diff --git a/fixtures/basic-state-machine/serverless.yml b/fixtures/basic-state-machine/serverless.yml
index 46dacc24..6c36193c 100644
--- a/fixtures/basic-state-machine/serverless.yml
+++ b/fixtures/basic-state-machine/serverless.yml
@@ -24,3 +24,13 @@ stepFunctions:
             Resource:
               Fn::GetAtt: [HelloLambdaFunction, Arn]
             End: true
+    fnSubMachine:
+      name: integration-basic-fn-sub-${opt:stage, 'test'}
+      definition:
+        StartAt: InvokeLambda
+        States:
+          InvokeLambda:
+            Type: Task
+            Resource:
+              Fn::Sub: "arn:${AWS::Partition}:lambda:${AWS::Region}:${AWS::AccountId}:function:my-fn"
+            End: true
diff --git a/fixtures/basic-state-machine/verify.test.js b/fixtures/basic-state-machine/verify.test.js
new file mode 100644
index 00000000..51e569c1
--- /dev/null
+++ b/fixtures/basic-state-machine/verify.test.js
@@ -0,0 +1,73 @@
+'use strict';
+
+const fs = require('node:fs');
+const path = require('node:path');
+const expect = require('chai').expect;
+
+const templatePath = path.join(__dirname, '.serverless', 'cloudformation-template-update-stack.json');
+
+describe('basic-state-machine fixture — CloudFormation template', () => {
+  let resources;
+
+  before(() => {
+    const template = JSON.parse(fs.readFileSync(templatePath, 'utf8'));
+    resources = template.Resources;
+  });
+
+  it('should have an IAM role for each state machine', () => {
+    const stateMachineRoles = Object.values(resources).filter(
+      (r) => r.Type === 'AWS::IAM::Role'
+        && JSON.stringify(r).includes('states.'),
+    );
+    expect(stateMachineRoles).to.have.lengthOf(2);
+  });
+
+  it('should grant lambda:InvokeFunction for a Fn::GetAtt resource reference', () => {
+    // basicMachine uses Fn::GetAtt: [HelloLambdaFunction, Arn] — the generated
+    // role should allow invoking that function and its aliases/versions (:*)
+    const roles = Object.values(resources).filter((r) => r.Type === 'AWS::IAM::Role');
+    const statements = roles.flatMap((r) => r.Properties.Policies[0].PolicyDocument.Statement);
+    const lambdaStatement = statements.find((s) => {
+      const actions = [].concat(s.Action);
+      return actions.includes('lambda:InvokeFunction');
+    });
+    expect(lambdaStatement, 'should have a lambda:InvokeFunction statement').to.not.equal(undefined);
+    const arnList = [].concat(lambdaStatement.Resource);
+    const hasGetAtt = arnList.some((a) => a && a['Fn::GetAtt']);
+    expect(hasGetAtt, 'should reference the Lambda function via Fn::GetAtt').to.equal(true);
+  });
+
+  it('should not produce nested Fn::Sub when Resource is a Fn::Sub expression (issue #302)', () => {
+    // fnSubMachine uses a Fn::Sub ARN (simulating serverless-pseudo-parameters output).
+    // The versioned form (:*) must not nest a Fn::Sub inside a Fn::Sub variable map —
+    // that is invalid CloudFormation and causes MalformedPolicyDocument errors.
+    const roles = Object.values(resources).filter((r) => r.Type === 'AWS::IAM::Role');
+    const statements = roles.flatMap((r) => r.Properties.Policies[0].PolicyDocument.Statement);
+    const allArns = statements
+      .filter((s) => [].concat(s.Action).includes('lambda:InvokeFunction'))
+      .flatMap((s) => [].concat(s.Resource));
+
+    for (const arn of allArns) {
+      if (arn && typeof arn === 'object' && Array.isArray(arn['Fn::Sub'])) {
+        const [, varMap] = arn['Fn::Sub'];
+        if (varMap) {
+          for (const val of Object.values(varMap)) {
+            expect(val, 'Fn::Sub variable map must not contain a nested Fn::Sub').to.not.have.property('Fn::Sub');
+          }
+        }
+      }
+    }
+  });
+
+  it('should include a valid versioned ARN (:*) for the Fn::Sub resource', () => {
+    const fnSubTemplate = 'arn:${AWS::Partition}:lambda:${AWS::Region}:${AWS::AccountId}:function:my-fn';
+    const roles = Object.values(resources).filter((r) => r.Type === 'AWS::IAM::Role');
+    const statements = roles.flatMap((r) => r.Properties.Policies[0].PolicyDocument.Statement);
+    const allArns = statements
