diff --git a/src/aks-preview/HISTORY.rst b/src/aks-preview/HISTORY.rst
index 16968a8a68b..1f72874429c 100644
--- a/src/aks-preview/HISTORY.rst
+++ b/src/aks-preview/HISTORY.rst
@@ -11,6 +11,7 @@ To release a new version, please select a new version number (usually plus 1 to
 
 Pending
 +++++++
+* `az aks update`: Fix misleading error when updating outbound type to `userDefinedRouting` or `userAssignedNATGateway`. For managed VNet clusters (unsupported), a clear error message is now shown instead of asking for `--vnet-subnet-id`. For BYO VNet clusters, the update works correctly without requiring the user to re-specify the subnet.
 
 20.0.0b2
 +++++++
diff --git a/src/aks-preview/azext_aks_preview/managed_cluster_decorator.py b/src/aks-preview/azext_aks_preview/managed_cluster_decorator.py
index d0ccbfb0389..845fa9f7ea5 100644
--- a/src/aks-preview/azext_aks_preview/managed_cluster_decorator.py
+++ b/src/aks-preview/azext_aks_preview/managed_cluster_decorator.py
@@ -510,7 +510,7 @@ def _get_disable_local_accounts(self, enable_validation: bool = False) -> bool:
                     )
         return disable_local_accounts
 
-    def _get_outbound_type(
+    def _get_outbound_type(  # pylint: disable=too-many-branches
         self,
         enable_validation: bool = False,
         read_only: bool = False,
@@ -594,9 +594,17 @@ def _get_outbound_type(
                     CONST_OUTBOUND_TYPE_USER_ASSIGNED_NAT_GATEWAY,
                 ]:
                     if self.get_vnet_subnet_id() in ["", None]:
-                        raise RequiredArgumentMissingError(
-                            "--vnet-subnet-id must be specified for userDefinedRouting and it must "
-                            "be pre-configured with a route table with egress rules"
+                        if self.decorator_mode == DecoratorMode.CREATE:
+                            raise RequiredArgumentMissingError(
+                                "--vnet-subnet-id must be specified for userDefinedRouting and it must "
+                                "be pre-configured with a route table with egress rules"
+                            )
+                        raise InvalidArgumentValueError(
+                            f"Updating outbound type to {outbound_type} is only supported for "
+                            "clusters using a custom (BYO) virtual network. Managed VNet clusters "
+                            f"cannot be updated to {outbound_type}. Please refer to "
+                            "https://learn.microsoft.com/en-us/azure/aks/egress-outboundtype"
+                            "#updating-outboundtype-after-cluster-creation for supported migration paths."
                         )
 
                 if (
diff --git a/src/aks-preview/azext_aks_preview/tests/latest/test_managed_cluster_decorator.py b/src/aks-preview/azext_aks_preview/tests/latest/test_managed_cluster_decorator.py
index f84639fab49..05f814fb3af 100644
--- a/src/aks-preview/azext_aks_preview/tests/latest/test_managed_cluster_decorator.py
+++ b/src/aks-preview/azext_aks_preview/tests/latest/test_managed_cluster_decorator.py
@@ -99,6 +99,8 @@
 from azure.cli.command_modules.acs._consts import (
     CONST_OUTBOUND_TYPE_LOAD_BALANCER,
     CONST_OUTBOUND_TYPE_MANAGED_NAT_GATEWAY,
+    CONST_OUTBOUND_TYPE_USER_DEFINED_ROUTING,
+    CONST_OUTBOUND_TYPE_USER_ASSIGNED_NAT_GATEWAY,
     DecoratorEarlyExitException,
     DecoratorMode,
 )
@@ -4705,6 +4707,96 @@ def test_get_outbound_type(self):
             CONST_OUTBOUND_TYPE_MANAGED_NAT_GATEWAY_V2,
         )
 
