Thanks @moonrail for reporting this and sorry for the problem.

This breaks any use-case with a base class/type and/or abc classes, where the type is not explicitly known beforehand.

agree

From this POV 2.2.0 should be 3.0.0, as this is a Breaking Change. Moving from copy-by-reference to copy-by-value with casting is a change that can have a lot of impact in an interfacing-focused library.

Yes, you are right. As this wasn't the plan I am going to introduce a config flag for this change and make this disable by default. So, You will have the old behavior after my fix.

As a side note: The amount of breaking changes in Minor-Releases across the pydantic project increased in the last year. We have more and more debugging sessions regarding it and are scratching our heads, if and how we are possibly "holding it wrong" or its something out of our control and pydantic is not as stable as it should be...

We really try to not introduce breaking changes in minor releases but we are not aware of all the use-cases.
Thanks for helping us by reporting issues.

@moonrail
The example you've provided is not working on pydantic-settings==2.1.0

Could you please test it with pydantic-settings==2.1.0?

Could you provide pydantic, pydantic-core and pydantic-settings versions of the setup that your example is working on it?

I think the validation error here is correct because you defined auth: Type[BaseAuth] but provided value is an instance of CustomAuth. So, probably your problem will be fixed by changing auth: Type[BaseAuth] to auth: BaseAuth

Hey @hramezani
you're right, I've copy-pasted one of our internal code usages (that one is quite old and incorrectly uses Union[Type[XyzClass], Any]) and mended it until it looked postable, but did not test it again against 2.1.0.
Sorry about that - did not intend to cause more work than necessary.

Tested code is:

from abc import ABC, abstractmethod
from pydantic import SecretStr, HttpUrl
from pydantic_settings import BaseSettings


class BaseAuth(ABC, BaseSettings):
    @property
    @abstractmethod
    def token(self) -> str:
        """returns authentication token for XYZ"""
        pass


class CustomAuth(BaseAuth):
    url: HttpUrl
    username: str
    password: SecretStr

    _token: SecretStr = None

    @property
    def token(self):
        ...  # (re)fetch token
        return self._token.get_secret_value()


class Settings(BaseSettings):
    auth: BaseAuth


s = Settings(
    auth=CustomAuth(
        url='https://127.0.0.1',
        username='some-username',
        password='some-password'
    )
)
print(s.auth)
print(type(s.auth))

pydantic-settings 2.0.0 and 2.1.0 print:

url=Url('https://127.0.0.1/') username='some-username' password=SecretStr('**********')
<class 'main.CustomAuth'>

While pydantic-settings 2.2.0 prints:

Traceback (most recent call last):
  File "/tmp/test_pydantic_settings_nesting.py", line 32, in <module>
    s = Settings(
        ^^^^^^^^^
  File "/tmp/venv/lib/python3.11/site-packages/pydantic_settings/main.py", line 85, in __init__
    super().__init__(
  File "/tmp/venv/lib/python3.11/site-packages/pydantic/main.py", line 171, in __init__
    self.__pydantic_validator__.validate_python(data, self_instance=self)
TypeError: Can't instantiate abstract class BaseAuth with abstract method token

pydantic-settings 2.2.1 just released. I reverted that change.