diff --git a/dataprovider/bolt.go b/dataprovider/bolt.go
index ced30801..15987dcb 100644
--- a/dataprovider/bolt.go
+++ b/dataprovider/bolt.go
@@ -653,6 +653,30 @@ func (p *BoltProvider) deleteUser(user *User) error {
 	})
 }
 
+func (p *BoltProvider) updateUserPassword(username, password string) error {
+	return p.dbHandle.Update(func(tx *bolt.Tx) error {
+		bucket, err := getUsersBucket(tx)
+		if err != nil {
+			return err
+		}
+		var u []byte
+		if u = bucket.Get([]byte(username)); u == nil {
+			return util.NewRecordNotFoundError(fmt.Sprintf("username %#v does not exist", username))
+		}
+		var user User
+		err = json.Unmarshal(u, &user)
+		if err != nil {
+			return err
+		}
+		user.Password = password
+		buf, err := json.Marshal(user)
+		if err != nil {
+			return err
+		}
+		return bucket.Put([]byte(username), buf)
+	})
+}
+
 func (p *BoltProvider) dumpUsers() ([]User, error) {
 	users := make([]User, 0, 100)
 	err := p.dbHandle.View(func(tx *bolt.Tx) error {
diff --git a/dataprovider/dataprovider.go b/dataprovider/dataprovider.go
index 8fb6a553..6b1898ac 100644
--- a/dataprovider/dataprovider.go
+++ b/dataprovider/dataprovider.go
@@ -6,6 +6,7 @@ import (
 	"bufio"
 	"bytes"
 	"context"
+	"crypto/md5"
 	"crypto/sha1"
 	"crypto/sha256"
 	"crypto/sha512"
@@ -81,6 +82,7 @@ const (
 	md5cryptPwdPrefix         = "$1$"
 	md5cryptApr1PwdPrefix     = "$apr1$"
 	sha512cryptPwdPrefix      = "$6$"
+	md5LDAPPwdPrefix          = "{MD5}"
 	trackQuotaDisabledError   = "please enable track_quota in your configuration to use this method"
 	operationAdd              = "add"
 	operationUpdate           = "update"
@@ -144,7 +146,8 @@ var (
 	sqlPlaceholders          []string
 	internalHashPwdPrefixes  = []string{argonPwdPrefix, bcryptPwdPrefix}
 	hashPwdPrefixes          = []string{argonPwdPrefix, bcryptPwdPrefix, pbkdf2SHA1Prefix, pbkdf2SHA256Prefix,
-		pbkdf2SHA512Prefix, pbkdf2SHA256B64SaltPrefix, md5cryptPwdPrefix, md5cryptApr1PwdPrefix, sha512cryptPwdPrefix}
+		pbkdf2SHA512Prefix, pbkdf2SHA256B64SaltPrefix, md5cryptPwdPrefix, md5cryptApr1PwdPrefix, md5LDAPPwdPrefix,
+		sha512cryptPwdPrefix}
 	pbkdfPwdPrefixes        = []string{pbkdf2SHA1Prefix, pbkdf2SHA256Prefix, pbkdf2SHA512Prefix, pbkdf2SHA256B64SaltPrefix}
 	pbkdfPwdB64SaltPrefixes = []string{pbkdf2SHA256B64SaltPrefix}
 	unixPwdPrefixes         = []string{md5cryptPwdPrefix, md5cryptApr1PwdPrefix, sha512cryptPwdPrefix}
@@ -624,6 +627,7 @@ type Provider interface {
 	addUser(user *User) error
 	updateUser(user *User) error
 	deleteUser(user *User) error
+	updateUserPassword(username, password string) error
 	getUsers(limit int, offset int, order string) ([]User, error)
 	dumpUsers() ([]User, error)
 	getRecentlyUpdatedUsers(after int64) ([]User, error)
@@ -2166,6 +2170,21 @@ func validateBaseParams(user *User) error {
 	return nil
 }
 
