diff --git a/homeassistant/components/generic/config_flow.py b/homeassistant/components/generic/config_flow.py
index 651ed87da39..272c7a2d98e 100644
--- a/homeassistant/components/generic/config_flow.py
+++ b/homeassistant/components/generic/config_flow.py
@@ -198,6 +198,13 @@ async def async_test_stream(hass, info) -> dict[str, str]:
     """Verify that the stream is valid before we create an entity."""
     if not (stream_source := info.get(CONF_STREAM_SOURCE)):
         return {}
+    if not isinstance(stream_source, template_helper.Template):
+        stream_source = template_helper.Template(stream_source, hass)
+    try:
+        stream_source = stream_source.async_render(parse_result=False)
+    except TemplateError as err:
+        _LOGGER.warning("Problem rendering template %s: %s", stream_source, err)
+        return {CONF_STREAM_SOURCE: "template_error"}
     try:
         # For RTSP streams, prefer TCP. This code is duplicated from
         # homeassistant.components.stream.__init__.py:create_stream()
diff --git a/homeassistant/components/generic/strings.json b/homeassistant/components/generic/strings.json
index 0954656f71d..6b73c70cf3d 100644
--- a/homeassistant/components/generic/strings.json
+++ b/homeassistant/components/generic/strings.json
@@ -8,6 +8,7 @@
       "invalid_still_image": "URL did not return a valid still image",
       "stream_file_not_found": "File not found while trying to connect to stream (is ffmpeg installed?)",
       "stream_http_not_found": "HTTP 404 Not found while trying to connect to stream",
+      "template_error": "Error rendering template. Review log for more info.",
       "timeout": "Timeout while loading URL",
       "stream_no_route_to_host": "Could not find host while trying to connect to stream",
       "stream_io_error": "Input/Output error while trying to connect to stream. Wrong RTSP transport protocol?",
@@ -79,6 +80,7 @@
       "invalid_still_image": "[%key:component::generic::config::error::invalid_still_image%]",
       "stream_file_not_found": "[%key:component::generic::config::error::stream_file_not_found%]",
       "stream_http_not_found": "[%key:component::generic::config::error::stream_http_not_found%]",
+      "template_error": "[%key:component::generic::config::error::template_error%]",
       "timeout": "[%key:component::generic::config::error::timeout%]",
       "stream_no_route_to_host": "[%key:component::generic::config::error::stream_no_route_to_host%]",
       "stream_io_error": "[%key:component::generic::config::error::stream_io_error%]",
diff --git a/homeassistant/components/generic/translations/en.json b/homeassistant/components/generic/translations/en.json
index b552c780d29..d01e6e59a4b 100644
--- a/homeassistant/components/generic/translations/en.json
+++ b/homeassistant/components/generic/translations/en.json
@@ -15,6 +15,7 @@
             "stream_no_video": "Stream has no video",
             "stream_not_permitted": "Operation not permitted while trying to connect to stream. Wrong RTSP transport protocol?",
             "stream_unauthorised": "Authorisation failed while trying to connect to stream",
+            "template_error": "Error rendering template. Review log for more info.",
             "timeout": "Timeout while loading URL",
             "unable_still_load": "Unable to load valid image from still image URL (e.g. invalid host, URL or authentication failure).  Review log for more info.",
             "unknown": "Unexpected error"
@@ -57,6 +58,7 @@
             "stream_no_video": "Stream has no video",
             "stream_not_permitted": "Operation not permitted while trying to connect to stream. Wrong RTSP transport protocol?",
             "stream_unauthorised": "Authorisation failed while trying to connect to stream",
+            "template_error": "Error rendering template. Review log for more info.",
             "timeout": "Timeout while loading URL",
             "unable_still_load": "Unable to load valid image from still image URL (e.g. invalid host, URL or authentication failure).  Review log for more info.",
             "unknown": "Unexpected error"
diff --git a/tests/components/generic/test_config_flow.py b/tests/components/generic/test_config_flow.py
index b7f3bf73527..a525619d962 100644
--- a/tests/components/generic/test_config_flow.py
+++ b/tests/components/generic/test_config_flow.py
@@ -534,6 +534,16 @@ async def test_options_template_error(hass, fakeimgbytes_png, mock_av_open):
         assert result4.get("type") == data_entry_flow.RESULT_TYPE_FORM
         assert result4["errors"] == {"still_image_url": "template_error"}
 
+        # verify that an invalid template reports the correct UI error.
+        data[CONF_STILL_IMAGE_URL] = "http://127.0.0.1/testurl/1"
+        data[CONF_STREAM_SOURCE] = "http://127.0.0.2/testurl/{{1/0}}"
+        result5 = await hass.config_entries.options.async_configure(
+            result4["flow_id"],
+            user_input=data,
+        )
+        assert result5.get("type") == data_entry_flow.RESULT_TYPE_FORM
+        assert result5["errors"] == {"stream_source": "template_error"}
+
 
 @respx.mock
 async def test_options_only_stream(hass, fakeimgbytes_png, mock_av_open):