+    def test_get_outbound_type_update_udr_byo_vnet(self):
+        """Test that updating to UDR succeeds when the cluster has a BYO VNet (vnet_subnet_id is set on agentpool)."""
+        ctx = AKSPreviewManagedClusterContext(
+            self.cmd,
+            AKSManagedClusterParamDict({"outbound_type": "userDefinedRouting"}),
+            self.models,
+            decorator_mode=DecoratorMode.UPDATE,
+        )
+        self.create_attach_agentpool_context(ctx)
+        # Simulate a BYO VNet cluster: agentpool has vnet_subnet_id set
+        agentpool = self.models.ManagedClusterAgentPoolProfile(
+            name="nodepool1",
+            vnet_subnet_id="/subscriptions/test/resourceGroups/rg/providers/Microsoft.Network/virtualNetworks/vnet/subnets/subnet",
+        )
+        mc = self.models.ManagedCluster(
+            location="test_location",
+            agent_pool_profiles=[agentpool],
+            network_profile=self.models.ContainerServiceNetworkProfile(
+                load_balancer_sku="standard",
+            ),
+        )
+        ctx.attach_mc(mc)
+        ctx.agentpool_context.attach_agentpool(agentpool)
+        # Should succeed — BYO VNet cluster can update to UDR
+        outbound_type = ctx._get_outbound_type(enable_validation=True)
+        self.assertEqual(outbound_type, CONST_OUTBOUND_TYPE_USER_DEFINED_ROUTING)
+
+    def test_get_outbound_type_update_udr_managed_vnet(self):
+        """Test that updating to UDR fails with clear error when the cluster uses managed VNet (no vnet_subnet_id)."""
+        ctx = AKSPreviewManagedClusterContext(
+            self.cmd,
+            AKSManagedClusterParamDict({"outbound_type": "userDefinedRouting"}),
+            self.models,
+            decorator_mode=DecoratorMode.UPDATE,
+        )
+        self.create_attach_agentpool_context(ctx)
+        # Simulate a managed VNet cluster: agentpool has no vnet_subnet_id
+        agentpool = self.models.ManagedClusterAgentPoolProfile(
+            name="nodepool1",
+        )
+        mc = self.models.ManagedCluster(
+            location="test_location",
+            agent_pool_profiles=[agentpool],
+            network_profile=self.models.ContainerServiceNetworkProfile(
+                load_balancer_sku="standard",
+            ),
+        )
+        ctx.attach_mc(mc)
+        ctx.agentpool_context.attach_agentpool(agentpool)
+        # Should fail with InvalidArgumentValueError for managed VNet clusters
+        with self.assertRaises(InvalidArgumentValueError):
+            ctx._get_outbound_type(enable_validation=True)
+
+    def test_get_outbound_type_update_user_assigned_nat_gw_managed_vnet(self):
+        """Test that updating to userAssignedNATGateway fails with clear error when using managed VNet."""
+        ctx = AKSPreviewManagedClusterContext(
+            self.cmd,
+            AKSManagedClusterParamDict({"outbound_type": "userAssignedNATGateway"}),
+            self.models,
+            decorator_mode=DecoratorMode.UPDATE,
+        )
+        self.create_attach_agentpool_context(ctx)
+        agentpool = self.models.ManagedClusterAgentPoolProfile(
+            name="nodepool1",
+        )
+        mc = self.models.ManagedCluster(
+            location="test_location",
+            agent_pool_profiles=[agentpool],
+            network_profile=self.models.ContainerServiceNetworkProfile(
+                load_balancer_sku="standard",
+            ),
+        )
+        ctx.attach_mc(mc)
+        ctx.agentpool_context.attach_agentpool(agentpool)
+        with self.assertRaises(InvalidArgumentValueError):
+            ctx._get_outbound_type(enable_validation=True)
+
+    def test_get_outbound_type_create_udr_no_subnet(self):
+        """Test that creating with UDR but no vnet_subnet_id raises RequiredArgumentMissingError."""
+        ctx = AKSPreviewManagedClusterContext(
+            self.cmd,
+            AKSManagedClusterParamDict({"outbound_type": "userDefinedRouting"}),
+            self.models,
+            decorator_mode=DecoratorMode.CREATE,
+        )
+        self.create_attach_agentpool_context(ctx)
+        # Should fail with RequiredArgumentMissingError during create
+        with self.assertRaises(RequiredArgumentMissingError):
+            ctx._get_outbound_type(enable_validation=True)
+
     def test_get_enable_gateway_api(self):
         # default value
         ctx_1 = AKSPreviewManagedClusterContext(