+func hashPlainPassword(plainPwd string) (string, error) {
+	if config.PasswordHashing.Algo == HashingAlgoBcrypt {
+		pwd, err := bcrypt.GenerateFromPassword([]byte(plainPwd), config.PasswordHashing.BcryptOptions.Cost)
+		if err != nil {
+			return "", fmt.Errorf("bcrypt hashing error: %w", err)
+		}
+		return string(pwd), nil
+	}
+	pwd, err := argon2id.CreateHash(plainPwd, argon2Params)
+	if err != nil {
+		return "", fmt.Errorf("argon2ID hashing error: %w", err)
+	}
+	return pwd, nil
+}
+
 func createUserPasswordHash(user *User) error {
 	if user.Password != "" && !user.IsPasswordHashed() {
 		if config.PasswordValidation.Users.MinEntropy > 0 {
@@ -2173,19 +2192,11 @@ func createUserPasswordHash(user *User) error {
 				return util.NewValidationError(err.Error())
 			}
 		}
-		if config.PasswordHashing.Algo == HashingAlgoBcrypt {
-			pwd, err := bcrypt.GenerateFromPassword([]byte(user.Password), config.PasswordHashing.BcryptOptions.Cost)
-			if err != nil {
-				return err
-			}
-			user.Password = string(pwd)
-		} else {
-			pwd, err := argon2id.CreateHash(user.Password, argon2Params)
-			if err != nil {
-				return err
-			}
-			user.Password = pwd
+		hashedPwd, err := hashPlainPassword(user.Password)
+		if err != nil {
+			return err
 		}
+		user.Password = hashedPwd
 	}
 	return nil
 }
@@ -2271,18 +2282,21 @@ func isPasswordOK(user *User, password string) (bool, error) {
 	}
 
 	match := false
+	updatePwd := true
 	var err error
 	if strings.HasPrefix(user.Password, bcryptPwdPrefix) {
 		if err = bcrypt.CompareHashAndPassword([]byte(user.Password), []byte(password)); err != nil {
 			return match, ErrInvalidCredentials
 		}
 		match = true
+		updatePwd = config.PasswordHashing.Algo != HashingAlgoBcrypt
 	} else if strings.HasPrefix(user.Password, argonPwdPrefix) {
 		match, err = argon2id.ComparePasswordAndHash(password, user.Password)
 		if err != nil {
 			providerLog(logger.LevelError, "error comparing password with argon hash: %v", err)
 			return match, err
 		}
+		updatePwd = config.PasswordHashing.Algo != HashingAlgoArgon2ID
 	} else if util.IsStringPrefixInSlice(user.Password, pbkdfPwdPrefixes) {
 		match, err = comparePbkdf2PasswordAndHash(password, user.Password)
 		if err != nil {
@@ -2293,13 +2307,32 @@ func isPasswordOK(user *User, password string) (bool, error) {
 		if err != nil {
 			return match, err
 		}
+	} else if strings.HasPrefix(user.Password, md5LDAPPwdPrefix) {
+		h := md5.New()
+		h.Write([]byte(password))
+		match = fmt.Sprintf("%s%x", md5LDAPPwdPrefix, h.Sum(nil)) == user.Password
 	}
 	if err == nil && match {
 		cachedPasswords.Add(user.Username, password)
+		if updatePwd {
+			convertUserPassword(user.Username, password)
+		}
 	}
 	return match, err
 }
 
+func convertUserPassword(username, plainPwd string) {
+	hashedPwd, err := hashPlainPassword(plainPwd)
+	if err == nil {
+		err = provider.updateUserPassword(username, hashedPwd)
+	}
+	if err != nil {
+		providerLog(logger.LevelWarn, "unable to convert password for user %s: %v", username, err)
+	} else {
+		providerLog(logger.LevelDebug, "password converted for user %s", username)
+	}
+}
+
 func checkUserAndTLSCertificate(user *User, protocol string, tlsCert *x509.Certificate) (User, error) {
 	err := user.CheckLoginConditions()
 	if err != nil {
diff --git a/dataprovider/memory.go b/dataprovider/memory.go
index 355c02ad..96438f63 100644
--- a/dataprovider/memory.go
+++ b/dataprovider/memory.go
@@ -367,6 +367,22 @@ func (p *MemoryProvider) deleteUser(user *User) error {
 	return nil
 }
 
