diff --git a/src/prefect/settings.py b/src/prefect/settings.py
index 357d51d0098e..3ee6f0b928f4 100644
--- a/src/prefect/settings.py
+++ b/src/prefect/settings.py
@@ -323,7 +323,11 @@ def templater(settings, value):
             setting.name: setting.value_from(settings) for setting in upstream_settings
         }
         template = string.Template(str(value))
-        return original_type(template.substitute(template_values))
+        # Note the use of `safe_substitute` to avoid raising an exception if a
+        # template value is missing. In this case, template values will be left
+        # as-is in the string. Using `safe_substitute` prevents us raising when
+        # the DB password contains a `$` character.
+        return original_type(template.safe_substitute(template_values))
 
     return templater
 
diff --git a/tests/test_settings.py b/tests/test_settings.py
index 0b434ec72284..ac45a3b2a4d7 100644
--- a/tests/test_settings.py
+++ b/tests/test_settings.py
@@ -569,6 +569,31 @@ def test_unknown_driver_raises(self):
             ):
                 pass
 
+    def test_connection_string_with_dollar_sign(self):
+        """
+        Regression test for https://github.com/PrefectHQ/prefect/issues/11067.
+
+        This test ensures that passwords with dollar signs do not cause issues when
+        templating the connection string.
+        """
+        with temporary_settings(
+            {
+                PREFECT_API_DATABASE_CONNECTION_URL: (
+                    "postgresql+asyncpg://"
+                    "the-user:the-$password@"
+                    "the-database-server.example.com:5432"
+                    "/the-database"
+                ),
+                PREFECT_API_DATABASE_USER: "the-user",
+            }
+        ):
+            assert PREFECT_API_DATABASE_CONNECTION_URL.value() == (
+                "postgresql+asyncpg://"
+                "the-user:the-$password@"
+                "the-database-server.example.com:5432"
+                "/the-database"
+            )
+
 
 class TestTemporarySettings:
     def test_temporary_settings(self):