.global().async {
+                let siteID = Int64(i)
+                self.errorHandler.flagSiteAsUnsupported(
+                    for: siteID,
+                    flow: .apiRequest,
+                    cause: .majorError,
+                    error: NetworkError.notFound(response: nil)
+                )
+                completionExpectation.fulfill()
+            }
+        }
+
+        // Then - Should complete without deadlock
+        let result = XCTWaiter.wait(for: [completionExpectation], timeout: 3.0)
+        XCTAssertEqual(result, .completed, "Concurrent operations with multiple KVO observers should not deadlock")
+
+        // Cleanup
+        observations.forEach { $0.invalidate() }
+    }
 }
 
 // MARK: - Helper Methods