diff --git a/esphome/components/api/__init__.py b/esphome/components/api/__init__.py
index 88618acef4..0e2c612279 100644
--- a/esphome/components/api/__init__.py
+++ b/esphome/components/api/__init__.py
@@ -226,32 +226,6 @@ def _encryption_schema(config):
     return ENCRYPTION_SCHEMA(config)
 
 
-def _validate_api_config(config: ConfigType) -> ConfigType:
-    """Validate API configuration with mutual exclusivity check and deprecation warning."""
-    # Check if both password and encryption are configured
-    has_password = CONF_PASSWORD in config and config[CONF_PASSWORD]
-    has_encryption = CONF_ENCRYPTION in config
-
-    if has_password and has_encryption:
-        raise cv.Invalid(
-            "The 'password' and 'encryption' options are mutually exclusive. "
-            "The API client only supports one authentication method at a time. "
-            "Please remove one of them. "
-            "Note: 'password' authentication is deprecated and will be removed in version 2026.1.0. "
-            "We strongly recommend using 'encryption' instead for better security."
-        )
-
-    # Warn about password deprecation
-    if has_password:
-        _LOGGER.warning(
-            "API 'password' authentication has been deprecated since May 2022 and will be removed in version 2026.1.0. "
-            "Please migrate to the 'encryption' configuration. "
-            "See https://esphome.io/components/api/#configuration-variables"
-        )
-
-    return config
-
-
 def _consume_api_sockets(config: ConfigType) -> ConfigType:
     """Register socket needs for API component."""
     from esphome.components import socket
@@ -268,7 +242,17 @@ CONFIG_SCHEMA = cv.All(
         {
             cv.GenerateID(): cv.declare_id(APIServer),
             cv.Optional(CONF_PORT, default=6053): cv.port,
-            cv.Optional(CONF_PASSWORD, default=""): cv.string_strict,
+            # Removed in 2026.1.0 - kept to provide helpful error message
+            cv.Optional(CONF_PASSWORD): cv.invalid(
+                "The 'password' option has been removed in ESPHome 2026.1.0.\n"
+                "Password authentication was deprecated in May 2022.\n"
+                "Please migrate to encryption for secure API communication:\n\n"
+                "api:\n"
+                "  encryption:\n"
+                "    key: !secret api_encryption_key\n\n"
+                "Generate a key with: openssl rand -base64 32\n"
+                "Or visit https://esphome.io/components/api/#configuration-variables"
+            ),
             cv.Optional(
                 CONF_REBOOT_TIMEOUT, default="15min"
             ): cv.positive_time_period_milliseconds,
@@ -330,7 +314,6 @@ CONFIG_SCHEMA = cv.All(
         }
     ).extend(cv.COMPONENT_SCHEMA),
     cv.rename_key(CONF_SERVICES, CONF_ACTIONS),
-    _validate_api_config,
     _consume_api_sockets,
 )
 
@@ -344,9 +327,6 @@ async def to_code(config: ConfigType) -> None:
     CORE.register_controller()
 
     cg.add(var.set_port(config[CONF_PORT]))
-    if config[CONF_PASSWORD]:
-        cg.add_define("USE_API_PASSWORD")
-        cg.add(var.set_password(config[CONF_PASSWORD]))
     cg.add(var.set_reboot_timeout(config[CONF_REBOOT_TIMEOUT]))
     cg.add(var.set_batch_delay(config[CONF_BATCH_DELAY]))
     if CONF_LISTEN_BACKLOG in config:
diff --git a/esphome/components/api/api.proto b/esphome/components/api/api.proto
index 5efd839673..652b456850 100644
--- a/esphome/components/api/api.proto
+++ b/esphome/components/api/api.proto
@@ -7,10 +7,7 @@ service APIConnection {
     option (needs_setup_connection) = false;
     option (needs_authentication) = false;
   }
-  rpc authenticate (AuthenticationRequest) returns (AuthenticationResponse) {
-    option (needs_setup_connection) = false;
-    option (needs_authentication) = false;
-  }
+  // REMOVED in ESPHome 2026.1.0: rpc authenticate (AuthenticationRequest) returns (AuthenticationResponse)
   rpc disconnect (DisconnectRequest) returns (DisconnectResponse) {
     option (needs_setup_connection) = false;
     option (needs_authentication) = false;
@@ -82,14 +79,13 @@ service APIConnection {
 //  * VarInt denoting the type of message.
 //  * The message object encoded as a ProtoBuf message
 
