diff --git a/python/semantic_kernel/connectors/openapi_plugin/openapi_function_execution_parameters.py b/python/semantic_kernel/connectors/openapi_plugin/openapi_function_execution_parameters.py
index 442af52a49d2..2d1ac19df68b 100644
--- a/python/semantic_kernel/connectors/openapi_plugin/openapi_function_execution_parameters.py
+++ b/python/semantic_kernel/connectors/openapi_plugin/openapi_function_execution_parameters.py
@@ -30,6 +30,23 @@ class OpenAPIFunctionExecutionParameters(KernelBaseModel):
     timeout: float | None = Field(
         None, description="Default timeout in seconds for HTTP requests. Uses httpx default (5 seconds) if None."
     )
+    enable_file_ref_resolution: bool = Field(
+        False,
+        description=(
+            "Whether to resolve local file $ref references when parsing OpenAPI documents. "
+            "Disabled by default. When False, only internal JSON pointer references are resolved. "
+            "Set to True if your OpenAPI spec is split across multiple local files and you trust "
+            "the document source."
+        ),
+    )
+    enable_http_ref_resolution: bool = Field(
+        False,
+        description=(
+            "Whether to resolve external HTTP $ref references when parsing OpenAPI documents. "
+            "Disabled by default. Set to True only if you trust the OpenAPI document source "
+            "and need external HTTP $ref resolution."
+        ),
+    )
 
     def model_post_init(self, __context: Any) -> None:
         """Post initialization method for the model."""
diff --git a/python/semantic_kernel/connectors/openapi_plugin/openapi_manager.py b/python/semantic_kernel/connectors/openapi_plugin/openapi_manager.py
index 135221f17c59..b825a1635cae 100644
--- a/python/semantic_kernel/connectors/openapi_plugin/openapi_manager.py
+++ b/python/semantic_kernel/connectors/openapi_plugin/openapi_manager.py
@@ -56,7 +56,11 @@ def create_functions_from_openapi(
 
         # Parse the document from the given path
         parser = OpenApiParser()
-        parsed_doc = parser.parse(openapi_document_path)
+        parsed_doc = parser.parse(
+            openapi_document_path,
+            enable_file_ref_resolution=(execution_settings.enable_file_ref_resolution if execution_settings else False),
+            enable_http_ref_resolution=(execution_settings.enable_http_ref_resolution if execution_settings else False),
+        )
         if parsed_doc is None:
             raise FunctionExecutionException(f"Error parsing OpenAPI document: {openapi_document_path}")
 
diff --git a/python/semantic_kernel/connectors/openapi_plugin/openapi_parser.py b/python/semantic_kernel/connectors/openapi_plugin/openapi_parser.py
index 0ed36f209d00..1f6aabe5eeff 100644
--- a/python/semantic_kernel/connectors/openapi_plugin/openapi_parser.py
+++ b/python/semantic_kernel/connectors/openapi_plugin/openapi_parser.py
@@ -6,6 +6,7 @@
 from typing import TYPE_CHECKING, Any, Final
 
 from prance import ResolvingParser
+from prance.util.resolver import RESOLVE_FILES, RESOLVE_HTTP, RESOLVE_INTERNAL
 
 from semantic_kernel.connectors.openapi_plugin.models.rest_api_expected_response import RestApiExpectedResponse
 from semantic_kernel.connectors.openapi_plugin.models.rest_api_operation import RestApiOperation
@@ -44,9 +45,29 @@ class OpenApiParser:
     PAYLOAD_PROPERTIES_HIERARCHY_MAX_DEPTH: int = 10
     SUPPORTED_MEDIA_TYPES: Final[list[str]] = ["application/json", "text/plain"]
 
