diff --git a/examples/with-custom-principals/context.tf b/examples/with-custom-principals/context.tf
new file mode 100644
index 0000000..5e0ef88
--- /dev/null
+++ b/examples/with-custom-principals/context.tf
@@ -0,0 +1,279 @@
+#
+# ONLY EDIT THIS FILE IN github.com/cloudposse/terraform-null-label
+# All other instances of this file should be a copy of that one
+#
+#
+# Copy this file from https://github.com/cloudposse/terraform-null-label/blob/master/exports/context.tf
+# and then place it in your Terraform module to automatically get
+# Cloud Posse's standard configuration inputs suitable for passing
+# to Cloud Posse modules.
+#
+# curl -sL https://raw.githubusercontent.com/cloudposse/terraform-null-label/master/exports/context.tf -o context.tf
+#
+# Modules should access the whole context as `module.this.context`
+# to get the input variables with nulls for defaults,
+# for example `context = module.this.context`,
+# and access individual variables as `module.this.<var>`,
+# with final values filled in.
+#
+# For example, when using defaults, `module.this.context.delimiter`
+# will be null, and `module.this.delimiter` will be `-` (hyphen).
+#
+
+module "this" {
+  source  = "cloudposse/label/null"
+  version = "0.25.0" # requires Terraform >= 0.13.0
+
+  enabled             = var.enabled
+  namespace           = var.namespace
+  tenant              = var.tenant
+  environment         = var.environment
+  stage               = var.stage
+  name                = var.name
+  delimiter           = var.delimiter
+  attributes          = var.attributes
+  tags                = var.tags
+  additional_tag_map  = var.additional_tag_map
+  label_order         = var.label_order
+  regex_replace_chars = var.regex_replace_chars
+  id_length_limit     = var.id_length_limit
+  label_key_case      = var.label_key_case
+  label_value_case    = var.label_value_case
+  descriptor_formats  = var.descriptor_formats
+  labels_as_tags      = var.labels_as_tags
+
+  context = var.context
+}
+
+# Copy contents of cloudposse/terraform-null-label/variables.tf here
+
+variable "context" {
+  type = any
+  default = {
+    enabled             = true
+    namespace           = null
+    tenant              = null
+    environment         = null
+    stage               = null
+    name                = null
+    delimiter           = null
+    attributes          = []
+    tags                = {}
+    additional_tag_map  = {}
+    regex_replace_chars = null
+    label_order         = []
+    id_length_limit     = null
+    label_key_case      = null
+    label_value_case    = null
+    descriptor_formats  = {}
+    # Note: we have to use [] instead of null for unset lists due to
+    # https://github.com/hashicorp/terraform/issues/28137
+    # which was not fixed until Terraform 1.0.0,
+    # but we want the default to be all the labels in `label_order`
+    # and we want users to be able to prevent all tag generation
+    # by setting `labels_as_tags` to `[]`, so we need
+    # a different sentinel to indicate "default"
+    labels_as_tags = ["unset"]
+  }
+  description = <<-EOT
+    Single object for setting entire context at once.
+    See description of individual variables for details.
+    Leave string and numeric variables as `null` to use default value.
+    Individual variable settings (non-null) override settings in context object,
+    except for attributes, tags, and additional_tag_map, which are merged.
+  EOT
+
+  validation {
+    condition     = lookup(var.context, "label_key_case", null) == null ? true : contains(["lower", "title", "upper"], var.context["label_key_case"])
+    error_message = "Allowed values: `lower`, `title`, `upper`."
+  }
+
+  validation {
+    condition     = lookup(var.context, "label_value_case", null) == null ? true : contains(["lower", "title", "upper", "none"], var.context["label_value_case"])
+    error_message = "Allowed values: `lower`, `title`, `upper`, `none`."