-// The connection is established in 4 steps:
+// The connection is established in 2 steps:
 //  * First, the client connects to the server and sends a "Hello Request" identifying itself
-//  * The server responds with a "Hello Response" and selects the protocol version
-//  * After receiving this message, the client attempts to authenticate itself using
-//    the password and a "Connect Request"
-//  * The server responds with a "Connect Response" and notifies of invalid password.
+//  * The server responds with a "Hello Response" and the connection is authenticated
 // If anything in this initial process fails, the connection must immediately closed
 // by both sides and _no_ disconnection message is to be sent.
+// Note: Password authentication via AuthenticationRequest/AuthenticationResponse (message IDs 3, 4)
+// was removed in ESPHome 2026.1.0. Those message IDs are reserved and should not be reused.
 
 // Message sent at the beginning of each connection
 // Can only be sent by the client and only at the beginning of the connection
@@ -130,25 +126,23 @@ message HelloResponse {
   string name = 4;
 }
 
-// Message sent at the beginning of each connection to authenticate the client
-// Can only be sent by the client and only at the beginning of the connection
+// DEPRECATED in ESPHome 2026.1.0 - Password authentication is no longer supported.
+// These messages are kept for protocol documentation but are not processed by the server.
+// Use noise encryption instead: https://esphome.io/components/api/#configuration-variables
 message AuthenticationRequest {
   option (id) = 3;
   option (source) = SOURCE_CLIENT;
   option (no_delay) = true;
-  option (ifdef) = "USE_API_PASSWORD";
+  option deprecated = true;
 
-  // The password to log in with
   string password = 1;
 }
 
-// Confirmation of successful connection. After this the connection is available for all traffic.
-// Can only be sent by the server and only at the beginning of the connection
 message AuthenticationResponse {
   option (id) = 4;
   option (source) = SOURCE_SERVER;
   option (no_delay) = true;
-  option (ifdef) = "USE_API_PASSWORD";
+  option deprecated = true;
 
   bool invalid_password = 1;
 }
@@ -205,7 +199,9 @@ message DeviceInfoResponse {
   option (id) = 10;
   option (source) = SOURCE_SERVER;
 
-  bool uses_password = 1 [(field_ifdef) = "USE_API_PASSWORD"];
+  // Deprecated in ESPHome 2026.1.0, but kept for backward compatibility
+  // with older ESPHome versions that still send this field.
+  bool uses_password = 1 [deprecated = true];
 
   // The name of the node, given by "App.set_name()"
   string name = 2;
diff --git a/esphome/components/api/api_connection.cpp b/esphome/components/api/api_connection.cpp
index 2ecd54bb00..3ded5e4408 100644
--- a/esphome/components/api/api_connection.cpp
+++ b/esphome/components/api/api_connection.cpp
@@ -1535,27 +1535,11 @@ bool APIConnection::send_hello_response(const HelloRequest &msg) {
   resp.set_server_info(ESPHOME_VERSION_REF);
   resp.set_name(StringRef(App.get_name()));
 
-#ifdef USE_API_PASSWORD
-  // Password required - wait for authentication
-  this->flags_.connection_state = static_cast<uint8_t>(ConnectionState::CONNECTED);
-#else
-  // No password configured - auto-authenticate
+  // Auto-authenticate - password auth was removed in ESPHome 2026.1.0
   this->complete_authentication_();
-#endif
 
   return this->send_message(resp, HelloResponse::MESSAGE_TYPE);
 }
-#ifdef USE_API_PASSWORD
-bool APIConnection::send_authenticate_response(const AuthenticationRequest &msg) {
-  AuthenticationResponse resp;
-  // bool invalid_password = 1;
-  resp.invalid_password = !this->parent_->check_password(msg.password.byte(), msg.password.size());
-  if (!resp.invalid_password) {
-    this->complete_authentication_();
-  }
-  return this->send_message(resp, AuthenticationResponse::MESSAGE_TYPE);
-}
-#endif  // USE_API_PASSWORD
 
