diff --git a/CHANGELOG.md b/CHANGELOG.md
index e11259edfd..b73dbd4c68 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -53,6 +53,10 @@
   - [changelog](https://github.com/getsentry/sentry-javascript-bundler-plugins/blob/main/CHANGELOG.md#490)
   - [diff](https://github.com/getsentry/sentry-javascript-bundler-plugins/compare/4.8.0...4.9.0)
 
+### Fixes
+
+- Fix `SENTRY_ALLOW_FAILURE` environment variable not being respected in Xcode build scripts ([#5616](https://github.com/getsentry/sentry-react-native/pull/5616))
+
 ## 7.11.0
 
 ### Features
diff --git a/packages/core/scripts/sentry-xcode-debug-files.sh b/packages/core/scripts/sentry-xcode-debug-files.sh
index 9ebf0ae2bc..2200d1e515 100755
--- a/packages/core/scripts/sentry-xcode-debug-files.sh
+++ b/packages/core/scripts/sentry-xcode-debug-files.sh
@@ -70,11 +70,17 @@ else
   # 'warning:' triggers a warning in Xcode, 'error:' triggers an error
   set +x +e # disable printing commands otherwise we might print `error:` by accident and allow continuing on error
   SENTRY_UPLOAD_COMMAND_OUTPUT=$(/bin/sh -c "\"$LOCAL_NODE_BINARY\" $UPLOAD_DEBUG_FILES" 2>&1)
-  if [ $? -eq 0 ]; then
+  UPLOAD_EXIT_CODE=$?
+  if [ $UPLOAD_EXIT_CODE -eq 0 ]; then
     echo "$SENTRY_UPLOAD_COMMAND_OUTPUT" | awk '{print "output: sentry-cli - " $0}'
   else
-    echo "error: sentry-cli - To disable native debug files auto upload, set SENTRY_DISABLE_AUTO_UPLOAD=true in your environment variables. Or to allow failing upload, set SENTRY_ALLOW_FAILURE=true"
-    echo "error: sentry-cli - $SENTRY_UPLOAD_COMMAND_OUTPUT"
+    if [ "$SENTRY_ALLOW_FAILURE" == true ]; then
+      echo "warning: sentry-cli - Debug files upload failed, but continuing build because SENTRY_ALLOW_FAILURE=true"
+      echo "warning: sentry-cli - $SENTRY_UPLOAD_COMMAND_OUTPUT"
+    else
+      echo "error: sentry-cli - To disable native debug files auto upload, set SENTRY_DISABLE_AUTO_UPLOAD=true in your environment variables. Or to allow failing upload, set SENTRY_ALLOW_FAILURE=true"
+      echo "error: sentry-cli - $SENTRY_UPLOAD_COMMAND_OUTPUT"
+    fi
   fi
   set -x -e # re-enable
 fi
diff --git a/packages/core/scripts/sentry-xcode.sh b/packages/core/scripts/sentry-xcode.sh
index 73ba666fc2..4390112f27 100755
--- a/packages/core/scripts/sentry-xcode.sh
+++ b/packages/core/scripts/sentry-xcode.sh
@@ -56,9 +56,14 @@ if [ "$SENTRY_DISABLE_AUTO_UPLOAD" != true ]; then
   if [ $? -eq 0 ]; then
     echo "$SENTRY_XCODE_COMMAND_OUTPUT" | awk '{print "output: sentry-cli - " $0}'
   else
-    echo "error: sentry-cli - To disable source maps auto upload, set SENTRY_DISABLE_AUTO_UPLOAD=true in your environment variables. Or to allow failing upload, set SENTRY_ALLOW_FAILURE=true"
-    echo "error: sentry-cli - $SENTRY_XCODE_COMMAND_OUTPUT"
-    exitCode=1
+    if [ "$SENTRY_ALLOW_FAILURE" == true ]; then
+      echo "warning: sentry-cli - Source maps upload failed, but continuing build because SENTRY_ALLOW_FAILURE=true"
+      echo "warning: sentry-cli - $SENTRY_XCODE_COMMAND_OUTPUT"
+    else
+      echo "error: sentry-cli - To disable source maps auto upload, set SENTRY_DISABLE_AUTO_UPLOAD=true in your environment variables. Or to allow failing upload, set SENTRY_ALLOW_FAILURE=true"
+      echo "error: sentry-cli - $SENTRY_XCODE_COMMAND_OUTPUT"
+      exitCode=1
+    fi
   fi
   set -x -e # re-enable
 else
diff --git a/packages/core/test/scripts/sentry-xcode-scripts.test.ts b/packages/core/test/scripts/sentry-xcode-scripts.test.ts
new file mode 100644
index 0000000000..b4529b9104
--- /dev/null
+++ b/packages/core/test/scripts/sentry-xcode-scripts.test.ts
@@ -0,0 +1,266 @@
+import { execSync } from 'child_process';
+import * as fs from 'fs';
+import * as os from 'os';
+import * as path from 'path';
+
+const SCRIPTS_DIR = path.resolve(__dirname, '../../scripts');
+const DEBUG_FILES_SCRIPT = path.join(SCRIPTS_DIR, 'sentry-xcode-debug-files.sh');
+const XCODE_SCRIPT = path.join(SCRIPTS_DIR, 'sentry-xcode.sh');
+
+describe('sentry-xcode-debug-files.sh', () => {
+  let tempDir: string;
+  let mockSentryCliScript: string;
+
+  beforeEach(() => {