-    def parse(self, openapi_document: str) -> Any | dict[str, Any] | None:
-        """Parse the OpenAPI document."""
-        parser = ResolvingParser(openapi_document)
+    def parse(
+        self,
+        openapi_document: str,
+        enable_file_ref_resolution: bool = False,
+        enable_http_ref_resolution: bool = False,
+    ) -> Any | dict[str, Any] | None:
+        """Parse the OpenAPI document.
+
+        Args:
+            openapi_document: The path or URL to the OpenAPI document.
+            enable_file_ref_resolution: Whether to resolve local file $ref references.
+                Disabled by default. When False, only internal JSON pointer references
+                are resolved. Set to True if your OpenAPI spec is split across multiple
+                local files.
+            enable_http_ref_resolution: Whether to resolve external HTTP $ref references.
+                Disabled by default.
+        """
+        resolve_types = RESOLVE_INTERNAL
+        if enable_file_ref_resolution:
+            resolve_types |= RESOLVE_FILES
+        if enable_http_ref_resolution:
+            resolve_types |= RESOLVE_HTTP
+        parser = ResolvingParser(openapi_document, resolve_types=resolve_types)
         return parser.specification
 
     def _parse_parameters(self, parameters: list[dict[str, Any]]):
diff --git a/python/tests/unit/connectors/openapi_plugin/test_openapi_manager.py b/python/tests/unit/connectors/openapi_plugin/test_openapi_manager.py
index 05f3f948ff43..37bd6b324d77 100644
--- a/python/tests/unit/connectors/openapi_plugin/test_openapi_manager.py
+++ b/python/tests/unit/connectors/openapi_plugin/test_openapi_manager.py
@@ -223,7 +223,11 @@ async def test_create_functions_from_openapi_raises_exception(mock_parse):
     with pytest.raises(FunctionExecutionException, match="Error parsing OpenAPI document: test_openapi_document_path"):
         create_functions_from_openapi(plugin_name="test_plugin", openapi_document_path="test_openapi_document_path")
 
-    mock_parse.assert_called_once_with("test_openapi_document_path")
+    mock_parse.assert_called_once_with(
+        "test_openapi_document_path",
+        enable_file_ref_resolution=False,
+        enable_http_ref_resolution=False,
+    )
 