 bool APIConnection::send_ping_response(const PingRequest &msg) {
   PingResponse resp;
@@ -1564,9 +1548,6 @@ bool APIConnection::send_ping_response(const PingRequest &msg) {
 
 bool APIConnection::send_device_info_response(const DeviceInfoRequest &msg) {
   DeviceInfoResponse resp{};
-#ifdef USE_API_PASSWORD
-  resp.uses_password = true;
-#endif
   resp.set_name(StringRef(App.get_name()));
   resp.set_friendly_name(StringRef(App.get_friendly_name()));
 #ifdef USE_AREAS
@@ -1845,12 +1826,6 @@ bool APIConnection::send_buffer(ProtoWriteBuffer buffer, uint8_t message_type) {
   // Do not set last_traffic_ on send
   return true;
 }
-#ifdef USE_API_PASSWORD
-void APIConnection::on_unauthenticated_access() {
-  this->on_fatal_error();
-  ESP_LOGD(TAG, "%s (%s) no authentication", this->client_info_.name.c_str(), this->client_info_.peername.c_str());
-}
-#endif
 void APIConnection::on_no_setup_connection() {
   this->on_fatal_error();
   ESP_LOGD(TAG, "%s (%s) no connection setup", this->client_info_.name.c_str(), this->client_info_.peername.c_str());
diff --git a/esphome/components/api/api_connection.h b/esphome/components/api/api_connection.h
index 59c42aa033..ffe3614f20 100644
--- a/esphome/components/api/api_connection.h
+++ b/esphome/components/api/api_connection.h
@@ -203,9 +203,6 @@ class APIConnection final : public APIServerConnection {
   void on_get_time_response(const GetTimeResponse &value) override;
 #endif
   bool send_hello_response(const HelloRequest &msg) override;
-#ifdef USE_API_PASSWORD
-  bool send_authenticate_response(const AuthenticationRequest &msg) override;
-#endif
   bool send_disconnect_response(const DisconnectRequest &msg) override;
   bool send_ping_response(const PingRequest &msg) override;
   bool send_device_info_response(const DeviceInfoRequest &msg) override;
@@ -261,9 +258,6 @@ class APIConnection final : public APIServerConnection {
   }
 
   void on_fatal_error() override;
-#ifdef USE_API_PASSWORD
-  void on_unauthenticated_access() override;
-#endif
   void on_no_setup_connection() override;
   ProtoWriteBuffer create_buffer(uint32_t reserve_size) override {
     // FIXME: ensure no recursive writes can happen
diff --git a/esphome/components/api/api_pb2.cpp b/esphome/components/api/api_pb2.cpp
index 698e08f9b3..d26b309552 100644
--- a/esphome/components/api/api_pb2.cpp
+++ b/esphome/components/api/api_pb2.cpp
@@ -43,21 +43,6 @@ void HelloResponse::calculate_size(ProtoSize &size) const {
   size.add_length(1, this->server_info_ref_.size());
   size.add_length(1, this->name_ref_.size());
 }
-#ifdef USE_API_PASSWORD
-bool AuthenticationRequest::decode_length(uint32_t field_id, ProtoLengthDelimited value) {
-  switch (field_id) {
-    case 1: {
-      this->password = StringRef(reinterpret_cast<const char *>(value.data()), value.size());
-      break;
-    }
-    default:
-      return false;
-  }
-  return true;
-}
-void AuthenticationResponse::encode(ProtoWriteBuffer buffer) const { buffer.encode_bool(1, this->invalid_password); }
-void AuthenticationResponse::calculate_size(ProtoSize &size) const { size.add_bool(1, this->invalid_password); }
-#endif
 #ifdef USE_AREAS
 void AreaInfo::encode(ProtoWriteBuffer buffer) const {
   buffer.encode_uint32(1, this->area_id);
@@ -81,9 +66,6 @@ void DeviceInfo::calculate_size(ProtoSize &size) const {
 }
 #endif
 void DeviceInfoResponse::encode(ProtoWriteBuffer buffer) const {
-#ifdef USE_API_PASSWORD
-  buffer.encode_bool(1, this->uses_password);
-#endif
   buffer.encode_string(2, this->name_ref_);
   buffer.encode_string(3, this->mac_address_ref_);
   buffer.encode_string(4, this->esphome_version_ref_);
@@ -139,9 +121,6 @@ void DeviceInfoResponse::encode(ProtoWriteBuffer buffer) const {
 #endif
 }
 void DeviceInfoResponse::calculate_size(ProtoSize &size) const {
-#ifdef USE_API_PASSWORD
-  size.add_bool(1, this->uses_password);
-#endif
   size.add_length(1, this->name_ref_.size());
   size.add_length(1, this->mac_address_ref_.size());
   size.add_length(1, this->esphome_version_ref_.size());
diff --git a/esphome/components/api/api_pb2.h b/esphome/components/api/api_pb2.h
index e08cf65bb9..0605051e29 100644
--- a/esphome/components/api/api_pb2.h
+++ b/esphome/components/api/api_pb2.h
@@ -393,39 +393,6 @@ class HelloResponse final : public ProtoMessage {
 
