diff --git a/command-snapshot.json b/command-snapshot.json
index 9c077e54..d5a270c9 100644
--- a/command-snapshot.json
+++ b/command-snapshot.json
@@ -432,7 +432,8 @@
       "version-description",
       "version-name",
       "version-number",
-      "wait"
+      "wait",
+      "generate-pkg-zip"
     ],
     "plugin": "@salesforce/plugin-packaging"
   },
diff --git a/messages/package_version_create.md b/messages/package_version_create.md
index d510a399..fb6e0b93 100644
--- a/messages/package_version_create.md
+++ b/messages/package_version_create.md
@@ -145,9 +145,13 @@ Return a new package version before completing package validations.
 
 Specifying async validation returns the package version earlier in the process, allowing you to install and test the new version right away. If your development team is using continuous integration (CI) scripts, async validation can reduce your overall CI run time.
 
+# flags.generate-pkg-zip.summary
+
+Generate a package ZIP file that you can use for debugging or to examine the package contents.
+
 # flags.skip-ancestor-check.summary
 
-Overrides ancestry requirements, which allows you to specify a package ancestor that isn’t the highest released package version.
+Override ancestry requirements, which allows you to specify a package ancestor that isn’t the highest released package version.
 
 # flags.post-install-url.summary
 
diff --git a/src/commands/package/version/create.ts b/src/commands/package/version/create.ts
index c8dd23b8..40b42376 100644
--- a/src/commands/package/version/create.ts
+++ b/src/commands/package/version/create.ts
@@ -142,6 +142,10 @@ export class PackageVersionCreateCommand extends SfCommand<PackageVersionCommand
       default: false,
       exclusive: ['skip-validation'],
     }),
+    'generate-pkg-zip': Flags.boolean({
+      summary: messages.getMessage('flags.generate-pkg-zip.summary'),
+      default: false,
+    }),
     tag: Flags.string({
       char: 't',
       summary: messages.getMessage('flags.tag.summary'),
diff --git a/test/commands/package/packageVersionCreateManaged.nut.ts b/test/commands/package/packageVersionCreateManaged.nut.ts
new file mode 100644
index 00000000..882fef04
--- /dev/null
+++ b/test/commands/package/packageVersionCreateManaged.nut.ts
@@ -0,0 +1,136 @@
+/*
+ * Copyright 2026, Salesforce, Inc.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+import * as fs from 'node:fs';
+import * as path from 'node:path';
+import { expect } from 'chai';
+import { execCmd, TestSession } from '@salesforce/cli-plugins-testkit';
+import { Org, SfProject } from '@salesforce/core';
+import { Duration } from '@salesforce/kit';
+import { PackageVersionCreateRequestResult } from '@salesforce/packaging';
+import { FileDownloadEntry } from '../../../src/commands/package/version/retrieve.js';
+
+let packageName: string;
+let devHubOrg: Org;
+
+describe('package:version:create with managed package (--generate-pkg-zip)', () => {
+  let session: TestSession;
+  let managedPackageId: string;
+
+  before('setup managed package', async function () {
+    // TODO: Remove once 260 is released to instance the CI dev hub is running on
+    this.skip();
+    this.timeout(Duration.minutes(5).milliseconds);
+
+    session = await TestSession.create({
+      devhubAuthStrategy: 'AUTO',
+      project: { name: 'managed-pkg-test' },
+    });
+
+    devHubOrg = await Org.create({ aliasOrUsername: session.hubOrg.username });
+
+    // Query for existing managed package
+    const existingPkgQuery = `
+      SELECT Id, Name, NamespacePrefix
+      FROM Package2
+      WHERE ContainerOptions = 'Managed'
+      AND IsDeprecated = false