+  }
+}
+
+variable "enabled" {
+  type        = bool
+  default     = null
+  description = "Set to false to prevent the module from creating any resources"
+}
+
+variable "namespace" {
+  type        = string
+  default     = null
+  description = "ID element. Usually an abbreviation of your organization name, e.g. 'eg' or 'cp', to help ensure generated IDs are globally unique"
+}
+
+variable "tenant" {
+  type        = string
+  default     = null
+  description = "ID element _(Rarely used, not included by default)_. A customer identifier, indicating who this instance of a resource is for"
+}
+
+variable "environment" {
+  type        = string
+  default     = null
+  description = "ID element. Usually used for region e.g. 'uw2', 'us-west-2', OR role 'prod', 'staging', 'dev', 'UAT'"
+}
+
+variable "stage" {
+  type        = string
+  default     = null
+  description = "ID element. Usually used to indicate role, e.g. 'prod', 'staging', 'source', 'build', 'test', 'deploy', 'release'"
+}
+
+variable "name" {
+  type        = string
+  default     = null
+  description = <<-EOT
+    ID element. Usually the component or solution name, e.g. 'app' or 'jenkins'.
+    This is the only ID element not also included as a `tag`.
+    The "name" tag is set to the full `id` string. There is no tag with the value of the `name` input.
+    EOT
+}
+
+variable "delimiter" {
+  type        = string
+  default     = null
+  description = <<-EOT
+    Delimiter to be used between ID elements.
+    Defaults to `-` (hyphen). Set to `""` to use no delimiter at all.
+  EOT
+}
+
+variable "attributes" {
+  type        = list(string)
+  default     = []
+  description = <<-EOT
+    ID element. Additional attributes (e.g. `workers` or `cluster`) to add to `id`,
+    in the order they appear in the list. New attributes are appended to the
+    end of the list. The elements of the list are joined by the `delimiter`
+    and treated as a single ID element.
+    EOT
+}
+
+variable "labels_as_tags" {
+  type        = set(string)
+  default     = ["default"]
+  description = <<-EOT
+    Set of labels (ID elements) to include as tags in the `tags` output.
+    Default is to include all labels.
+    Tags with empty values will not be included in the `tags` output.
+    Set to `[]` to suppress all generated tags.
+    **Notes:**
+      The value of the `name` tag, if included, will be the `id`, not the `name`.
+      Unlike other `null-label` inputs, the initial setting of `labels_as_tags` cannot be
+      changed in later chained modules. Attempts to change it will be silently ignored.
+    EOT
+}
+
+variable "tags" {
+  type        = map(string)
+  default     = {}
+  description = <<-EOT
+    Additional tags (e.g. `{'BusinessUnit': 'XYZ'}`).
+    Neither the tag keys nor the tag values will be modified by this module.
+    EOT
+}
+
+variable "additional_tag_map" {
+  type        = map(string)
+  default     = {}
+  description = <<-EOT
+    Additional key-value pairs to add to each map in `tags_as_list_of_maps`. Not added to `tags` or `id`.
+    This is for some rare cases where resources want additional configuration of tags
+    and therefore take a list of maps with tag key, value, and additional configuration.
+    EOT
+}
+
+variable "label_order" {
+  type        = list(string)
+  default     = null
+  description = <<-EOT
+    The order in which the labels (ID elements) appear in the `id`.
+    Defaults to ["namespace", "environment", "stage", "name", "attributes"].
+    You can omit any of the 6 labels ("tenant" is the 6th), but at least one must be present.
+    EOT
+}
+
+variable "regex_replace_chars" {
+  type        = string
+  default     = null
+  description = <<-EOT
+    Terraform regular expression (regex) string.
+    Characters matching the regex will be removed from the ID elements.
+    If not set, `"/[^a-zA-Z0-9-]/"` is used to remove all characters other than hyphens, letters and digits.
+  EOT
+}
+
+variable "id_length_limit" {
+  type        = number
+  default     = null
+  description = <<-EOT
+    Limit `id` to this many characters (minimum 6).
+    Set to `0` for unlimited length.
+    Set to `null` for keep the existing setting, which defaults to `0`.
+    Does not affect `id_full`.