  protected:
 };
-#ifdef USE_API_PASSWORD
-class AuthenticationRequest final : public ProtoDecodableMessage {
- public:
-  static constexpr uint8_t MESSAGE_TYPE = 3;
-  static constexpr uint8_t ESTIMATED_SIZE = 9;
-#ifdef HAS_PROTO_MESSAGE_DUMP
-  const char *message_name() const override { return "authentication_request"; }
-#endif
-  StringRef password{};
-#ifdef HAS_PROTO_MESSAGE_DUMP
-  void dump_to(std::string &out) const override;
-#endif
-
- protected:
-  bool decode_length(uint32_t field_id, ProtoLengthDelimited value) override;
-};
-class AuthenticationResponse final : public ProtoMessage {
- public:
-  static constexpr uint8_t MESSAGE_TYPE = 4;
-  static constexpr uint8_t ESTIMATED_SIZE = 2;
-#ifdef HAS_PROTO_MESSAGE_DUMP
-  const char *message_name() const override { return "authentication_response"; }
-#endif
-  bool invalid_password{false};
-  void encode(ProtoWriteBuffer buffer) const override;
-  void calculate_size(ProtoSize &size) const override;
-#ifdef HAS_PROTO_MESSAGE_DUMP
-  void dump_to(std::string &out) const override;
-#endif
-
- protected:
-};
-#endif
 class DisconnectRequest final : public ProtoMessage {
  public:
   static constexpr uint8_t MESSAGE_TYPE = 5;
@@ -525,12 +492,9 @@ class DeviceInfo final : public ProtoMessage {
 class DeviceInfoResponse final : public ProtoMessage {
  public:
   static constexpr uint8_t MESSAGE_TYPE = 10;
-  static constexpr uint16_t ESTIMATED_SIZE = 257;
+  static constexpr uint8_t ESTIMATED_SIZE = 255;
 #ifdef HAS_PROTO_MESSAGE_DUMP
   const char *message_name() const override { return "device_info_response"; }
-#endif
-#ifdef USE_API_PASSWORD
-  bool uses_password{false};
 #endif
   StringRef name_ref_{};
   void set_name(const StringRef &ref) { this->name_ref_ = ref; }
diff --git a/esphome/components/api/api_pb2_dump.cpp b/esphome/components/api/api_pb2_dump.cpp
index 1ec6645b3f..ac5f04f3fb 100644
--- a/esphome/components/api/api_pb2_dump.cpp
+++ b/esphome/components/api/api_pb2_dump.cpp
@@ -748,18 +748,6 @@ void HelloResponse::dump_to(std::string &out) const {
   dump_field(out, "server_info", this->server_info_ref_);
   dump_field(out, "name", this->name_ref_);
 }
-#ifdef USE_API_PASSWORD
-void AuthenticationRequest::dump_to(std::string &out) const {
-  MessageDumpHelper helper(out, "AuthenticationRequest");
-  out.append("  password: ");
-  out.append("'").append(this->password.c_str(), this->password.size()).append("'");
-  out.append("\n");
-}
-void AuthenticationResponse::dump_to(std::string &out) const {
-  MessageDumpHelper helper(out, "AuthenticationResponse");
-  dump_field(out, "invalid_password", this->invalid_password);
-}
-#endif
 void DisconnectRequest::dump_to(std::string &out) const { out.append("DisconnectRequest {}"); }
 void DisconnectResponse::dump_to(std::string &out) const { out.append("DisconnectResponse {}"); }
