diff --git a/controllers/virtualmachine/volume/volume_controller.go b/controllers/virtualmachine/volume/volume_controller.go
index ae5feacf7..0db408e34 100644
--- a/controllers/virtualmachine/volume/volume_controller.go
+++ b/controllers/virtualmachine/volume/volume_controller.go
@@ -525,6 +525,11 @@ func (r *Reconciler) createInstanceStoragePVC(
 		},
 	}
 
+	if c := ctx.VM.Spec.Crypto; c != nil && c.EncryptionClassName != "" {
+		// Assign the InstanceStorage PVC the same EncryptionClass as the VM.
+		pvc.Annotations[constants.EncryptionClassNameAnnotation] = c.EncryptionClassName
+	}
+
 	if err := controllerutil.SetControllerReference(ctx.VM, pvc, r.Client.Scheme()); err != nil {
 		// This is an unexpected error.
 		return fmt.Errorf("cannot set controller reference on PersistentVolumeClaim: %w", err)
diff --git a/controllers/virtualmachine/volume/volume_controller_intg_test.go b/controllers/virtualmachine/volume/volume_controller_intg_test.go
index 9b917efcc..698f5bffe 100644
--- a/controllers/virtualmachine/volume/volume_controller_intg_test.go
+++ b/controllers/virtualmachine/volume/volume_controller_intg_test.go
@@ -244,7 +244,9 @@ func intgTestsReconcile() {
 				config.Features.InstanceStorage = true
 				config.InstanceStorage.PVPlacementFailedTTL = 0
 			})
+		})
 
+		JustBeforeEach(func() {
 			vm.Spec.Volumes = append(vm.Spec.Volumes, builder.DummyInstanceStorageVirtualMachineVolumes()...)
 			vm.Labels = map[string]string{constants.InstanceStorageLabelKey: "true"}
 			Expect(ctx.Client.Create(ctx, vm)).To(Succeed())
@@ -305,6 +307,42 @@ func intgTestsReconcile() {
 				waitForVirtualMachineInstanceStorage(vmKey, false, false)
 			})
 		})
+
+		When("VM has non-empty spec.crypto.encryptionClassName", func() {
+			BeforeEach(func() {
+				if vm.Annotations == nil {
+					vm.Annotations = map[string]string{}
+				}
+				vm.Annotations[constants.InstanceStorageSelectedNodeAnnotationKey] = dummySelectedNode
+				vm.Annotations[constants.InstanceStorageSelectedNodeMOIDAnnotationKey] = dummySelectedNodeMOID
+
+				vm.Spec.Crypto = &vmopv1.VirtualMachineCryptoSpec{
+					EncryptionClassName: "my-encryption-class",
+				}
+			})
+			Specify("PVCs are created with the expected annotation", func() {
+				Expect(ctx.Client.Get(ctx, vmKey, vm)).To(Succeed())
+
+				volumes := instancestorage.FilterVolumes(vm)
+				Expect(volumes).ToNot(BeEmpty())
+
+				Eventually(func(g Gomega) {
+					for i := range volumes {
+						var obj corev1.PersistentVolumeClaim
+						g.Expect(ctx.Client.Get(
+							ctx,
+							client.ObjectKey{
+								Namespace: vm.Namespace,
+								Name:      volumes[i].PersistentVolumeClaim.ClaimName,
+							},
+							&obj)).To(Succeed())
+						g.Expect(obj.Annotations).To(HaveKeyWithValue(
+							constants.EncryptionClassNameAnnotation,
+							vm.Spec.Crypto.EncryptionClassName))
+					}
+				}).Should(Succeed())
+			})
+		})
 	})
 
 	Context("Reconcile", func() {
diff --git a/controllers/virtualmachine/volume/volume_controller_unit_test.go b/controllers/virtualmachine/volume/volume_controller_unit_test.go
index caad41abe..72cb4cde4 100644
--- a/controllers/virtualmachine/volume/volume_controller_unit_test.go
+++ b/controllers/virtualmachine/volume/volume_controller_unit_test.go
@@ -270,6 +270,57 @@ func unitTestsReconcile() {
 				Expect(err.Error()).To(ContainSubstring("insufficient quota"))
 				expectPVCsStatus(volCtx, ctx, true, false, 0)
 			})
+
+			When("VM has nil spec.crypto", func() {
+				BeforeEach(func() {
+					vm.Spec.Crypto = nil
+				})
+				Specify("PVCs are created sans the expected annotation", func() {
+					Expect(reconciler.ReconcileNormal(volCtx)).To(Succeed())
+					pvcList, err := getInstanceStoragePVCs(volCtx, ctx)
+					Expect(err).ToNot(HaveOccurred())
+					Expect(pvcList).ToNot(BeEmpty())
+					for i := range pvcList {
+						Expect(pvcList[i].Annotations).ToNot(HaveKey(constants.EncryptionClassNameAnnotation))
+					}
+				})
+			})
+
+			When("VM has empty spec.crypto.encryptionClassName", func() {
+				BeforeEach(func() {
+					vm.Spec.Crypto = &vmopv1.VirtualMachineCryptoSpec{
+						EncryptionClassName: "",
+					}
+				})
+				Specify("PVCs are created sans the expected annotation", func() {
+					Expect(reconciler.ReconcileNormal(volCtx)).To(Succeed())
+					pvcList, err := getInstanceStoragePVCs(volCtx, ctx)
+					Expect(err).ToNot(HaveOccurred())
+					Expect(pvcList).ToNot(BeEmpty())
+					for i := range pvcList {
+						Expect(pvcList[i].Annotations).ToNot(HaveKey(constants.EncryptionClassNameAnnotation))
+					}
+				})
+			})
+
+			When("VM has non-empty spec.crypto.encryptionClassName", func() {
+				BeforeEach(func() {
+					vm.Spec.Crypto = &vmopv1.VirtualMachineCryptoSpec{
+						EncryptionClassName: "my-encryption-class",
+					}
+				})
+				Specify("PVCs are created with the expected annotation", func() {
+					Expect(reconciler.ReconcileNormal(volCtx)).To(Succeed())
+					pvcList, err := getInstanceStoragePVCs(volCtx, ctx)
+					Expect(err).ToNot(HaveOccurred())
+					Expect(pvcList).ToNot(BeEmpty())
+					for i := range pvcList {
+						Expect(pvcList[i].Annotations).To(HaveKeyWithValue(
+							constants.EncryptionClassNameAnnotation,
+							vm.Spec.Crypto.EncryptionClassName))
+					}
+				})
+			})
 		})
 
 		When("VM does not have BiosUUID", func() {
diff --git a/pkg/providers/vsphere/constants/constants.go b/pkg/providers/vsphere/constants/constants.go
index 27cc2d672..0fdf9ccba 100644
--- a/pkg/providers/vsphere/constants/constants.go
+++ b/pkg/providers/vsphere/constants/constants.go
@@ -68,6 +68,11 @@ const (
 	CloudInitGuestInfoUserdata         = "guestinfo.userdata"
 	CloudInitGuestInfoUserdataEncoding = "guestinfo.userdata.encoding"
 
+	// EncryptionClassNameAnnotation specifies the name of an EncryptionClass
+	// resource. This is used by APIs that participate in BYOK but cannot modify
+	// their spec to do so, such as the PersistentVolumeClaim API.
+	EncryptionClassNameAnnotation = "encryption.vmware.com/encryption-class-name"
+
 	// InstanceStoragePVCNamePrefix prefix of auto-generated PVC names.
 	InstanceStoragePVCNamePrefix = "instance-pvc-"
 	// InstanceStorageLabelKey identifies resources related to instance storage.