+func (p *MemoryProvider) updateUserPassword(username, password string) error {
+	p.dbHandle.Lock()
+	defer p.dbHandle.Unlock()
+	if p.dbHandle.isClosed {
+		return errMemoryProviderClosed
+	}
+
+	user, err := p.userExistsInternal(username)
+	if err != nil {
+		return err
+	}
+	user.Password = password
+	p.dbHandle.users[username] = user
+	return nil
+}
+
 func (p *MemoryProvider) dumpUsers() ([]User, error) {
 	p.dbHandle.Lock()
 	defer p.dbHandle.Unlock()
diff --git a/dataprovider/mysql.go b/dataprovider/mysql.go
index 3ab8c6a9..79d9b0cc 100644
--- a/dataprovider/mysql.go
+++ b/dataprovider/mysql.go
@@ -247,6 +247,10 @@ func (p *MySQLProvider) deleteUser(user *User) error {
 	return sqlCommonDeleteUser(user, p.dbHandle)
 }
 
+func (p *MySQLProvider) updateUserPassword(username, password string) error {
+	return sqlCommonUpdateUserPassword(username, password, p.dbHandle)
+}
+
 func (p *MySQLProvider) dumpUsers() ([]User, error) {
 	return sqlCommonDumpUsers(p.dbHandle)
 }
diff --git a/dataprovider/pgsql.go b/dataprovider/pgsql.go
index 91d35d7e..3adb03c5 100644
--- a/dataprovider/pgsql.go
+++ b/dataprovider/pgsql.go
@@ -223,6 +223,10 @@ func (p *PGSQLProvider) deleteUser(user *User) error {
 	return sqlCommonDeleteUser(user, p.dbHandle)
 }
 
+func (p *PGSQLProvider) updateUserPassword(username, password string) error {
+	return sqlCommonUpdateUserPassword(username, password, p.dbHandle)
+}
+
 func (p *PGSQLProvider) dumpUsers() ([]User, error) {
 	return sqlCommonDumpUsers(p.dbHandle)
 }
diff --git a/dataprovider/sqlcommon.go b/dataprovider/sqlcommon.go
index bd40bc9b..b97e03dc 100644
--- a/dataprovider/sqlcommon.go
+++ b/dataprovider/sqlcommon.go
@@ -838,6 +838,21 @@ func sqlCommonAddUser(user *User, dbHandle *sql.DB) error {
 	})
 }
 
+func sqlCommonUpdateUserPassword(username, password string, dbHandle *sql.DB) error {
+	ctx, cancel := context.WithTimeout(context.Background(), defaultSQLQueryTimeout)
+	defer cancel()
+
+	q := getUpdateUserPasswordQuery()
+	stmt, err := dbHandle.PrepareContext(ctx, q)
+	if err != nil {
+		providerLog(logger.LevelError, "error preparing database query %#v: %v", q, err)
+		return err
+	}
+	defer stmt.Close()
+	_, err = stmt.ExecContext(ctx, password, username)
+	return err
+}
+
 func sqlCommonUpdateUser(user *User, dbHandle *sql.DB) error {
 	err := ValidateUser(user)
 	if err != nil {
diff --git a/dataprovider/sqlite.go b/dataprovider/sqlite.go
index 5ba82c1c..ae213bf3 100644
--- a/dataprovider/sqlite.go
+++ b/dataprovider/sqlite.go
@@ -197,6 +197,10 @@ func (p *SQLiteProvider) deleteUser(user *User) error {
 	return sqlCommonDeleteUser(user, p.dbHandle)
 }
 
+func (p *SQLiteProvider) updateUserPassword(username, password string) error {
+	return sqlCommonUpdateUserPassword(username, password, p.dbHandle)
+}
+
 func (p *SQLiteProvider) dumpUsers() ([]User, error) {
 	return sqlCommonDumpUsers(p.dbHandle)
 }
diff --git a/dataprovider/sqlqueries.go b/dataprovider/sqlqueries.go
index c7957fe8..e2615ec1 100644
--- a/dataprovider/sqlqueries.go
+++ b/dataprovider/sqlqueries.go
@@ -365,6 +365,10 @@ func getUpdateUserQuery() string {
 		sqlPlaceholders[20], sqlPlaceholders[21], sqlPlaceholders[22])
 }
 
