diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index f3f3d768e3..63f25ef12a 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -37,6 +37,14 @@ Changed
 
   Contributed by @khushboobhatia01
 
+Fixed
+~~~~~
+
+* Correct error reported when encrypted key value is reported, and another key value parameter that requires conversion is present. #5328
+  Contributed by @amanda11, Ammeon Solutions
+
+
+
 3.5.0 - June 23, 2021
 ---------------------
 
diff --git a/st2api/st2api/controllers/v1/actionexecutions.py b/st2api/st2api/controllers/v1/actionexecutions.py
index cc20c61f52..70d709192e 100644
--- a/st2api/st2api/controllers/v1/actionexecutions.py
+++ b/st2api/st2api/controllers/v1/actionexecutions.py
@@ -219,6 +219,7 @@ def _schedule_execution(
                 liveaction=liveaction_db,
                 action_db=action_db,
                 runnertype_db=runnertype_db,
+                validate_params=False,
             )
 
             # By this point the execution is already in the DB therefore need to mark it failed.
diff --git a/st2api/tests/unit/controllers/v1/test_executions.py b/st2api/tests/unit/controllers/v1/test_executions.py
index 5afcdbaeda..fb80a35917 100644
--- a/st2api/tests/unit/controllers/v1/test_executions.py
+++ b/st2api/tests/unit/controllers/v1/test_executions.py
@@ -198,6 +198,26 @@
         "non_secret_param_2": {"type": "string", "required": True},
     },
 }
+ACTION_DEFAULT_ENCRYPT_AND_BOOL = {
+    "name": "st2.dummy.default_encrypted_and_bool",
+    "description": "An action that uses a jinja template with decrypt_kv filter "
+    "in default parameter",
+    "enabled": True,
+    "pack": "starterpack",
+    "runner_type": "local-shell-cmd",
+    "parameters": {
+        "encrypted_param": {
+            "type": "string",
+            "default": "{{ st2kv.system.secret | decrypt_kv }}",
+            "secret": True,
+        },
+        "bool_param": {
+            "type": "boolean",
+            "default": "{{ st2kv.system.test_bool }}",
+        },
+    },
+}
+
 
 LIVE_ACTION_1 = {
     "action": "sixpack.st2.dummy.action1",
@@ -298,6 +318,9 @@
 LIVE_ACTION_DEFAULT_ENCRYPT = {
     "action": "starterpack.st2.dummy.default_encrypted_value",
 }
+LIVE_ACTION_DEFAULT_ENCRYPT_AND_BOOL = {
+    "action": "starterpack.st2.dummy.default_encrypted_and_bool",
+}
 LIVE_ACTION_DEFAULT_ENCRYPT_SECRET_PARAM = {
     "action": "starterpack.st2.dummy.default_encrypted_value_secret_param",
 }
@@ -359,6 +382,10 @@ def setUpClass(cls):
         post_resp = cls.app.post_json("/v1/actions", cls.action_decrypt)
         cls.action_decrypt["id"] = post_resp.json["id"]
 
+        cls.action_decrypt_and_bool = copy.deepcopy(ACTION_DEFAULT_ENCRYPT_AND_BOOL)
+        post_resp = cls.app.post_json("/v1/actions", cls.action_decrypt_and_bool)
+        cls.action_decrypt_and_bool["id"] = post_resp.json["id"]
+
         cls.action_decrypt_secret_param = copy.deepcopy(
             ACTION_DEFAULT_ENCRYPT_SECRET_PARAMS
         )
@@ -390,6 +417,8 @@ def tearDownClass(cls):
         cls.app.delete("/v1/actions/%s" % cls.action_inquiry["id"])
         cls.app.delete("/v1/actions/%s" % cls.action_template["id"])
         cls.app.delete("/v1/actions/%s" % cls.action_decrypt["id"])
+        cls.app.delete("/v1/actions/%s" % cls.action_decrypt_secret_param["id"])
+        cls.app.delete("/v1/actions/%s" % cls.action_decrypt_and_bool["id"])
         cls.app.delete(
             "/v1/actions/%s" % cls.action_with_output_schema_secret_param["id"]
         )
@@ -913,6 +942,26 @@ def test_template_param(self):
         # was not rendered, and the provided parameter was used
         self.assertEqual(post_resp.json["parameters"]["intparam"], live_int_param)
 