+    // Create a temporary directory for test artifacts
+    tempDir = fs.mkdtempSync(path.join(os.tmpdir(), 'sentry-xcode-test-'));
+
+    // Create a mock sentry-cli script that can simulate success or failure
+    mockSentryCliScript = path.join(tempDir, 'mock-sentry-cli.js');
+    fs.writeFileSync(
+      mockSentryCliScript,
+      `
+      const exitCode = process.env.MOCK_CLI_EXIT_CODE || '0';
+      const output = process.env.MOCK_CLI_OUTPUT || 'Mock upload output';
+      console.log(output);
+      process.exit(parseInt(exitCode));
+      `,
+    );
+  });
+
+  afterEach(() => {
+    // Clean up temp directory
+    if (tempDir && fs.existsSync(tempDir)) {
+      fs.rmSync(tempDir, { recursive: true, force: true });
+    }
+  });
+
+  const runScript = (env: Record<string, string> = {}): { stdout: string; stderr: string; exitCode: number } => {
+    const defaultEnv = {
+      NODE_BINARY: process.execPath,
+      SENTRY_CLI_EXECUTABLE: mockSentryCliScript,
+      DWARF_DSYM_FOLDER_PATH: tempDir,
+      CONFIGURATION: 'Release',
+      PROJECT_DIR: tempDir,
+      DERIVED_FILE_DIR: tempDir,
+    };
+
+    try {
+      const stdout = execSync(`bash "${DEBUG_FILES_SCRIPT}"`, {
+        env: { ...process.env, ...defaultEnv, ...env },
+        encoding: 'utf8',
+        stdio: 'pipe',
+      });
+      return { stdout, stderr: '', exitCode: 0 };
+    } catch (error: any) {
+      return {
+        stdout: error.stdout?.toString() || '',
+        stderr: error.stderr?.toString() || '',
+        exitCode: error.status || 1,
+      };
+    }
+  };
+
+  it('exits with 0 when upload succeeds', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '0',
+      MOCK_CLI_OUTPUT: 'Upload successful',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('Upload successful');
+  });
+
+  it('exits with 0 when SENTRY_ALLOW_FAILURE=true and upload fails', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '1',
+      MOCK_CLI_OUTPUT: 'Upload failed: API error',
+      SENTRY_ALLOW_FAILURE: 'true',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('warning: sentry-cli');
+    expect(result.stdout).toContain('continuing build because SENTRY_ALLOW_FAILURE=true');
+    expect(result.stdout).toContain('Upload failed: API error');
+  });
+
+  it('exits with 0 but prints error when SENTRY_ALLOW_FAILURE not set and upload fails', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '1',
+      MOCK_CLI_OUTPUT: 'Upload failed: API error',
+    });
+
+    // Original behavior: script exits 0, but Xcode fails build due to "error:" prefix
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('error: sentry-cli');
+    expect(result.stdout).toContain('SENTRY_ALLOW_FAILURE=true');
+    expect(result.stdout).toContain('Upload failed: API error');
+  });
+
+  it('exits with 0 but prints error when SENTRY_ALLOW_FAILURE=false and upload fails', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '1',
+      MOCK_CLI_OUTPUT: 'Upload failed: Network error',
+      SENTRY_ALLOW_FAILURE: 'false',
+    });
+
+    // Original behavior: script exits 0, but Xcode fails build due to "error:" prefix
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('error: sentry-cli');
+  });
+
+  it('skips upload when SENTRY_DISABLE_AUTO_UPLOAD=true', () => {
+    const result = runScript({
+      SENTRY_DISABLE_AUTO_UPLOAD: 'true',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('SENTRY_DISABLE_AUTO_UPLOAD=true');
+    expect(result.stdout).toContain('skipping debug files upload');
+  });
+
+  it('skips upload for Debug configuration', () => {
+    const result = runScript({
+      CONFIGURATION: 'Debug',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('Skipping debug files upload for *Debug* configuration');
+  });
+
+  it('skips upload for debug configuration (case insensitive)', () => {
+    const result = runScript({
+      CONFIGURATION: 'debug',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('Skipping debug files upload for *Debug* configuration');
+  });
+});
+
+describe('sentry-xcode.sh', () => {
+  let tempDir: string;
+  let mockSentryCliScript: string;