+func getUpdateUserPasswordQuery() string {
+	return fmt.Sprintf(`UPDATE %v SET password=%v WHERE username = %v`, sqlTableUsers, sqlPlaceholders[0], sqlPlaceholders[1])
+}
+
 func getDeleteUserQuery() string {
 	return fmt.Sprintf(`DELETE FROM %v WHERE id = %v`, sqlTableUsers, sqlPlaceholders[0])
 }
diff --git a/docs/full-configuration.md b/docs/full-configuration.md
index 70ec340d..8cc835ee 100644
--- a/docs/full-configuration.md
+++ b/docs/full-configuration.md
@@ -405,7 +405,7 @@ You can select `sha256-simd` setting the environment variable `SFTPGO_MINIO_SHA2
 
 </details>
 
-<details><summary><font size=5> Binding to privileged ports</font></summary>
+<details><summary><font size=5>Binding to privileged ports</font></summary>
 
 On Linux, if you want to use Internet domain privileged ports (port numbers less than 1024) instead of running the SFTPGo service as root user you can set the `cap_net_bind_service` capability on the `sftpgo` binary. To set the capability you can use the following command:
 
@@ -429,6 +429,27 @@ sudo iptables -t nat -A OUTPUT     -d <ip> -p tcp --dport 22 -m addrtype --dst-t
 
 </details>
 
+<details><summary><font size=5>Supported Password Hashing Algorithms</font></summary>
+
+SFTPGo can verify passwords in several formats and uses, by default, the `bcrypt` algorithm to hash passwords in plain-text before storing them inside the data provider. Each hashing algorithm is identified by a prefix.
+Supported hash algorithms:
+
+- bcrypt, prefix `$2a$`
+- argon2id, prefix `$argon2id$`
+- PBKDF2 sha1, prefix `$pbkdf2-sha1$`
+- PBKDF2 sha256, prefix `$pbkdf2-sha256$`
+- PBKDF2 sha512, prefix `$pbkdf2-sha512$`
+- PBKDF2 sha256 with base64 salt, prefix `$pbkdf2-b64salt-sha256$`
+- MD5 crypt, prefix `$1$`
+- MD5 crypt APR1, prefix `$apr1$`
+- SHA512 crypt, prefix `$6$`
+- LDAP md5, prefix `{MD5}`
+
+If you set a password with one of these prefixes it will not be encrypted.
+When users log in, if their passwords are stored with anything other than the preferred algorithm, SFTPGo will automatically upgrade the algorithm to the preferred one.
+
+</details>
+
 ## Telemetry Server
 
 The telemetry server exposes the following endpoints:
diff --git a/sftpd/sftpd_test.go b/sftpd/sftpd_test.go
index 08e23dd4..8e444d74 100644
--- a/sftpd/sftpd_test.go
+++ b/sftpd/sftpd_test.go
@@ -6919,20 +6919,29 @@ func TestOverwriteDirWithFile(t *testing.T) {
 
