diff --git a/python/semantic_kernel/functions/kernel_function.py b/python/semantic_kernel/functions/kernel_function.py
index 15f2ab34c6b7..8928e7315fd8 100644
--- a/python/semantic_kernel/functions/kernel_function.py
+++ b/python/semantic_kernel/functions/kernel_function.py
@@ -388,9 +388,13 @@ def function_copy(self, plugin_name: str | None = None) -> "KernelFunction":
             KernelFunction: The copied function.
         """
         cop: KernelFunction = copy(self)
-        cop.metadata = deepcopy(self.metadata)
-        if plugin_name:
+        # Only copy metadata if we need to modify plugin_name
+        if plugin_name and plugin_name != self.metadata.plugin_name:
+            cop.metadata = self.metadata.model_copy()  # Shallow copy via Pydantic
             cop.metadata.plugin_name = plugin_name
+        else:
+            # Reuse reference when no modification needed (safe as metadata is immutable in practice)
+            cop.metadata = self.metadata
         return cop
 
     def _handle_exception(self, current_span: trace.Span, exception: Exception, attributes: dict[str, str]) -> None:
diff --git a/python/tests/unit/functions/test_function_copy_optimization.py b/python/tests/unit/functions/test_function_copy_optimization.py
new file mode 100644
index 000000000000..8e7c93941580
--- /dev/null
+++ b/python/tests/unit/functions/test_function_copy_optimization.py
@@ -0,0 +1,97 @@
+# Copyright (c) Microsoft. All rights reserved.
+
+"""Tests for function_copy optimization (Issue #1: Lazy deepcopy)."""
+
+import pytest
+from unittest.mock import patch
+
+from semantic_kernel.functions.kernel_function import KernelFunction
+from semantic_kernel.functions import kernel_function
+
+
+@pytest.fixture
+def sample_function():
+    """Create a sample kernel function for testing."""
+    @kernel_function
+    def test_func(input: str) -> str:
+        return f"Result: {input}"
+    
+    return test_func
+
+
+class TestFunctionCopyOptimization:
+    """Test suite for function_copy lazy deepcopy optimization."""
+    
+    def test_function_copy_same_plugin_no_deepcopy(self, sample_function):
+        """Test that function_copy doesn't deepcopy when plugin_name is same or None.
+        
+        This tests the optimization where metadata is reused when no plugin_name change.
+        """
+        original_plugin = sample_function.plugin_name
+        
+        # Case 1: No plugin_name provided (should reuse reference)
+        copy1 = sample_function.function_copy()
+        assert copy1.metadata is sample_function.metadata  # Should be same reference
+        assert copy1.plugin_name == original_plugin
+        
+        # Case 2: Same plugin_name provided (should reuse reference)
+        copy2 = sample_function.function_copy(original_plugin)
+        assert copy2.metadata is sample_function.metadata  # Should be same reference
+    
+    def test_function_copy_different_plugin_creates_copy(self, sample_function):
+        """Test that function_copy does create a shallow copy when plugin_name changes.
+        
+        This tests that when we actually need to change the plugin_name,
+        a shallow copy is created.
+        """
+        new_plugin_name = "new_plugin"
+        copy = sample_function.function_copy(new_plugin_name)
+        
+        # Metadata should be different object (copied)
+        assert copy.metadata is not sample_function.metadata
+        # But should have the new plugin_name
+        assert copy.metadata.plugin_name == new_plugin_name
+        # Original should be unchanged
+        assert sample_function.metadata.plugin_name != new_plugin_name
+    
+    def test_function_copy_preserves_function_behavior(self, sample_function):
+        """Test that copied function still works correctly."""
+        copy = sample_function.function_copy()
+        
+        # Verify function metadata is preserved
+        assert copy.name == sample_function.name
+        assert copy.description == sample_function.description
+        # Verify function is callable (indirectly through having same underlying function)
+        assert hasattr(copy, 'invoke')
+    
+    @patch('semantic_kernel.functions.kernel_function.deepcopy', side_effect=AssertionError("deepcopy should not be called"))
+    def test_function_copy_no_unnecessary_deepcopy(self, mock_deepcopy, sample_function):
+        """Test that deepcopy is NOT called when plugin_name doesn't change.
+        
+        This is the key optimization test - it verifies that the old problematic
+        deepcopy is not being called anymore.
+        """
+        # When plugin_name is None or same, deepcopy should not be called
+        try:
+            sample_function.function_copy()
+            # If we get here, deepcopy was not called (good!)
+            assert True
+        except AssertionError as e:
+            if "deepcopy should not be called" in str(e):
+                pytest.fail("function_copy still calls deepcopy unnecessarily")
+            raise
+    
+    def test_function_copy_multiple_calls_same_plugin(self, sample_function):
+        """Test that multiple copies with same plugin reuse metadata.
+        
+        This tests the performance benefit of reusing metadata references
+        when no change is needed.
+        """
+        copy1 = sample_function.function_copy()
+        copy2 = sample_function.function_copy()
+        copy3 = sample_function.function_copy(sample_function.plugin_name)
+        
+        # All should reference the same original metadata
+        assert copy1.metadata is sample_function.metadata
+        assert copy2.metadata is sample_function.metadata
+        assert copy3.metadata is sample_function.metadata