diff --git a/.changeset/small-avatars-smile.md b/.changeset/small-avatars-smile.md
new file mode 100644
index 00000000000..24e0458bdec
--- /dev/null
+++ b/.changeset/small-avatars-smile.md
@@ -0,0 +1,5 @@
+---
+'@primer/react': minor
+---
+
+Add text placeholder support to Avatar when no image source is provided.
diff --git a/packages/react/src/Avatar/Avatar.module.css b/packages/react/src/Avatar/Avatar.module.css
index fc67531b9a7..6641d530df4 100644
--- a/packages/react/src/Avatar/Avatar.module.css
+++ b/packages/react/src/Avatar/Avatar.module.css
@@ -10,6 +10,17 @@
   /* stylelint-disable-next-line primer/box-shadow */
   box-shadow: 0 0 0 1px var(--avatar-borderColor);
 
+  &:where([data-placeholder]) {
+    display: inline-flex;
+    align-items: center;
+    justify-content: center;
+    background: var(--bgColor-muted);
+    color: var(--fgColor-muted);
+    font-size: calc(var(--avatarSize-regular) * 0.4);
+    font-weight: var(--base-text-weight-semibold);
+    white-space: nowrap;
+  }
+
   &:where([data-square]) {
     /* stylelint-disable-next-line primer/borders */
     border-radius: clamp(4px, calc(var(--avatarSize-regular) - 24px), var(--borderRadius-medium));
diff --git a/packages/react/src/Avatar/Avatar.test.tsx b/packages/react/src/Avatar/Avatar.test.tsx
index ba816856822..314934a2190 100644
--- a/packages/react/src/Avatar/Avatar.test.tsx
+++ b/packages/react/src/Avatar/Avatar.test.tsx
@@ -36,6 +36,31 @@ describe('Avatar', () => {
     expect(avatar).toHaveAttribute('src', 'primer.png')
   })
 
+  it('renders a text placeholder when src is omitted', () => {
+    render(<Avatar placeholder="NS" size={40} data-testid="avatar" />)
+    const avatar = screen.getByTestId('avatar')
+    expect(avatar).toHaveTextContent('NS')
+    expect(avatar).toHaveAttribute('role', 'img')
+    expect(avatar).toHaveAttribute('aria-label', 'NS')
+    expect(avatar).toHaveAttribute('data-placeholder')
+    expect(avatar).toHaveAttribute('data-component', 'Avatar')
+    expect(avatar).not.toHaveAttribute('src')
+  })
+
+  it('prefers the image when both src and placeholder are provided', () => {
+    render(<Avatar src="primer.png" placeholder="NS" alt="Naveed" data-testid="avatar" />)
+    const avatar = screen.getByTestId('avatar')
+    expect(avatar.tagName).toBe('IMG')
+    expect(avatar).toHaveAttribute('src', 'primer.png')
+    expect(avatar).toHaveAttribute('alt', 'Naveed')
+    expect(avatar).not.toHaveAttribute('data-placeholder')
+  })
+
+  it('uses alt text as the accessible name for a placeholder when provided', () => {
+    render(<Avatar placeholder="NS" alt="Naveed Sajjad" data-testid="avatar" />)
+    expect(screen.getByTestId('avatar')).toHaveAttribute('aria-label', 'Naveed Sajjad')
+  })
+
   it('should support the `style` prop without overriding internal styles', () => {
     render(
       <Avatar
diff --git a/packages/react/src/Avatar/Avatar.tsx b/packages/react/src/Avatar/Avatar.tsx
index b9e501a8412..d98dfb1bca3 100644
--- a/packages/react/src/Avatar/Avatar.tsx
+++ b/packages/react/src/Avatar/Avatar.tsx
@@ -11,16 +11,18 @@ export type AvatarProps = {
   size?: number | ResponsiveValue<number>
   /** Sets the shape of the avatar to a square if true. If false, the avatar will be circular. */
   square?: boolean
-  /** URL of the avatar image. */
-  src: string
+  /** URL of the avatar image. When provided, the image takes precedence over the placeholder. */
+  src?: string
+  /** Text to display when no image URL is provided, such as a user's initials. */
+  placeholder?: string
   /** Provide alt text when the Avatar is used without the user's name next to it. */
   alt?: string
   /** Additional class name. */
   className?: string
-} & React.ComponentPropsWithoutRef<'img'>
+} & Omit<React.ComponentPropsWithoutRef<'img'>, 'src'>
 
-const Avatar = React.forwardRef<HTMLImageElement, AvatarProps>(function Avatar(
-  {alt = '', size = DEFAULT_AVATAR_SIZE, square = false, className, style, ...rest},
+const Avatar = React.forwardRef<HTMLElement, AvatarProps>(function Avatar(
+  {alt = '', size = DEFAULT_AVATAR_SIZE, square = false, placeholder, src, className, style, ...rest},
   ref,
 ) {
   const isResponsive = isResponsiveValue(size)
@@ -34,26 +36,43 @@ const Avatar = React.forwardRef<HTMLImageElement, AvatarProps>(function Avatar(
     cssSizeVars['--avatarSize-regular'] = `${size}px`
   }
 
+  const sharedProps = {
+    'data-component': 'Avatar',
+    className: clsx(className, classes.Avatar),
+    'data-responsive': isResponsive ? '' : undefined,
+    'data-square': square ? '' : undefined,
+    style: style
+      ? {
+          ...cssSizeVars,
+          ...style,
+        }
+      : (cssSizeVars as React.CSSProperties),
+    ...rest,
+  }
+
+  if (src) {
+    return (
+      <img
+        {...sharedProps}
+        ref={ref as React.Ref<HTMLImageElement>}
+        alt={alt}
+        width={isResponsive ? undefined : size}
+        height={isResponsive ? undefined : size}
+        src={src}
+      />
+    )
+  }
+
   return (
-    <img
-      data-component="Avatar"
-      className={clsx(className, classes.Avatar)}
-      ref={ref}
-      alt={alt}
-      data-responsive={isResponsive ? '' : undefined}
-      data-square={square ? '' : undefined}
-      width={isResponsive ? undefined : size}
-      height={isResponsive ? undefined : size}
-      style={
-        style
-          ? {
-              ...cssSizeVars,
-              ...style,
-            }
-          : (cssSizeVars as React.CSSProperties)
-      }
-      {...rest}
-    />
+    <span
+      {...sharedProps}
+      ref={ref as React.Ref<HTMLSpanElement>}
+      role="img"
+      aria-label={alt || placeholder || undefined}
+      data-placeholder=""
+    >
+      {placeholder}
+    </span>
   )
 })