 func TestHashedPasswords(t *testing.T) {
 	usePubKey := false
+	plainPwd := "password"
 	pwdMapping := make(map[string]string)
-	pwdMapping["$pbkdf2-sha1$150000$DveVjgYUD05R$X6ydQZdyMeOvpgND2nqGR/0GGic="] = "password" //nolint:goconst
-	pwdMapping["$pbkdf2-sha256$150000$E86a9YMX3zC7$R5J62hsSq+pYw00hLLPKBbcGXmq7fj5+/M0IFoYtZbo="] = "password"
-	pwdMapping["$pbkdf2-sha512$150000$dsu7T5R3IaVQ$1hFXPO1ntRBcoWkSLKw+s4sAP09Xtu4Ya7CyxFq64jM9zdUg8eRJVr3NcR2vQgb0W9HHvZaILHsL4Q/Vr6arCg=="] = "password"
-	pwdMapping["$1$b5caebda$VODr/nyhGWgZaY8sJ4x05."] = "password"
+	pwdMapping["$argon2id$v=19$m=65536,t=3,p=2$xtcO/oRkC8O2Tn+mryl2mw$O7bn24f2kuSGRMi9s5Cm61Wqd810px1jDsAasrGWkzQ"] = plainPwd
+	pwdMapping["$pbkdf2-sha1$150000$DveVjgYUD05R$X6ydQZdyMeOvpgND2nqGR/0GGic="] = plainPwd
+	pwdMapping["$pbkdf2-sha256$150000$E86a9YMX3zC7$R5J62hsSq+pYw00hLLPKBbcGXmq7fj5+/M0IFoYtZbo="] = plainPwd
+	pwdMapping["$pbkdf2-sha512$150000$dsu7T5R3IaVQ$1hFXPO1ntRBcoWkSLKw+s4sAP09Xtu4Ya7CyxFq64jM9zdUg8eRJVr3NcR2vQgb0W9HHvZaILHsL4Q/Vr6arCg=="] = plainPwd
+	pwdMapping["$1$b5caebda$VODr/nyhGWgZaY8sJ4x05."] = plainPwd
 	pwdMapping["$2a$14$ajq8Q7fbtFRQvXpdCq7Jcuy.Rx1h/L4J60Otx.gyNLbAYctGMJ9tK"] = "secret"
 	pwdMapping["$6$459ead56b72e44bc$uog86fUxscjt28BZxqFBE2pp2QD8P/1e98MNF75Z9xJfQvOckZnQ/1YJqiq1XeytPuDieHZvDAMoP7352ELkO1"] = "secret"
-	pwdMapping["$apr1$OBWLeSme$WoJbB736e7kKxMBIAqilb1"] = "password"
+	pwdMapping["$apr1$OBWLeSme$WoJbB736e7kKxMBIAqilb1"] = plainPwd
+	pwdMapping["{MD5}5f4dcc3b5aa765d61d8327deb882cf99"] = plainPwd
 
 	for pwd, clearPwd := range pwdMapping {
 		u := getTestUser(usePubKey)
 		u.Password = pwd
 		user, _, err := httpdtest.AddUser(u, http.StatusCreated)
 		assert.NoError(t, err)
+		user.Password = ""
+		userGetInitial, _, err := httpdtest.UpdateUser(user, http.StatusOK, "")
+		assert.NoError(t, err)
+		user, err = dataprovider.UserExists(user.Username)
+		assert.NoError(t, err)
+		assert.Equal(t, pwd, user.Password)
 		user.Password = clearPwd
 		conn, client, err := getSftpClient(user, usePubKey)
 		if assert.NoError(t, err, "unable to login with password %#v", pwd) {
@@ -6946,6 +6955,25 @@ func TestHashedPasswords(t *testing.T) {
 			client.Close()
 			conn.Close()
 		}
+		// the password must converted to bcrypt and we should still be able to login
+		user, err = dataprovider.UserExists(user.Username)
+		assert.NoError(t, err)
+		assert.True(t, strings.HasPrefix(user.Password, "$2a$"))
+		// update the user to invalidate the cached password and force a new check
+		user.Password = ""
+		userGet, _, err := httpdtest.UpdateUser(user, http.StatusOK, "")
+		assert.NoError(t, err)
+		userGetInitial.LastLogin = userGet.LastLogin
+		userGetInitial.UpdatedAt = userGet.UpdatedAt
+		assert.Equal(t, userGetInitial, userGet)
+		// login should still work
+		user.Password = clearPwd
+		conn, client, err = getSftpClient(user, usePubKey)
+		if assert.NoError(t, err, "unable to login with password %#v", pwd) {
+			defer conn.Close()
+			defer client.Close()
+			assert.NoError(t, checkBasicSFTP(client))
+		}
 		_, err = httpdtest.RemoveUser(user, http.StatusOK)
 		assert.NoError(t, err)
 		err = os.RemoveAll(user.GetHomeDir())