+    def test_template_encrypted_and_bool(self):
+        # register datastore values which are used in this test case
+        KeyValuePairAPI._setup_crypto()
+        register_items = [
+            {
+                "name": "test_bool",
+                "value": "true",
+            },
+        ]
+        [KeyValuePair.add_or_update(KeyValuePairDB(**x)) for x in register_items]
+
+        post_resp = self._do_post(
+            LIVE_ACTION_DEFAULT_ENCRYPT_AND_BOOL, expect_errors=True
+        )
+        self.assertEqual(post_resp.status_int, 400)
+        self.assertEqual(
+            post_resp.json["faultstring"],
+            'Failed to render parameter "encrypted_param": Referenced datastore item "st2kv.system.secret" doesn\'t exist or it contains an empty string',
+        )
+
     def test_template_encrypted_params(self):
         # register datastore values which are used in this test case
         KeyValuePairAPI._setup_crypto()
diff --git a/st2common/st2common/services/action.py b/st2common/st2common/services/action.py
index b7bf650bde..cb5c9ebbe6 100644
--- a/st2common/st2common/services/action.py
+++ b/st2common/st2common/services/action.py
@@ -55,7 +55,9 @@ def _get_immutable_params(parameters):
     return [k for k, v in six.iteritems(parameters) if v.get("immutable", False)]
 
 
-def create_request(liveaction, action_db=None, runnertype_db=None):
+def create_request(
+    liveaction, action_db=None, runnertype_db=None, validate_params=True
+):
     """
     Create an action execution.
 
@@ -66,6 +68,9 @@ def create_request(liveaction, action_db=None, runnertype_db=None):
     :param runnertype_db: Runner model to operate one. If not provided, one is retrieved from the
                           database using values from "liveaction".
     :type runnertype_db: :class:`RunnerTypeDB`
+    :param validate_params: Whether to validate parameters against schema. Default to True, but
+                          set to False when raising a request to report an error.
+    :type validate_params: ``bool``
 
     :return: (liveaction, execution)
     :rtype: tuple
@@ -108,13 +113,14 @@ def create_request(liveaction, action_db=None, runnertype_db=None):
     # Validate action parameters.
     schema = util_schema.get_schema_for_action_parameters(action_db, runnertype_db)
     validator = util_schema.get_validator()
-    util_schema.validate(
-        liveaction.parameters,
-        schema,
-        validator,
-        use_default=True,
-        allow_default_none=True,
-    )
+    if validate_params:
+        util_schema.validate(
+            liveaction.parameters,
+            schema,
+            validator,
+            use_default=True,
+            allow_default_none=True,
+        )
 
     # validate that no immutable params are being overriden. Although possible to
     # ignore the override it is safer to inform the user to avoid surprises.
diff --git a/st2common/tests/unit/services/test_action.py b/st2common/tests/unit/services/test_action.py
index ab8db72329..e27126ec86 100644
--- a/st2common/tests/unit/services/test_action.py
+++ b/st2common/tests/unit/services/test_action.py
@@ -624,3 +624,25 @@ def test_root_liveaction(self):
             child, expected_root = self._create_nested_executions(depth=i)
             actual_root = action_service.get_root_liveaction(child)
             self.assertEqual(expected_root["id"], actual_root["id"])
+
+    def test_invalid_json_request_validate(self):
+        parameters = {"hosts": "127.0.0.1", "cmd": "uname -a", "arg_default_value": 123}
+        liveaction = LiveActionDB(action=ACTION_REF, parameters=parameters)
+
+        self.assertRaisesRegexp(
+            jsonschema.ValidationError,
+            "123 is not of type 'string'",
+            action_service.create_request,
+            liveaction,
+        )
+
+    def test_invalid_json_request_skipvalidate(self):
+        parameters = {"hosts": "127.0.0.1", "cmd": "uname -a", "arg_default_value": 123}
+        liveaction = LiveActionDB(action=ACTION_REF, parameters=parameters)
+
+        # Validate that if skip validation that no exception raised
+        (action, execution) = action_service.create_request(
+            liveaction, validate_params=False
+        )
+        self.assertTrue(action)
+        self.assertTrue(execution)