+      AND Name = 'pnhmanaged'
+      LIMIT 1
+    `;
+    const existingPkgRecords = (
+      await devHubOrg
+        .getConnection()
+        .tooling.query<{ Id: string; Name: string; NamespacePrefix: string }>(existingPkgQuery)
+    ).records;
+
+    managedPackageId = existingPkgRecords[0].Id;
+
+    // Create minimal source structure for a custom object
+    const objectName = 'TestObject__c';
+    const objectDir = path.join(session.project.dir, 'force-app', 'main', 'default', 'objects', objectName);
+    fs.mkdirSync(objectDir, { recursive: true });
+
+    fs.writeFileSync(
+      path.join(objectDir, `${objectName}.object-meta.xml`),
+      `<?xml version="1.0" encoding="UTF-8"?>
+<CustomObject xmlns="http://soap.sforce.com/2006/04/metadata">
+    <deploymentStatus>Deployed</deploymentStatus>
+    <label>Test Object</label>
+    <nameField>
+        <label>Test Object Name</label>
+        <type>Text</type>
+    </nameField>
+    <pluralLabel>Test Objects</pluralLabel>
+    <sharingModel>ReadWrite</sharingModel>
+</CustomObject>`
+    );
+
+    // Configure the project for the managed package
+    const project = await SfProject.resolve(session.project.dir);
+    const projectJson = project.getSfProjectJson();
+    const namespacePrefix = existingPkgRecords[0].NamespacePrefix;
+    packageName = existingPkgRecords[0].Name;
+
+    const packageDirectory = {
+      path: 'force-app',
+      package: existingPkgRecords[0].Name,
+      versionNumber: '1.0.0.NEXT',
+      ancestorVersion: 'NONE',
+      versionName: 'v1',
+      default: true,
+    };
+
+    projectJson.set('packageDirectories', [packageDirectory]);
+    projectJson.set('packageAliases', { [packageName]: managedPackageId });
+    projectJson.set('namespace', namespacePrefix);
+    projectJson.writeSync();
+  });
+
+  after(async () => {
+    await session?.clean();
+  });
+
+  it('should create a managed package version with --generate-pkg-zip flag and retrieve the metadata', async function () {
+    this.timeout(Duration.minutes(25).milliseconds);
+
+    const createResult = execCmd<PackageVersionCreateRequestResult>(
+      `package:version:create --package ${packageName} --wait 20 -x --generate-pkg-zip --version-description "Test pkg zip" --json --skip-ancestor-check`,
+      { ensureExitCode: 0, timeout: Duration.minutes(20).milliseconds }
+    ).jsonOutput?.result;
+
+    // Debug: verify the flag was actually set
+    const pvcRequestId = createResult?.Id;
+    const verifyQuery = `SELECT Id, IsDevUsePkgZipRequested FROM Package2VersionCreateRequest WHERE Id = '${pvcRequestId}'`;
+    const verifyResult = await devHubOrg
+      .getConnection()
+      .tooling.query<{ Id: string; IsDevUsePkgZipRequested: boolean }>(verifyQuery);
+    // eslint-disable-next-line no-console
+    console.log('IsDevUsePkgZipRequested:', verifyResult.records[0]?.IsDevUsePkgZipRequested);
+
+    expect(createResult?.Status).to.equal('Success');
+    const subscriberPkgVersionId = createResult?.SubscriberPackageVersionId;
+    expect(subscriberPkgVersionId).to.match(/04t.{15}/);
+
+    const retrieveOutputDir = 'pkg-zip-test-output';
+    const retrieveResult = execCmd<FileDownloadEntry[]>(
+      `package:version:retrieve --package ${subscriberPkgVersionId} --output-dir ${retrieveOutputDir} --json`,
+      { ensureExitCode: 0 }
+    ).jsonOutput?.result;
+
+    expect(retrieveResult).to.be.an('array');
+    expect(retrieveResult?.length).to.be.greaterThan(0);
+  });
+});
diff --git a/yarn.lock b/yarn.lock
index fbaf5a55..228241be 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -879,15 +879,7 @@
     "@smithy/types" "^4.12.0"
     tslib "^2.6.2"
 
