diff --git a/terraform/lib/dependabot/terraform/file_updater.rb b/terraform/lib/dependabot/terraform/file_updater.rb
index 3d008b7c02..d55130accf 100644
--- a/terraform/lib/dependabot/terraform/file_updater.rb
+++ b/terraform/lib/dependabot/terraform/file_updater.rb
@@ -90,7 +90,7 @@ def update_registry_declaration(new_req, old_req, updated_content)
         end
       end
 
-      def update_lockfile_declaration
+      def update_lockfile_declaration # rubocop:disable Metrics/AbcSize
         return if lock_file.nil?
 
         new_req = dependency.requirements.first
@@ -115,6 +115,14 @@ def update_lockfile_declaration
                  content.scan(declaration_regex).first.scan(/^\s*version\s*=.*/)
             content.sub!(declaration_regex, updated_dependency)
           end
+        rescue SharedHelpers::HelperSubprocessFailed => e
+          raise if @retrying_lock || !e.message.include?("terraform init")
+
+          # NOTE: Modules need to be installed before terraform can update the
+          # lockfile
+          @retrying_lock = true
+          SharedHelpers.run_shell_command("terraform init")
+          retry
         end
 
         content
diff --git a/terraform/spec/dependabot/terraform/file_updater_spec.rb b/terraform/spec/dependabot/terraform/file_updater_spec.rb
index 4c2e3431d5..08e2c1690d 100644
--- a/terraform/spec/dependabot/terraform/file_updater_spec.rb
+++ b/terraform/spec/dependabot/terraform/file_updater_spec.rb
@@ -838,5 +838,51 @@ module "github_terraform" {
         )
       end
     end
+
+    describe "with a lockfile and modules that need to be installed" do
+      let(:files) { project_dependency_files("lockfile_with_modules") }
+      let(:dependencies) do
+        [
+          Dependabot::Dependency.new(
+            name: "integrations/github",
+            version: "4.12.0",
+            previous_version: "4.4.0",
+            requirements: [{
+              requirement: "4.12.0",
+              groups: [],
+              file: "main.tf",
+              source: {
+                type: "registry",
+                registry_hostname: "registry.terraform.io",
+                module_identifier: "integrations/github"
+              }
+            }],
+            previous_requirements: [{
+              requirement: "4.4.0",
+              groups: [],
+              file: "main.tf",
+              source: {
+                type: "registry",
+                registry_hostname: "registry.terraform.io",
+                module_identifier: "integrations/github"
+              }
+            }],
+            package_manager: "terraform"
+          )
+        ]
+      end
+
+      it "updates the version in the lockfile" do
+        lockfile = subject.find { |file| file.name == ".terraform.lock.hcl" }
+
+        expect(lockfile.content).to include(
+          <<~DEP
+            provider "registry.terraform.io/integrations/github" {
+              version     = "4.12.0"
+              constraints = "~> 4.4"
+          DEP
+        )
+      end
+    end
   end
 end
diff --git a/terraform/spec/fixtures/projects/lockfile_with_modules/.terraform.lock.hcl b/terraform/spec/fixtures/projects/lockfile_with_modules/.terraform.lock.hcl
new file mode 100644
index 0000000000..29b0caf8ce
--- /dev/null
+++ b/terraform/spec/fixtures/projects/lockfile_with_modules/.terraform.lock.hcl
@@ -0,0 +1,22 @@
+# This file is maintained automatically by "terraform init".
+# Manual edits may be lost in future updates.
+
+provider "registry.terraform.io/integrations/github" {
+  version     = "4.4.0"
+  constraints = "~> 4.4"
+  hashes = [
+    "h1:dgn+oL1cC8kz3ODIuT/PyHqgso00SpItPN089ZuUGt4=",
+    "h1:eKArqtLcYoYUFf4dgNzVemqu2GsoEf7K0ZLEXjSoPBo=",
+    "zh:0ebb07c4971ca7d60fce8614270d056328a121fd4ffbda4b29a06d4a1e90e939",
+    "zh:178b333f2f285c1a59b9335320f584bd01304179c2d6a1919366945b55cfb293",
+    "zh:2c9087e987a5e1af2aad803a79fa5bd847ac060d4c766b5a187b9aabb3f734a4",
+    "zh:419597d8d284616ed93a2c13b3833b129aaba7af7a057d2f48aeb7bc3610cefc",
+    "zh:61686d578880ad76cb8e9c2cc72ad14ef2896fde973cca18b8f7c8848781c71d",
+    "zh:662e125ac42a0c113d811afd2e7a0f81ba061f00cc62ba7435bd685f889290b9",
+    "zh:87fb3d97070cae7f0b623d1a9b59e8cfad0dfece4a27ee964c4c77f228592a80",
+    "zh:e9dcc85ef2f2e09d298f3bbbb9b0d673596d62c1d7d480b2999b4badb2f4aeff",
+    "zh:f052c377a0630a6881c183ac5de0dbef4e5627638a23434a6aa7fce8977b43de",
+    "zh:f7456ec2a6a31caa5d2c85f4da660689f8bac5541c70324803de0c26a14586e1",
+    "zh:fbf6bfddde6f209dc65052ca27e0c83e96bae5fde6940edf029ca42e7e4f1110",
+  ]
+}
diff --git a/terraform/spec/fixtures/projects/lockfile_with_modules/caf_module.tf b/terraform/spec/fixtures/projects/lockfile_with_modules/caf_module.tf
new file mode 100644
index 0000000000..fb04b444b1
--- /dev/null
+++ b/terraform/spec/fixtures/projects/lockfile_with_modules/caf_module.tf
@@ -0,0 +1,4 @@
+module "caf" {
+  source  = "aztfmod/caf/azurerm"
+  version = "5.1.0"
+}
diff --git a/terraform/spec/fixtures/projects/lockfile_with_modules/versions.tf b/terraform/spec/fixtures/projects/lockfile_with_modules/versions.tf
new file mode 100644
index 0000000000..db7fa42821
--- /dev/null
+++ b/terraform/spec/fixtures/projects/lockfile_with_modules/versions.tf
@@ -0,0 +1,9 @@
+terraform {
+  required_providers {
+    github = {
+      source  = "integrations/github"
+      version = "~> 4.4"
+    }
+  }
+  required_version = ">= 0.14"
+}