diff --git a/internal/clients/aws.go b/internal/clients/aws.go
index 13fa90b9ab..3b7032319b 100644
--- a/internal/clients/aws.go
+++ b/internal/clients/aws.go
@@ -50,7 +50,10 @@ func SelectTerraformSetup(config *SetupConfig) terraform.SetupFn { // nolint:goc
 		} else if awsCfg == nil {
 			return terraform.Setup{}, errors.Wrap(err, "obtained aws config cannot be nil")
 		}
-		creds, err := awsCfg.Credentials.Retrieve(ctx)
+
+		// only IRSA auth credentials are cached, other auth methods will skip
+		// cache and call downstream Credentials.Retrieve() of given awsCfg
+		creds, err := GlobalAWSCredentialsProviderCache.RetrieveCredentials(ctx, pc, awsCfg)
 		if err != nil {
 			return terraform.Setup{}, errors.Wrap(err, "failed to retrieve aws credentials from aws config")
 		}
diff --git a/internal/clients/creds_cache.go b/internal/clients/creds_cache.go
new file mode 100644
index 0000000000..7eacd702c4
--- /dev/null
+++ b/internal/clients/creds_cache.go
@@ -0,0 +1,200 @@
+// SPDX-FileCopyrightText: 2024 The Crossplane Authors <https://crossplane.io>
+//
+// SPDX-License-Identifier: Apache-2.0
+
+package clients
+
+import (
+	"context"
+	"crypto/sha256"
+	"fmt"
+	"github.com/pkg/errors"
+	"io"
+	"os"
+	"sigs.k8s.io/controller-runtime/pkg/log/zap"
+	"strings"
+	"sync"
+	"time"
+
+	"github.com/aws/aws-sdk-go-v2/aws"
+	"github.com/crossplane/crossplane-runtime/pkg/logging"
+	"github.com/upbound/provider-aws/apis/v1beta1"
+)
+
+// GlobalAWSCredentialsProviderCache is a global AWS CredentialsProvider cache to be used by all controllers.
+var GlobalAWSCredentialsProviderCache = NewAWSCredentialsProviderCache()
+
+// AWSCredentialsProviderCacheOption lets you configure *GlobalAWSCredentialsProviderCache.
+type AWSCredentialsProviderCacheOption func(cache *AWSCredentialsProviderCache)
+
+// WithCacheMaxSize lets you override the default MaxSize for AWS CredentialsProvider cache.
+func WithCacheMaxSize(n int) AWSCredentialsProviderCacheOption {
+	return func(c *AWSCredentialsProviderCache) {
+		c.maxSize = n
+	}
+}
+
+// WithCacheStore lets you bootstrap AWS CredentialsProvider Cache with your own cache.
+func WithCacheStore(cache map[string]*awsCredentialsProviderCacheEntry) AWSCredentialsProviderCacheOption {
+	return func(c *AWSCredentialsProviderCache) {
+		c.cache = cache
+	}
+}
+
+// WithCacheLogger lets you configure the logger for the cache.
+func WithCacheLogger(l logging.Logger) AWSCredentialsProviderCacheOption {
+	return func(c *AWSCredentialsProviderCache) {
+		c.logger = l
+	}
+}
+
+// NewAWSCredentialsProviderCache returns a new empty *AWSCredentialsProviderCache with the default GetAWSConfig method.
+func NewAWSCredentialsProviderCache(opts ...AWSCredentialsProviderCacheOption) *AWSCredentialsProviderCache {
+	// zl := zap.New(zap.UseDevMode(false))
+	logr := logging.NewLogrLogger(zap.New(zap.UseDevMode(false)).WithName("provider-aws-credentials-cache"))
+	c := &AWSCredentialsProviderCache{
+		cache:   map[string]*awsCredentialsProviderCacheEntry{},
+		maxSize: 100,
+		mu:      &sync.RWMutex{},
+		logger:  logr,
+	}
+	for _, f := range opts {
+		f(c)
+	}
+	return c
+}
+
+// AWSCredentialsProviderCache holds aws.CredentialsProvider objects in memory so that
+// we don't need to make API calls to AWS in every reconciliation of every
+// resource. It has a maximum size that when it's reached, the entry that has
+// the oldest access time will be removed from the cache, i.e. FIFO on last access
+// time.
+// Note that there is no need to invalidate the values in the cache because they
+// never change, so we don't need concurrency-safety to prevent access to an
+// invalidated entry.
+type AWSCredentialsProviderCache struct {
+	// cache holds the AWS Config with a unique cache key per provider configuration.
+	// key content includes the ProviderConfig's UUID and ResourceVersion and
+	// additional fields depending on the auth method
+	cache map[string]*awsCredentialsProviderCacheEntry
+
+	// maxSize is the maximum number of elements this cache can ever have.