+  let mockReactNativeScript: string;
+
+  beforeEach(() => {
+    // Create a temporary directory for test artifacts
+    tempDir = fs.mkdtempSync(path.join(os.tmpdir(), 'sentry-xcode-test-'));
+
+    // Create a mock sentry-cli script
+    mockSentryCliScript = path.join(tempDir, 'mock-sentry-cli.js');
+    fs.writeFileSync(
+      mockSentryCliScript,
+      `
+      const exitCode = process.env.MOCK_CLI_EXIT_CODE || '0';
+      const output = process.env.MOCK_CLI_OUTPUT || 'Mock upload output';
+      console.log(output);
+      process.exit(parseInt(exitCode));
+      `,
+    );
+
+    // Create a mock react-native-xcode.sh script
+    mockReactNativeScript = path.join(tempDir, 'react-native-xcode.sh');
+    fs.writeFileSync(
+      mockReactNativeScript,
+      `#!/bin/bash
+      echo "Mock React Native bundle"
+      exit 0
+      `,
+    );
+    fs.chmodSync(mockReactNativeScript, '755');
+  });
+
+  afterEach(() => {
+    // Clean up temp directory
+    if (tempDir && fs.existsSync(tempDir)) {
+      fs.rmSync(tempDir, { recursive: true, force: true });
+    }
+  });
+
+  const runScript = (env: Record<string, string> = {}): { stdout: string; stderr: string; exitCode: number } => {
+    // Create a mock collect-modules.sh script to prevent script failure
+    const mockCollectModulesScript = path.join(tempDir, 'collect-modules.sh');
+    fs.writeFileSync(mockCollectModulesScript, '#!/bin/bash\nexit 0\n');
+    fs.chmodSync(mockCollectModulesScript, '755');
+
+    const defaultEnv = {
+      NODE_BINARY: process.execPath,
+      SENTRY_CLI_EXECUTABLE: mockSentryCliScript,
+      PROJECT_DIR: tempDir,
+      DERIVED_FILE_DIR: tempDir,
+      SENTRY_COLLECT_MODULES: mockCollectModulesScript, // Set this to avoid package resolution failure
+    };
+
+    try {
+      const stdout = execSync(`bash "${XCODE_SCRIPT}" "${mockReactNativeScript}"`, {
+        env: { ...process.env, ...defaultEnv, ...env },
+        encoding: 'utf8',
+        stdio: 'pipe',
+      });
+      return { stdout, stderr: '', exitCode: 0 };
+    } catch (error: any) {
+      return {
+        stdout: error.stdout?.toString() || '',
+        stderr: error.stderr?.toString() || '',
+        exitCode: error.status || 1,
+      };
+    }
+  };
+
+  it('exits with 0 when upload succeeds', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '0',
+      MOCK_CLI_OUTPUT: 'Source maps uploaded successfully',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('Source maps uploaded successfully');
+  });
+
+  it('exits with 0 when SENTRY_ALLOW_FAILURE=true and upload fails', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '1',
+      MOCK_CLI_OUTPUT: 'Upload failed: Connection timeout',
+      SENTRY_ALLOW_FAILURE: 'true',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('warning: sentry-cli');
+    expect(result.stdout).toContain('continuing build because SENTRY_ALLOW_FAILURE=true');
+    expect(result.stdout).toContain('Upload failed: Connection timeout');
+  });
+
+  it('exits with 1 when SENTRY_ALLOW_FAILURE not set and upload fails', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '1',
+      MOCK_CLI_OUTPUT: 'Upload failed: Invalid auth token',
+    });
+
+    expect(result.exitCode).toBe(1);
+    expect(result.stdout).toContain('error: sentry-cli');
+    expect(result.stdout).toContain('SENTRY_ALLOW_FAILURE=true');
+    expect(result.stdout).toContain('Upload failed: Invalid auth token');
+  });
+
+  it('exits with 1 when SENTRY_ALLOW_FAILURE=false and upload fails', () => {
+    const result = runScript({
+      MOCK_CLI_EXIT_CODE: '1',
+      MOCK_CLI_OUTPUT: 'Upload failed',
+      SENTRY_ALLOW_FAILURE: 'false',
+    });
+
+    expect(result.exitCode).toBe(1);
+    expect(result.stdout).toContain('error: sentry-cli');
+  });
+
+  it('skips upload when SENTRY_DISABLE_AUTO_UPLOAD=true', () => {
+    const result = runScript({
+      SENTRY_DISABLE_AUTO_UPLOAD: 'true',
+    });
+
+    expect(result.exitCode).toBe(0);
+    expect(result.stdout).toContain('SENTRY_DISABLE_AUTO_UPLOAD=true');
+    expect(result.stdout).toContain('skipping sourcemaps upload');
+  });
+});