+      .filter((s) => [].concat(s.Action).includes('lambda:InvokeFunction'))
+      .flatMap((s) => [].concat(s.Resource));
+
+    const versionedArn = allArns.find((a) => a && a['Fn::Sub'] === `${fnSubTemplate}:*`);
+    expect(versionedArn, 'versioned ARN should be a Fn::Sub string with :* appended').to.not.equal(undefined);
+  });
+});
diff --git a/fixtures/package-lock.json b/fixtures/package-lock.json
index 8d78043c..fff7739c 100644
--- a/fixtures/package-lock.json
+++ b/fixtures/package-lock.json
@@ -13,7 +13,7 @@
     },
     "..": {
       "name": "serverless-step-functions",
-      "version": "3.28.2",
+      "version": "3.29.0",
       "dev": true,
       "license": "MIT",
       "dependencies": {
diff --git a/lib/deploy/stepFunctions/iamStrategies/lambda.js b/lib/deploy/stepFunctions/iamStrategies/lambda.js
index fa7157da..4a99b177 100644
--- a/lib/deploy/stepFunctions/iamStrategies/lambda.js
+++ b/lib/deploy/stepFunctions/iamStrategies/lambda.js
@@ -85,6 +85,19 @@ function getPermissions(state, { plugin }) {
   }];
 }
 
+function getVersionedArn(functionArn) {
+  if (_.has(functionArn, 'Fn::Sub')) {
+    const sub = functionArn['Fn::Sub'];
+    if (typeof sub === 'string') {
+      return { 'Fn::Sub': `${sub}:*` };
+    }
+    if (Array.isArray(sub)) {
+      return { 'Fn::Sub': [`${sub[0]}:*`, sub[1]] };
+    }
+  }
+  return { 'Fn::Sub': ['${functionArn}:*', { functionArn }] };
+}
+
 function getFallbackPermissions(state, { plugin }) {
   if (isIntrinsic(state.Resource) || !!state.Resource.match(/arn:aws(-[a-z]+)*:lambda/)) {
     const trimmedArn = trimAliasFromLambdaArn(state.Resource);
@@ -93,7 +106,7 @@ function getFallbackPermissions(state, { plugin }) {
       action: 'lambda:InvokeFunction',
       resource: [
         functionArn,
-        { 'Fn::Sub': ['${functionArn}:*', { functionArn }] },
+        getVersionedArn(functionArn),
       ],
     }];
   }
diff --git a/lib/deploy/stepFunctions/iamStrategies/lambda.test.js b/lib/deploy/stepFunctions/iamStrategies/lambda.test.js
index 922a3e7c..295313bd 100644
--- a/lib/deploy/stepFunctions/iamStrategies/lambda.test.js
+++ b/lib/deploy/stepFunctions/iamStrategies/lambda.test.js
@@ -307,4 +307,43 @@ describe('lambda strategy — getFallbackPermissions (direct lambda ARN task res
     const result = getFallbackPermissions(state, { plugin });
     expect(result).to.deep.equal([]);
   });
+
+  it('should not produce a nested Fn::Sub when Resource is a Fn::Sub expression (issue #302)', () => {
+    // serverless-pseudo-parameters converts #{AWS::Region} → ${AWS::Region} and wraps
+    // the whole ARN in Fn::Sub. Putting that object as a variable value inside another
+    // Fn::Sub array is invalid CloudFormation and causes MalformedPolicyDocument errors.
+    const state = {
+      Type: 'Task',
+      Resource: {
+        'Fn::Sub': 'arn:${AWS::Partition}:lambda:${AWS::Region}:${AWS::AccountId}:function:my-fn',
+      },
+    };
+    const plugin = makePlugin();
+    const result = getFallbackPermissions(state, { plugin });
+    expect(result[0].action).to.equal('lambda:InvokeFunction');
+    const arnList = result[0].resource;
+    for (const arn of arnList) {
+      if (arn && typeof arn === 'object' && Array.isArray(arn['Fn::Sub'])) {
+        const [, varMap] = arn['Fn::Sub'];
+        if (varMap) {
+          for (const val of Object.values(varMap)) {
+            expect(val, 'variable map value must not be a nested Fn::Sub').to.not.have.property('Fn::Sub');
+          }
+        }
+      }
+    }
+  });
+
+  it('should generate a valid versioned ARN when Resource is a Fn::Sub string', () => {
+    const fnSub = 'arn:${AWS::Partition}:lambda:${AWS::Region}:${AWS::AccountId}:function:my-fn';
+    const state = {
+      Type: 'Task',
+      Resource: { 'Fn::Sub': fnSub },
+    };
+    const plugin = makePlugin();
+    const result = getFallbackPermissions(state, { plugin });
+    const arnList = result[0].resource;
+    const versionedArn = arnList.find((a) => a && a['Fn::Sub'] === `${fnSub}:*`);
+    expect(versionedArn, 'versioned ARN should be a simple Fn::Sub string with :* appended').to.not.equal(undefined);
+  });
 });