diff --git a/changelogs/fragments/20230424-ec2_instance-app_callback.yml b/changelogs/fragments/20230424-ec2_instance-app_callback.yml
new file mode 100644
index 00000000000..e8066909b9f
--- /dev/null
+++ b/changelogs/fragments/20230424-ec2_instance-app_callback.yml
@@ -0,0 +1,2 @@
+bugfixes:
+- ec2_instance - Pick up ``app_callback -> set_password`` rather than ``app_callback -> set_passwd`` (https://github.com/ansible-collections/amazon.aws/issues/1449).
diff --git a/plugins/modules/ec2_instance.py b/plugins/modules/ec2_instance.py
index 1ccaa9c2a5e..9bbdca2ce99 100644
--- a/plugins/modules/ec2_instance.py
+++ b/plugins/modules/ec2_instance.py
@@ -1240,7 +1240,7 @@ def build_userdata(params):
             job_template_id=params.get("aap_callback").get("job_template_id"),
             host_config_key=params.get("aap_callback").get("host_config_key"),
             windows=params.get("aap_callback").get("windows"),
-            passwd=params.get("aap_callback").get("set_passwd"),
+            passwd=params.get("aap_callback").get("set_password"),
         )
         return {"UserData": userdata}
     return {}