+	maxSize int
+
+	// mu is used to make sure the cache map is concurrency-safe.
+	mu *sync.RWMutex
+
+	// logger is the logger for cache operations
+	logger logging.Logger
+}
+
+type awsCredentialsProviderCacheEntry struct {
+	*aws.Config
+	credProvider aws.CredentialsProvider
+	AccessedAt   time.Time
+}
+
+func (c *AWSCredentialsProviderCache) RetrieveCredentials(ctx context.Context, pc *v1beta1.ProviderConfig, awsCfg *aws.Config) (aws.Credentials, error) {
+	// cache key calculation tries to capture any parameter that could cause changes
+	// in the resulting AWS credentials, to ensure unique keys.
+	//
+	// Parameters that are directly available in the provider config, will generate
+	// unique cache keys through UUID and ResourceVersion of the ProviderConfig's
+	// k8s object, as they change when the provider config is modified.
+	//
+	// any other external parameter that have an effect on the resulting credentials
+	// and does not appear in the ProviderConfig directly (i.e. the same provider config
+	// content produces a different config), should be included in the cache key
+	cacheKeyParams := []string{
+		string(pc.UID),
+		pc.ResourceVersion,
+		awsCfg.Region,
+		string(pc.Spec.Credentials.Source),
+	}
+
+	// Only IRSA authentication method credentials are cached currently
+	switch s := pc.Spec.Credentials.Source; s { //nolint:exhaustive
+	case authKeyIRSA:
+		tokenHash, err := hashTokenFile(os.Getenv("AWS_WEB_IDENTITY_TOKEN_FILE"))
+		if err != nil {
+			return aws.Credentials{}, errors.Wrap(err, "cannot calculate cache key for credentials")
+		}
+		cacheKeyParams = append(cacheKeyParams, authKeyIRSA, tokenHash, os.Getenv("AWS_WEB_IDENTITY_TOKEN_FILE"), os.Getenv("AWS_ROLE_ARN"))
+	default:
+		c.logger.Debug("skipping cache", "pc", pc.GroupVersionKind().String(), "authSource", s)
+		// skip cache for other/unimplemented credential types
+		return awsCfg.Credentials.Retrieve(ctx)
+	}
+
+	cacheKey := strings.Join(cacheKeyParams, ":")
+	c.logger.Debug("checking cache entry", "cacheKey", cacheKey, "pc", pc.GroupVersionKind().String())
+	c.mu.RLock()
+	cacheEntry, ok := c.cache[cacheKey]
+	c.mu.RUnlock()
+
+	// TODO: consider implementing a TTL even though the cached entry is valid
+	// cache hit
+	if ok {
+		c.logger.Debug("cache hit", "cacheKey", cacheKey, "pc", pc.GroupVersionKind().String())
+		// since this is a hot-path in the execution, do not always update
+		// the last access times, it is fine to evict the LRU entry on a less
+		// granular precision.
+		if time.Since(cacheEntry.AccessedAt) > 10*time.Minute {
+			c.mu.Lock()
+			cacheEntry.AccessedAt = time.Now()
+			c.mu.Unlock()
+		}
+		return cacheEntry.credProvider.Retrieve(ctx)
+	}
+
+	// cache miss
+	c.logger.Debug("cache miss", "cacheKey", cacheKey, "pc", pc.GroupVersionKind().String())
+	c.mu.Lock()
+	defer c.mu.Unlock()
+	c.makeRoom()
+	c.cache[cacheKey] = &awsCredentialsProviderCacheEntry{
+		credProvider: awsCfg.Credentials,
+		AccessedAt:   time.Now(),
+	}
+	return awsCfg.Credentials.Retrieve(ctx)
+}
+
+// makeRoom ensures that there is at most maxSize-1 elements in the cache map
+// so that a new entry can be added. It deletes the object that was last accessed
+// before all others.
+func (c *AWSCredentialsProviderCache) makeRoom() {
+	if 1+len(c.cache) <= c.maxSize {
+		return
+	}
+	var dustiest string
+	for key, val := range c.cache {
+		if dustiest == "" {
+			dustiest = key
+		}
+		if val.AccessedAt.Before(c.cache[dustiest].AccessedAt) {
+			dustiest = key
+		}
+	}
+	delete(c.cache, dustiest)
+}
+
+// hashTokenFile calculates the sha256 checksum of the token file content at
+// the supplied file path
+func hashTokenFile(filename string) (string, error) {
+	if filename == "" {
+		return "", errors.New("token file name cannot be empty")
+	}
+	file, err := os.Open(filename)
+	if err != nil {
+		return "", err
+	}
+	defer file.Close()
+
+	hash := sha256.New()
+	if _, err = io.Copy(hash, file); err != nil {
+		return "", err
+	}
+
+	checksum := hash.Sum(nil)
+	return fmt.Sprintf("%x", checksum), nil
+}