-"@aws-sdk/types@^3.222.0":
-  version "3.957.0"
-  resolved "https://registry.yarnpkg.com/@aws-sdk/types/-/types-3.957.0.tgz#06e899503028bdb8c655aa11a9a01f562882f361"
-  integrity sha512-wzWC2Nrt859ABk6UCAVY/WYEbAd7FjkdrQL6m24+tfmWYDNRByTJ9uOgU/kw9zqLCAwb//CPvrJdhqjTznWXAg==
-  dependencies:
-    "@smithy/types" "^4.11.0"
-    tslib "^2.6.2"
-
-"@aws-sdk/types@^3.973.0":
+"@aws-sdk/types@^3.222.0", "@aws-sdk/types@^3.973.0":
   version "3.973.0"
   resolved "https://registry.yarnpkg.com/@aws-sdk/types/-/types-3.973.0.tgz#4e7428dbaac37797a81339f646f40f41cc22a1fe"
   integrity sha512-jYIdB7a7jhRTvyb378nsjyvJh1Si+zVduJ6urMNGpz8RjkmHZ+9vM2H07XaIB2Cfq0GhJRZYOfUCH8uqQhqBkQ==
@@ -2031,16 +2023,16 @@
     terminal-link "^3.0.0"
 
 "@salesforce/source-deploy-retrieve@^12.31.9":
-  version "12.31.10"
-  resolved "https://registry.yarnpkg.com/@salesforce/source-deploy-retrieve/-/source-deploy-retrieve-12.31.10.tgz#612886356d81c87eb9053bbc9173546556fd5f36"
-  integrity sha512-kUdJicJUd3/lzNQOvDW1Sc5iBl8PVv2Tz7L59YA/Le0fzZCYM72oyKwdbl/f6kc+MzJpMVia2+AxrvVZir8oJw==
+  version "12.31.9"
+  resolved "https://registry.yarnpkg.com/@salesforce/source-deploy-retrieve/-/source-deploy-retrieve-12.31.9.tgz#69592e0b1564157fce8b7c66b33412460fa62b6e"
+  integrity sha512-UVRmLVl+Es1jLGnSx4G2xxTNHR7L6v5uzOpBFbg1ADMOQ4b1v8cDwZO9noJa9xAG+MLJJ7zDkcqywgFxU/3mmQ==
   dependencies:
     "@salesforce/core" "^8.24.0"
     "@salesforce/kit" "^3.2.4"
     "@salesforce/ts-types" "^2.0.12"
     "@salesforce/types" "^1.6.0"
     fast-levenshtein "^3.0.0"
-    fast-xml-parser "^5.3.4"
+    fast-xml-parser "^4.5.3"
     got "^11.8.6"
     graceful-fs "^4.2.11"
     ignore "^5.3.2"
@@ -2568,13 +2560,6 @@
     "@smithy/util-stream" "^4.5.10"
     tslib "^2.6.2"
 
-"@smithy/types@^4.11.0":
-  version "4.11.0"
-  resolved "https://registry.yarnpkg.com/@smithy/types/-/types-4.11.0.tgz#c02f6184dcb47c4f0b387a32a7eca47956cc09f1"
-  integrity sha512-mlrmL0DRDVe3mNrjTcVcZEgkFmufITfUAPBEA+AHYiIeYyJebso/He1qLbP3PssRe22KUzLRpQSdBPbXdgZ2VA==
-  dependencies:
-    tslib "^2.6.2"
-
 "@smithy/types@^4.12.0":
   version "4.12.0"
   resolved "https://registry.yarnpkg.com/@smithy/types/-/types-4.12.0.tgz#55d2479080922bda516092dbf31916991d9c6fee"
@@ -4782,6 +4767,13 @@ fast-xml-parser@5.2.5:
   dependencies:
     strnum "^2.1.0"
 
+fast-xml-parser@^4.5.3:
+  version "4.5.3"
+  resolved "https://registry.yarnpkg.com/fast-xml-parser/-/fast-xml-parser-4.5.3.tgz#c54d6b35aa0f23dc1ea60b6c884340c006dc6efb"
+  integrity sha512-RKihhV+SHsIUGXObeVy9AXiBbFwkVk7Syp8XgwN5U3JV416+Gwp/GO9i0JYKmikykgz/UHRrrV4ROuZEo/T0ig==
+  dependencies:
+    strnum "^1.1.1"
+
 fast-xml-parser@^5.3.4:
   version "5.3.4"
   resolved "https://registry.yarnpkg.com/fast-xml-parser/-/fast-xml-parser-5.3.4.tgz#06f39aafffdbc97bef0321e626c7ddd06a043ecf"
@@ -8376,6 +8368,11 @@ strip-json-comments@^3.1.1:
   resolved "https://registry.yarnpkg.com/strip-json-comments/-/strip-json-comments-3.1.1.tgz#31f1281b3832630434831c310c01cccda8cbe006"
   integrity sha512-6fPc+R4ihwqP6N/aIv2f1gMH8lOVtWQHoqC4yK6oSDVVocumAsfCqjkXnqiYMhmMwS/mEHLp7Vehlt3ql6lEig==
 
+strnum@^1.1.1:
+  version "1.1.2"
+  resolved "https://registry.yarnpkg.com/strnum/-/strnum-1.1.2.tgz#57bca4fbaa6f271081715dbc9ed7cee5493e28e4"
+  integrity sha512-vrN+B7DBIoTTZjnPNewwhx6cBA/H+IS7rfW68n7XxC1y7uoiGQBxaKzqucGUgavX15dJgiGztLJ8vxuEzwqBdA==
+
 strnum@^2.1.0:
   version "2.1.1"
   resolved "https://registry.yarnpkg.com/strnum/-/strnum-2.1.1.tgz#cf2a6e0cf903728b8b2c4b971b7e36b4e82d46ab"