+  EOT
+  validation {
+    condition     = var.id_length_limit == null ? true : var.id_length_limit >= 6 || var.id_length_limit == 0
+    error_message = "The id_length_limit must be >= 6 if supplied (not null), or 0 for unlimited length."
+  }
+}
+
+variable "label_key_case" {
+  type        = string
+  default     = null
+  description = <<-EOT
+    Controls the letter case of the `tags` keys (label names) for tags generated by this module.
+    Does not affect keys of tags passed in via the `tags` input.
+    Possible values: `lower`, `title`, `upper`.
+    Default value: `title`.
+  EOT
+
+  validation {
+    condition     = var.label_key_case == null ? true : contains(["lower", "title", "upper"], var.label_key_case)
+    error_message = "Allowed values: `lower`, `title`, `upper`."
+  }
+}
+
+variable "label_value_case" {
+  type        = string
+  default     = null
+  description = <<-EOT
+    Controls the letter case of ID elements (labels) as included in `id`,
+    set as tag values, and output by this module individually.
+    Does not affect values of tags passed in via the `tags` input.
+    Possible values: `lower`, `title`, `upper` and `none` (no transformation).
+    Set this to `title` and set `delimiter` to `""` to yield Pascal Case IDs.
+    Default value: `lower`.
+  EOT
+
+  validation {
+    condition     = var.label_value_case == null ? true : contains(["lower", "title", "upper", "none"], var.label_value_case)
+    error_message = "Allowed values: `lower`, `title`, `upper`, `none`."
+  }
+}
+
+variable "descriptor_formats" {
+  type        = any
+  default     = {}
+  description = <<-EOT
+    Describe additional descriptors to be output in the `descriptors` output map.
+    Map of maps. Keys are names of descriptors. Values are maps of the form
+    `{
+       format = string
+       labels = list(string)
+    }`
+    (Type is `any` so the map values can later be enhanced to provide additional options.)
+    `format` is a Terraform format string to be passed to the `format()` function.
+    `labels` is a list of labels, in order, to pass to `format()` function.
+    Label values will be normalized before being passed to `format()` so they will be
+    identical to how they appear in `id`.
+    Default is `{}` (`descriptors` output will be empty).
+    EOT
+}
+
+#### End of copy of cloudposse/terraform-null-label/variables.tf
diff --git a/examples/with-custom-principals/fixtures.us-east-2.tfvars b/examples/with-custom-principals/fixtures.us-east-2.tfvars
new file mode 100644
index 0000000..29edc9a
--- /dev/null
+++ b/examples/with-custom-principals/fixtures.us-east-2.tfvars
@@ -0,0 +1,7 @@
+region = "us-east-2"
+
+namespace = "eg"
+
+stage = "test"
+
+name = "api-gw-custom-principals"
diff --git a/examples/with-custom-principals/main.tf b/examples/with-custom-principals/main.tf
new file mode 100644
index 0000000..76d1250
--- /dev/null
+++ b/examples/with-custom-principals/main.tf
@@ -0,0 +1,35 @@
+provider "aws" {
+  region = var.region
+}
+
+module "api_gateway" {
+  source = "../../"
+
+  openapi_config = {
+    openapi = "3.0.1"
+    info = {
+      title   = "example-custom-principals"
+      version = "1.0"
+    }
+    paths = {
+      "/test" = {
+        get = {
+          x-amazon-apigateway-integration = {
+            httpMethod           = "GET"
+            payloadFormatVersion = "1.0"
+            type                 = "HTTP_PROXY"
+            uri                  = "https://ip-ranges.amazonaws.com/ip-ranges.json"
+          }
+        }
+      }
+    }
+  }
+
+  # Enable logging to test CloudWatch IAM role creation
+  logging_level = "INFO"