 
 async def test_run_operation_uses_timeout_from_run_options():
diff --git a/python/tests/unit/connectors/openapi_plugin/test_openapi_parser.py b/python/tests/unit/connectors/openapi_plugin/test_openapi_parser.py
index ecd5e044ba2e..b0c81074e5a8 100644
--- a/python/tests/unit/connectors/openapi_plugin/test_openapi_parser.py
+++ b/python/tests/unit/connectors/openapi_plugin/test_openapi_parser.py
@@ -189,3 +189,197 @@ def test_no_operationid_raises_error():
             openapi_document_path=no_op_path,
             execution_settings=None,
         )
+
+
+def test_parse_blocks_external_http_refs_by_default():
+    """Verify that external HTTP $ref resolution is not enabled by default."""
+    from unittest.mock import MagicMock, patch
+
+    from prance.util.resolver import RESOLVE_HTTP, RESOLVE_INTERNAL
+
+    with patch("semantic_kernel.connectors.openapi_plugin.openapi_parser.ResolvingParser") as mock_parser_cls:
+        mock_parser_cls.return_value = MagicMock(specification={"openapi": "3.0.0"})
+        parser = OpenApiParser()
+        parser.parse("dummy_path.yaml")
+
+        mock_parser_cls.assert_called_once()
+        call_kwargs = mock_parser_cls.call_args
+        resolve_types = call_kwargs.kwargs.get("resolve_types") or call_kwargs[1].get("resolve_types")
+        assert resolve_types == RESOLVE_INTERNAL, (
+            f"Expected only RESOLVE_INTERNAL ({RESOLVE_INTERNAL}), got {resolve_types}"
+        )
+        assert not (resolve_types & RESOLVE_HTTP), "RESOLVE_HTTP should not be set by default"
+
+
+def test_parse_resolves_internal_refs_by_default(tmp_path):
+    """Verify that internal $ref references are still resolved by default."""
+    openapi_spec = tmp_path / "spec_with_internal_ref.yaml"
+    openapi_spec.write_text(
+        """
+openapi: 3.0.0
+info:
+  title: Internal Ref Test
+  version: 1.0.0
+servers:
+  - url: http://example.com
+paths:
+  /test:
+    get:
+      operationId: testOp
+      responses:
+        "200":
+          description: ok
+          content:
+            application/json:
+              schema:
+                $ref: "#/components/schemas/TestSchema"
+components:
+  schemas:
+    TestSchema:
+      type: object
+      properties:
+        name:
+          type: string
+""",
+        encoding="utf-8",
+    )
+
+    parser = OpenApiParser()
+    result = parser.parse(str(openapi_spec))
+
+    # Internal $ref should be resolved
+    response_schema = result["paths"]["/test"]["get"]["responses"]["200"]["content"]["application/json"]["schema"]
+    assert "$ref" not in response_schema, "Internal $ref should be resolved"
+    assert response_schema["type"] == "object"
+    assert "name" in response_schema["properties"]
+
+
+def test_parse_blocks_file_refs_by_default():
+    """Verify that local file $ref resolution is not enabled by default."""
+    from unittest.mock import MagicMock, patch
+
+    from prance.util.resolver import RESOLVE_FILES, RESOLVE_INTERNAL
+
+    with patch("semantic_kernel.connectors.openapi_plugin.openapi_parser.ResolvingParser") as mock_parser_cls:
+        mock_parser_cls.return_value = MagicMock(specification={"openapi": "3.0.0"})
+        parser = OpenApiParser()
+        parser.parse("dummy_path.yaml")
+
+        call_kwargs = mock_parser_cls.call_args
+        resolve_types = call_kwargs.kwargs.get("resolve_types") or call_kwargs[1].get("resolve_types")
+        assert resolve_types == RESOLVE_INTERNAL, (
+            f"Expected only RESOLVE_INTERNAL ({RESOLVE_INTERNAL}), got {resolve_types}"
+        )
+        assert not (resolve_types & RESOLVE_FILES), "RESOLVE_FILES should not be set by default"
+
+
+def test_parse_enables_file_refs_when_requested():
+    """Verify that local file $ref resolution is enabled when explicitly requested."""
+    from unittest.mock import MagicMock, patch
+
+    from prance.util.resolver import RESOLVE_FILES, RESOLVE_INTERNAL
+
+    with patch("semantic_kernel.connectors.openapi_plugin.openapi_parser.ResolvingParser") as mock_parser_cls:
+        mock_parser_cls.return_value = MagicMock(specification={"openapi": "3.0.0"})
+        parser = OpenApiParser()
+        parser.parse("dummy_path.yaml", enable_file_ref_resolution=True)
+
+        call_kwargs = mock_parser_cls.call_args
+        resolve_types = call_kwargs.kwargs.get("resolve_types") or call_kwargs[1].get("resolve_types")