 void PingRequest::dump_to(std::string &out) const { out.append("PingRequest {}"); }
@@ -782,9 +770,6 @@ void DeviceInfo::dump_to(std::string &out) const {
 #endif
 void DeviceInfoResponse::dump_to(std::string &out) const {
   MessageDumpHelper helper(out, "DeviceInfoResponse");
-#ifdef USE_API_PASSWORD
-  dump_field(out, "uses_password", this->uses_password);
-#endif
   dump_field(out, "name", this->name_ref_);
   dump_field(out, "mac_address", this->mac_address_ref_);
   dump_field(out, "esphome_version", this->esphome_version_ref_);
diff --git a/esphome/components/api/api_pb2_service.cpp b/esphome/components/api/api_pb2_service.cpp
index 984cb0bb6e..c9bf638ad7 100644
--- a/esphome/components/api/api_pb2_service.cpp
+++ b/esphome/components/api/api_pb2_service.cpp
@@ -24,17 +24,6 @@ void APIServerConnectionBase::read_message(uint32_t msg_size, uint32_t msg_type,
       this->on_hello_request(msg);
       break;
     }
-#ifdef USE_API_PASSWORD
-    case AuthenticationRequest::MESSAGE_TYPE: {
-      AuthenticationRequest msg;
-      msg.decode(msg_data, msg_size);
-#ifdef HAS_PROTO_MESSAGE_DUMP
-      ESP_LOGVV(TAG, "on_authentication_request: %s", msg.dump().c_str());
-#endif
-      this->on_authentication_request(msg);
-      break;
-    }
-#endif
     case DisconnectRequest::MESSAGE_TYPE: {
       DisconnectRequest msg;
       // Empty message: no decode needed
@@ -643,13 +632,6 @@ void APIServerConnection::on_hello_request(const HelloRequest &msg) {
     this->on_fatal_error();
   }
 }
-#ifdef USE_API_PASSWORD
-void APIServerConnection::on_authentication_request(const AuthenticationRequest &msg) {
-  if (!this->send_authenticate_response(msg)) {
-    this->on_fatal_error();
-  }
-}
-#endif
 void APIServerConnection::on_disconnect_request(const DisconnectRequest &msg) {
   if (!this->send_disconnect_response(msg)) {
     this->on_fatal_error();
@@ -841,10 +823,7 @@ void APIServerConnection::on_z_wave_proxy_request(const ZWaveProxyRequest &msg)
 void APIServerConnection::read_message(uint32_t msg_size, uint32_t msg_type, const uint8_t *msg_data) {
   // Check authentication/connection requirements for messages
   switch (msg_type) {
-    case HelloRequest::MESSAGE_TYPE:  // No setup required
-#ifdef USE_API_PASSWORD
-    case AuthenticationRequest::MESSAGE_TYPE:  // No setup required
-#endif
+    case HelloRequest::MESSAGE_TYPE:       // No setup required
     case DisconnectRequest::MESSAGE_TYPE:  // No setup required
     case PingRequest::MESSAGE_TYPE:        // No setup required
       break;                               // Skip all checks for these messages
diff --git a/esphome/components/api/api_pb2_service.h b/esphome/components/api/api_pb2_service.h
index 261d9fbd27..e2a23827dc 100644
--- a/esphome/components/api/api_pb2_service.h
+++ b/esphome/components/api/api_pb2_service.h
@@ -26,10 +26,6 @@ class APIServerConnectionBase : public ProtoService {
 