+
+  # Test custom principals parameter (should use default apigateway.amazonaws.com)
+  cloudwatch_log_group_principals = var.cloudwatch_log_group_principals
+
+  context = module.this.context
+}
diff --git a/examples/with-custom-principals/outputs.tf b/examples/with-custom-principals/outputs.tf
new file mode 100644
index 0000000..f2ec5f4
--- /dev/null
+++ b/examples/with-custom-principals/outputs.tf
@@ -0,0 +1,24 @@
+output "id" {
+  value       = module.api_gateway.id
+  description = "The ID of the REST API"
+}
+
+output "invoke_url" {
+  value       = module.api_gateway.invoke_url
+  description = "The URL to invoke the API"
+}
+
+output "execution_arn" {
+  value       = module.api_gateway.execution_arn
+  description = "The execution ARN of the REST API"
+}
+
+output "cloudwatch_log_group_arn" {
+  value       = module.api_gateway.cloudwatch_log_group_arn
+  description = "The ARN of the CloudWatch Log Group"
+}
+
+output "cloudwatch_role_arn" {
+  value       = module.api_gateway.cloudwatch_role_arn
+  description = "The ARN of the IAM role for CloudWatch Logs"
+}
diff --git a/examples/with-custom-principals/variables.tf b/examples/with-custom-principals/variables.tf
new file mode 100644
index 0000000..e0301eb
--- /dev/null
+++ b/examples/with-custom-principals/variables.tf
@@ -0,0 +1,12 @@
+variable "region" {
+  type        = string
+  description = "AWS region"
+}
+
+variable "cloudwatch_log_group_principals" {
+  description = "Map of service principals for CloudWatch Logs IAM role"
+  type        = map(list(string))
+  default = {
+    Service = ["apigateway.amazonaws.com"]
+  }
+}
diff --git a/examples/with-custom-principals/versions.tf b/examples/with-custom-principals/versions.tf
new file mode 100644
index 0000000..fe97db9
--- /dev/null
+++ b/examples/with-custom-principals/versions.tf
@@ -0,0 +1,10 @@
+terraform {
+  required_version = ">= 1.3"
+
+  required_providers {
+    aws = {
+      source  = "hashicorp/aws"
+      version = ">= 4.0"
+    }
+  }
+}
diff --git a/main.tf b/main.tf
index 8f699d9..4b1ae5c 100644
--- a/main.tf
+++ b/main.tf
@@ -33,6 +33,7 @@ module "cloudwatch_log_group" {
   enabled              = local.create_log_group
   iam_tags_enabled     = var.iam_tags_enabled
   permissions_boundary = var.permissions_boundary
+  principals           = var.cloudwatch_log_group_principals
 
   context = module.this.context
 }
diff --git a/test/src/examples_custom_principals_test.go b/test/src/examples_custom_principals_test.go
new file mode 100644
index 0000000..b8102fa
--- /dev/null
+++ b/test/src/examples_custom_principals_test.go
@@ -0,0 +1,116 @@
+package test
+
+import (
+	"encoding/json"
+	"fmt"
+	"math/rand"
+	"strconv"
+	"testing"
+	"time"
+
+	"github.com/gruntwork-io/terratest/modules/aws"
+	"github.com/gruntwork-io/terratest/modules/terraform"
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+)
+
+// Test the custom principals parameter ensures correct IAM trust policy
+func TestExamplesCustomPrincipals(t *testing.T) {
+	t.Parallel()
+
+	rand.Seed(time.Now().UnixNano())
+	randID := strconv.Itoa(rand.Intn(100000))
+	attributes := []string{randID}
+
+	terraformOptions := terraform.WithDefaultRetryableErrors(t, &terraform.Options{
+		// The path to where our Terraform code is located
+		TerraformDir: "../../examples/with-custom-principals",
+		Upgrade:      true,
+		// Variables to pass to our Terraform code using -var-file options
+		VarFiles: []string{"fixtures.us-east-2.tfvars"},
+		// We always include a random attribute so that parallel tests
+		// and AWS resources do not interfere with each other
+		Vars: map[string]interface{}{