+        assert resolve_types == (RESOLVE_INTERNAL | RESOLVE_FILES), (
+            f"Expected RESOLVE_INTERNAL | RESOLVE_FILES, got {resolve_types}"
+        )
+
+
+def test_parse_enables_http_refs_when_requested():
+    """Verify that HTTP $ref resolution is enabled when explicitly requested."""
+    from unittest.mock import MagicMock, patch
+
+    from prance.util.resolver import RESOLVE_HTTP, RESOLVE_INTERNAL
+
+    with patch("semantic_kernel.connectors.openapi_plugin.openapi_parser.ResolvingParser") as mock_parser_cls:
+        mock_parser_cls.return_value = MagicMock(specification={"openapi": "3.0.0"})
+        parser = OpenApiParser()
+        parser.parse("dummy_path.yaml", enable_http_ref_resolution=True)
+
+        call_kwargs = mock_parser_cls.call_args
+        resolve_types = call_kwargs.kwargs.get("resolve_types") or call_kwargs[1].get("resolve_types")
+        assert resolve_types == (RESOLVE_INTERNAL | RESOLVE_HTTP), (
+            f"Expected RESOLVE_INTERNAL | RESOLVE_HTTP, got {resolve_types}"
+        )
+
+
+def test_parse_enables_both_file_and_http_refs_when_requested():
+    """Verify both file and HTTP $ref resolution work together."""
+    from unittest.mock import MagicMock, patch
+
+    from prance.util.resolver import RESOLVE_FILES, RESOLVE_HTTP, RESOLVE_INTERNAL
+
+    with patch("semantic_kernel.connectors.openapi_plugin.openapi_parser.ResolvingParser") as mock_parser_cls:
+        mock_parser_cls.return_value = MagicMock(specification={"openapi": "3.0.0"})
+        parser = OpenApiParser()
+        parser.parse("dummy_path.yaml", enable_file_ref_resolution=True, enable_http_ref_resolution=True)
+
+        call_kwargs = mock_parser_cls.call_args
+        resolve_types = call_kwargs.kwargs.get("resolve_types") or call_kwargs[1].get("resolve_types")
+        assert resolve_types == (RESOLVE_INTERNAL | RESOLVE_FILES | RESOLVE_HTTP), (
+            f"Expected RESOLVE_INTERNAL | RESOLVE_FILES | RESOLVE_HTTP, got {resolve_types}"
+        )
+
+
+def test_create_functions_propagates_enable_http_ref_resolution():
+    """Verify enable_http_ref_resolution=True is propagated from settings to parser."""
+    from unittest.mock import patch
+
+    from semantic_kernel.connectors.openapi_plugin.openapi_function_execution_parameters import (
+        OpenAPIFunctionExecutionParameters,
+    )
+
+    minimal_spec = {
+        "openapi": "3.0.0",
+        "info": {"title": "Test", "version": "1.0.0"},
+        "paths": {},
+    }
+
+    settings = OpenAPIFunctionExecutionParameters(enable_http_ref_resolution=True)
+
+    with patch.object(OpenApiParser, "parse", return_value=minimal_spec) as mock_parse:
+        create_functions_from_openapi(
+            plugin_name="testPlugin",
+            openapi_document_path="dummy.yaml",
+            execution_settings=settings,
+        )
+        mock_parse.assert_called_once_with(
+            "dummy.yaml",
+            enable_file_ref_resolution=False,
+            enable_http_ref_resolution=True,
+        )
+
+
+def test_create_functions_propagates_enable_file_ref_resolution():
+    """Verify enable_file_ref_resolution=True is propagated from settings to parser."""
+    from unittest.mock import patch
+
+    from semantic_kernel.connectors.openapi_plugin.openapi_function_execution_parameters import (
+        OpenAPIFunctionExecutionParameters,
+    )
+
+    minimal_spec = {
+        "openapi": "3.0.0",
+        "info": {"title": "Test", "version": "1.0.0"},
+        "paths": {},
+    }
+
+    settings = OpenAPIFunctionExecutionParameters(enable_file_ref_resolution=True)
+
+    with patch.object(OpenApiParser, "parse", return_value=minimal_spec) as mock_parse:
+        create_functions_from_openapi(
+            plugin_name="testPlugin",
+            openapi_document_path="dummy.yaml",
+            execution_settings=settings,
+        )
+        mock_parse.assert_called_once_with(
+            "dummy.yaml",
+            enable_file_ref_resolution=True,
+            enable_http_ref_resolution=False,
+        )
diff --git a/python/uv.lock b/python/uv.lock
index 10b500f8c457..44c249e89981 100644
--- a/python/uv.lock
+++ b/python/uv.lock
@@ -1,5 +1,4 @@
 version = 1
-revision = 3
 requires-python = ">=3.10"
 resolution-markers = [
     "python_full_version >= '4' and sys_platform == 'darwin'",