   virtual void on_hello_request(const HelloRequest &value){};
 
-#ifdef USE_API_PASSWORD
-  virtual void on_authentication_request(const AuthenticationRequest &value){};
-#endif
-
   virtual void on_disconnect_request(const DisconnectRequest &value){};
   virtual void on_disconnect_response(const DisconnectResponse &value){};
   virtual void on_ping_request(const PingRequest &value){};
@@ -228,9 +224,6 @@ class APIServerConnectionBase : public ProtoService {
 class APIServerConnection : public APIServerConnectionBase {
  public:
   virtual bool send_hello_response(const HelloRequest &msg) = 0;
-#ifdef USE_API_PASSWORD
-  virtual bool send_authenticate_response(const AuthenticationRequest &msg) = 0;
-#endif
   virtual bool send_disconnect_response(const DisconnectRequest &msg) = 0;
   virtual bool send_ping_response(const PingRequest &msg) = 0;
   virtual bool send_device_info_response(const DeviceInfoRequest &msg) = 0;
@@ -357,9 +350,6 @@ class APIServerConnection : public APIServerConnectionBase {
 #endif
  protected:
   void on_hello_request(const HelloRequest &msg) override;
-#ifdef USE_API_PASSWORD
-  void on_authentication_request(const AuthenticationRequest &msg) override;
-#endif
   void on_disconnect_request(const DisconnectRequest &msg) override;
   void on_ping_request(const PingRequest &msg) override;
   void on_device_info_request(const DeviceInfoRequest &msg) override;
diff --git a/esphome/components/api/api_server.cpp b/esphome/components/api/api_server.cpp
index 8b76740e4d..eedf8c7172 100644
--- a/esphome/components/api/api_server.cpp
+++ b/esphome/components/api/api_server.cpp
@@ -224,38 +224,6 @@ void APIServer::dump_config() {
 #endif
 }
 
-#ifdef USE_API_PASSWORD
-bool APIServer::check_password(const uint8_t *password_data, size_t password_len) const {
-  // depend only on input password length
-  const char *a = this->password_.c_str();
-  uint32_t len_a = this->password_.length();
-  const char *b = reinterpret_cast<const char *>(password_data);
-  uint32_t len_b = password_len;
-
-  // disable optimization with volatile
-  volatile uint32_t length = len_b;
-  volatile const char *left = nullptr;
-  volatile const char *right = b;
-  uint8_t result = 0;
-
-  if (len_a == length) {
-    left = *((volatile const char **) &a);
-    result = 0;
-  }
-  if (len_a != length) {
-    left = b;
-    result = 1;
-  }
-
-  for (size_t i = 0; i < length; i++) {
-    result |= *left++ ^ *right++;  // NOLINT
-  }
-
-  return result == 0;
-}
-
-#endif
-
 void APIServer::handle_disconnect(APIConnection *conn) {}
 
 // Macro for controller update dispatch
@@ -377,10 +345,6 @@ float APIServer::get_setup_priority() const { return setup_priority::AFTER_WIFI;
 
 void APIServer::set_port(uint16_t port) { this->port_ = port; }
 
-#ifdef USE_API_PASSWORD
-void APIServer::set_password(const std::string &password) { this->password_ = password; }
-#endif
-
 void APIServer::set_batch_delay(uint16_t batch_delay) { this->batch_delay_ = batch_delay; }
 
 #ifdef USE_API_HOMEASSISTANT_SERVICES
diff --git a/esphome/components/api/api_server.h b/esphome/components/api/api_server.h
index b855d2cce0..2b2e8bae73 100644
--- a/esphome/components/api/api_server.h
+++ b/esphome/components/api/api_server.h
@@ -59,10 +59,6 @@ class APIServer : public Component,
 #endif
 #ifdef USE_CAMERA
   void on_camera_image(const std::shared_ptr<camera::CameraImage> &image) override;
-#endif
-#ifdef USE_API_PASSWORD
-  bool check_password(const uint8_t *password_data, size_t password_len) const;
-  void set_password(const std::string &password);
 #endif
   void set_port(uint16_t port);
   void set_reboot_timeout(uint32_t reboot_timeout);
@@ -256,9 +252,6 @@ class APIServer : public Component,
 
   // Vectors and strings (12 bytes each on 32-bit)
   std::vector<std::unique_ptr<APIConnection>> clients_;
-#ifdef USE_API_PASSWORD
-  std::string password_;
-#endif
   std::vector<uint8_t> shared_write_buffer_;  // Shared proto write buffer for all connections
 #ifdef USE_API_HOMEASSISTANT_STATES
   std::vector<HomeAssistantStateSubscription> state_subs_;
diff --git a/esphome/components/api/proto.h b/esphome/components/api/proto.h
index efdab9341c..f8b5cd9a5d 100644
--- a/esphome/components/api/proto.h
+++ b/esphome/components/api/proto.h
@@ -833,9 +833,6 @@ class ProtoService {
   virtual bool is_authenticated() = 0;
   virtual bool is_connection_setup() = 0;
   virtual void on_fatal_error() = 0;
-#ifdef USE_API_PASSWORD
-  virtual void on_unauthenticated_access() = 0;
-#endif
   virtual void on_no_setup_connection() = 0;
   /**
    * Create a buffer with a reserved size.
@@ -873,20 +870,7 @@ class ProtoService {
     return true;
   }
 
