diff --git a/python/semantic_kernel/template_engine/code_tokenizer.py b/python/semantic_kernel/template_engine/code_tokenizer.py
index 7b4ebb9c4a2a..f95119477d0e 100644
--- a/python/semantic_kernel/template_engine/code_tokenizer.py
+++ b/python/semantic_kernel/template_engine/code_tokenizer.py
@@ -70,7 +70,7 @@ def tokenize(text: str) -> list[Block]:
                 current_token_content.append(current_char)
                 continue
 
-            # While reading values between quotes
+            # While reading values between quotes (positional value or named-arg value)
             if current_token_type in (BlockTypes.VALUE, BlockTypes.NAMED_ARG):
                 # If the current char is escaping the next special char we:
                 #  - skip the current char (escape char)
@@ -89,7 +89,10 @@ def tokenize(text: str) -> list[Block]:
 
                 # When we reach the end of the value, we add the block
                 if current_char == text_value_delimiter:
-                    blocks.append(ValBlock(content="".join(current_token_content)))
+                    if current_token_type == BlockTypes.NAMED_ARG:
+                        blocks.append(NamedArgBlock(content="".join(current_token_content)))
+                    else:
+                        blocks.append(ValBlock(content="".join(current_token_content)))
                     current_token_content.clear()
                     current_token_type = None
                     space_separator_found = False
@@ -136,6 +139,16 @@ def tokenize(text: str) -> list[Block]:
                 else:
                     # A function id starts here
                     current_token_type = BlockTypes.FUNCTION_ID
+            elif (
+                current_token_type == BlockTypes.FUNCTION_ID
+                and current_char in (Symbols.DBL_QUOTE, Symbols.SGL_QUOTE)
+                and Symbols.NAMED_ARG_BLOCK_SEPARATOR.value in current_token_content
+            ):
+                # We just appended the opening quote of a named-arg value (e.g. key='value').
+                # Switch to NAMED_ARG quoted-value mode so spaces inside the value
+                # are not treated as token separators.
+                current_token_type = BlockTypes.NAMED_ARG
+                text_value_delimiter = current_char
 
         # end of main for loop
 
@@ -144,6 +157,8 @@ def tokenize(text: str) -> list[Block]:
 
         if current_token_type == BlockTypes.VALUE:
             blocks.append(ValBlock(content="".join(current_token_content)))
+        elif current_token_type == BlockTypes.NAMED_ARG:
+            blocks.append(NamedArgBlock(content="".join(current_token_content)))
         elif current_token_type == BlockTypes.VARIABLE:
             blocks.append(VarBlock(content="".join(current_token_content)))
         elif current_token_type == BlockTypes.FUNCTION_ID:
diff --git a/python/tests/unit/template_engine/test_code_tokenizer.py b/python/tests/unit/template_engine/test_code_tokenizer.py
index 42024c6120ad..ab5bb18bb87a 100644
--- a/python/tests/unit/template_engine/test_code_tokenizer.py
+++ b/python/tests/unit/template_engine/test_code_tokenizer.py
@@ -128,3 +128,25 @@ def test_named_args():
     assert blocks[1].content == '"direct"'
     assert blocks[2].content == "arg1=$arg1"
     assert blocks[3].content == 'arg2="arg2"'
+
+
+def test_named_args_with_spaces_in_quoted_value():
+    """Regression test for issue #14460: spaces inside quoted named-arg values should not split tokens."""
+    blocks = CodeTokenizer.tokenize("func key='hello world'")
+    assert len(blocks) == 2
+    assert blocks[0].content == "func"
+    assert blocks[0].type == BlockTypes.FUNCTION_ID
+    assert blocks[1].content == "key='hello world'"
+    assert blocks[1].type == BlockTypes.NAMED_ARG
+
+    blocks = CodeTokenizer.tokenize('func key="hello world"')
+    assert len(blocks) == 2
+    assert blocks[0].content == "func"
+    assert blocks[1].content == 'key="hello world"'
+    assert blocks[1].type == BlockTypes.NAMED_ARG
+
+    blocks = CodeTokenizer.tokenize("plugin.func greeting='hello world' name='john doe'")
+    assert len(blocks) == 3
+    assert blocks[0].content == "plugin.func"
+    assert blocks[1].content == "greeting='hello world'"
+    assert blocks[2].content == "name='john doe'"