+			"attributes": attributes,
+			"enabled":    true,
+		},
+	})
+
+	// At the end of the test, run `terraform destroy` to clean up any resources that were created
+	defer terraform.Destroy(t, terraformOptions)
+
+	// This will run `terraform init` and `terraform apply` and fail the test if there are any errors
+	terraform.InitAndApply(t, terraformOptions)
+
+	// Get the CloudWatch role ARN from terraform output
+	cloudwatchRoleArn := terraform.Output(t, terraformOptions, "cloudwatch_role_arn")
+	require.NotEmpty(t, cloudwatchRoleArn, "CloudWatch role ARN should not be empty")
+
+	// Extract region from terraform options
+	region := "us-east-2"
+
+	// Get the IAM role name from the ARN
+	roleName := extractRoleNameFromArn(cloudwatchRoleArn)
+	require.NotEmpty(t, roleName, "Role name should not be empty")
+
+	// Get the IAM role trust policy
+	role := aws.GetIamRole(t, region, roleName)
+	require.NotNil(t, role, "IAM role should exist")
+
+	// Parse the trust policy
+	var trustPolicy map[string]interface{}
+	err := json.Unmarshal([]byte(*role.AssumeRolePolicyDocument), &trustPolicy)
+	require.NoError(t, err, "Should be able to parse trust policy JSON")
+
+	// Verify the trust policy contains apigateway.amazonaws.com as principal
+	statements := trustPolicy["Statement"].([]interface{})
+	require.NotEmpty(t, statements, "Trust policy should have statements")
+
+	foundCorrectPrincipal := false
+	for _, stmt := range statements {
+		statement := stmt.(map[string]interface{})
+		if principal, ok := statement["Principal"].(map[string]interface{}); ok {
+			if service, ok := principal["Service"]; ok {
+				// Service can be a string or array
+				switch v := service.(type) {
+				case string:
+					if v == "apigateway.amazonaws.com" {
+						foundCorrectPrincipal = true
+					}
+				case []interface{}:
+					for _, svc := range v {
+						if svc == "apigateway.amazonaws.com" {
+							foundCorrectPrincipal = true
+						}
+					}
+				}
+			}
+		}
+	}
+
+	assert.True(t, foundCorrectPrincipal,
+		"Trust policy should contain apigateway.amazonaws.com as principal service. "+
+		"This validates the fix for issue #35.")
+
+	// Verify API Gateway was created successfully
+	apiId := terraform.Output(t, terraformOptions, "id")
+	require.NotEmpty(t, apiId, "API Gateway ID should not be empty")
+
+	// Verify we can get the invoke URL (proves API Gateway is functional)
+	invokeUrl := terraform.Output(t, terraformOptions, "invoke_url")
+	require.NotEmpty(t, invokeUrl, "Invoke URL should not be empty")
+
+	fmt.Printf("✅ API Gateway created successfully with correct IAM principal\n")
+	fmt.Printf("   API ID: %s\n", apiId)
+	fmt.Printf("   IAM Role: %s\n", roleName)
+	fmt.Printf("   Invoke URL: %s\n", invokeUrl)
+}
+
+// Helper function to extract role name from ARN
+// Example ARN: arn:aws:iam::123456789012:role/role-name
+func extractRoleNameFromArn(arn string) string {
+	// Simple parsing - in production you'd want more robust parsing
+	var roleName string
+	fmt.Sscanf(arn, "arn:aws:iam::%*d:role/%s", &roleName)
+	return roleName
+}
diff --git a/variables.tf b/variables.tf
index 75c781a..2bc7aec 100644
--- a/variables.tf
+++ b/variables.tf
@@ -151,3 +151,11 @@ variable "throttling_rate_limit" {
   type        = number
   default     = -1
 }
+
+variable "cloudwatch_log_group_principals" {
+  description = "Map of service principals allowed to assume the CloudWatch Logs IAM role. Defaults to apigateway.amazonaws.com to fix the incorrect ec2.amazonaws.com default from the cloudwatch-logs module."
+  type        = map(list(string))
+  default = {
+    Service = ["apigateway.amazonaws.com"]
+  }
+}