-  inline bool check_authenticated_() {
-#ifdef USE_API_PASSWORD
-    if (!this->check_connection_setup_()) {
-      return false;
-    }
-    if (!this->is_authenticated()) {
-      this->on_unauthenticated_access();
-      return false;
-    }
-    return true;
-#else
-    return this->check_connection_setup_();
-#endif
-  }
+  inline bool check_authenticated_() { return this->check_connection_setup_(); }
 };
 
 }  // namespace esphome::api
diff --git a/tests/integration/fixtures/host_mode_api_password.yaml b/tests/integration/fixtures/host_mode_api_password.yaml
deleted file mode 100644
index 038b6871e0..0000000000
--- a/tests/integration/fixtures/host_mode_api_password.yaml
+++ /dev/null
@@ -1,14 +0,0 @@
-esphome:
-  name: host-mode-api-password
-host:
-api:
-  password: "test_password_123"
-logger:
-  level: DEBUG
-# Test sensor to verify connection works
-sensor:
-  - platform: template
-    name: Test Sensor
-    id: test_sensor
-    lambda: return 42.0;
-    update_interval: 0.1s
diff --git a/tests/integration/test_host_mode_api_password.py b/tests/integration/test_host_mode_api_password.py
deleted file mode 100644
index 5c5e689e45..0000000000
--- a/tests/integration/test_host_mode_api_password.py
+++ /dev/null
@@ -1,69 +0,0 @@
-"""Integration test for API password authentication."""
-
-from __future__ import annotations
-
-import asyncio
-
-from aioesphomeapi import APIConnectionError, InvalidAuthAPIError
-import pytest
-
-from .types import APIClientConnectedFactory, RunCompiledFunction
-
-
-@pytest.mark.asyncio
-async def test_host_mode_api_password(
-    yaml_config: str,
-    run_compiled: RunCompiledFunction,
-    api_client_connected: APIClientConnectedFactory,
-) -> None:
-    """Test API authentication with password."""
-    async with run_compiled(yaml_config):
-        # Connect with correct password
-        async with api_client_connected(password="test_password_123") as client:
-            # Verify we can get device info
-            device_info = await client.device_info()
-            assert device_info is not None
-            assert device_info.uses_password is True
-            assert device_info.name == "host-mode-api-password"
-
-            # Subscribe to states to ensure authenticated connection works
-            loop = asyncio.get_running_loop()
-            state_future: asyncio.Future[bool] = loop.create_future()
-            states = {}
-
-            def on_state(state):
-                states[state.key] = state
-                if not state_future.done():
-                    state_future.set_result(True)
-
-            client.subscribe_states(on_state)
-
-            # Wait for at least one state with timeout
-            try:
-                await asyncio.wait_for(state_future, timeout=5.0)
-            except TimeoutError:
-                pytest.fail("No states received within timeout")
-
-            # Should have received at least one state (the test sensor)
-            assert len(states) > 0
-
-        # Test with wrong password - should fail
-        # Try connecting with wrong password
-        try:
-            async with api_client_connected(
-                password="wrong_password", timeout=5
-            ) as client:
-                # If we get here without exception, try to use the connection
-                # which should fail if auth failed
-                await client.device_info_and_list_entities()
-                # If we successfully got device info and entities, auth didn't fail properly
-                pytest.fail("Connection succeeded with wrong password")
-        except (InvalidAuthAPIError, APIConnectionError) as e:
-            # Expected - auth should fail
-            # Accept either InvalidAuthAPIError or generic APIConnectionError
-            # since the client might not always distinguish
-            assert (
-                "password" in str(e).lower()
-                or "auth" in str(e).lower()
-                or "invalid" in str(e).lower()
-            )