diff --git a/pkg/reconciler/common/releases.go b/pkg/reconciler/common/releases.go
index cca19a6a50..58b1a5d3c6 100644
--- a/pkg/reconciler/common/releases.go
+++ b/pkg/reconciler/common/releases.go
@@ -38,6 +38,8 @@ const (
 	VersionVariable = "${VERSION}"
 	// COMMA is the character comma
 	COMMA = ","
+	// LATEST_VERSION is the special version Knative Operator support, besides all semantic versions of Knative.
+	LATEST_VERSION = "latest"
 )
 
 var cache = map[string]mf.Manifest{}
@@ -81,7 +83,11 @@ func InstalledManifest(instance v1alpha1.KComponent) (mf.Manifest, error) {
 // manifest is able to upgrade or downgrade to the target manifest.
 func IsVersionValidMigrationEligible(instance v1alpha1.KComponent) error {
 	var err error
-	target := sanitizeSemver(TargetVersion(instance))
+	targetVersion := TargetVersion(instance)
+	if targetVersion == LATEST_VERSION {
+		return nil
+	}
+	target := sanitizeSemver(targetVersion)
 	if !semver.IsValid(target) {
 		return fmt.Errorf("target version %v is not in a valid semantic versioning format.", target)
 	}
@@ -92,7 +98,8 @@ func IsVersionValidMigrationEligible(instance v1alpha1.KComponent) error {
 
 	current := instance.GetStatus().GetVersion()
 	// If there is no manifest installed, return nil, because the target manifest is able to install.
-	if current == "" {
+	// If the installed manifest is versioned with latest, we allow any version to upgrade to or from it.
+	if current == "" || current == LATEST_VERSION {
 		return nil
 	}
 
@@ -154,8 +161,9 @@ func getManifestWithVersionValidation(version string, instance v1alpha1.KCompone
 		return manifests, fmt.Errorf("There is no resource available in the target manifests %s.", manifestsPath)
 	}
 
-	if version == "" {
-		// If target version is empty, there is no need to check whether the versions match.
+	if version == "" || version == LATEST_VERSION {
+		// If target version is empty or equal to the special latest version, there is no need to check whether
+		// the versions match.
 		return manifests, nil
 	}
 
diff --git a/pkg/reconciler/common/releases_test.go b/pkg/reconciler/common/releases_test.go
index b4ab88c483..c6be327407 100644
--- a/pkg/reconciler/common/releases_test.go
+++ b/pkg/reconciler/common/releases_test.go
@@ -206,6 +206,16 @@ func TestTargetVersion(t *testing.T) {
 			},
 		},
 		expected: "0.12",
+	}, {
+		name: "serving CR with the version latest",
+		component: &v1alpha1.KnativeServing{
+			Spec: v1alpha1.KnativeServingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "latest",
+				},
+			},
+		},
+		expected: "latest",
 	}, {
 		name: "eventing CR with major.minor version not available",
 		component: &v1alpha1.KnativeEventing{
@@ -236,6 +246,16 @@ func TestTargetVersion(t *testing.T) {
 			},
 		},
 		expected: "0.12.1",
+	}, {
+		name: "eventing CR with the version latest",
+		component: &v1alpha1.KnativeEventing{
+			Spec: v1alpha1.KnativeEventingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "latest",
+				},
+			},
+		},
+		expected: "latest",
 	}}
 
 	os.Setenv(KoEnvKey, koPath)
@@ -364,11 +384,11 @@ func TestListReleases(t *testing.T) {
 	}{{
 		name:      "knative-serving",
 		component: &v1alpha1.KnativeServing{},
-		expected:  []string{"0.16.1", "0.16.0", "0.15.0", "0.14.0"},
+		expected:  []string{"0.16.1", "0.16.0", "0.15.0", "0.14.0", "latest"},
 	}, {
 		name:      "knative-eventing",
 		component: &v1alpha1.KnativeEventing{},
-		expected:  []string{"0.16.0", "0.15.0", "0.14.2"},
+		expected:  []string{"0.16.0", "0.15.0", "0.14.2", "latest"},
 	}}
 
 	os.Setenv(KoEnvKey, koPath)
@@ -424,6 +444,42 @@ func TestIsVersionValidMigrationEligible(t *testing.T) {
 			},
 		},
 		expected: false,
+	}, {
+		name: "knative-serving with the version latest upgrading to",
+		component: &v1alpha1.KnativeServing{
+			Spec: v1alpha1.KnativeServingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "latest",
+				},
+			},
+			Status: v1alpha1.KnativeServingStatus{
+				Version: "0.13.0",
+			},
+		},
+		expected: true,
+	}, {
+		name: "knative-serving with the version latest upgrading from",
+		component: &v1alpha1.KnativeServing{
+			Spec: v1alpha1.KnativeServingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "0.14.0",
+				},
+			},
+			Status: v1alpha1.KnativeServingStatus{
+				Version: "latest",
+			},
+		},
+		expected: true,
+	}, {
+		name: "knative-serving with the version latest",
+		component: &v1alpha1.KnativeServing{
+			Spec: v1alpha1.KnativeServingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "latest",
+				},
+			},
+		},
+		expected: true,
 	}, {
 		name: "knative-serving upgrading to the latest version across multiple minor versions",
 		component: &v1alpha1.KnativeServing{
@@ -666,6 +722,17 @@ func TestTargetManifest(t *testing.T) {
 		expectedNumResources: 0,
 		expectedError: fmt.Errorf("The manifests of the target version %v are not available to this release.",
 			"0.12.1"),
+	}, {
+		name: "knative-serving with the latest version available",
+		component: &v1alpha1.KnativeServing{
+			Spec: v1alpha1.KnativeServingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "latest",
+				},
+			},
+		},
+		expectedNumResources: 2,
+		expectedError:        nil,
 	}, {
 		name: "knative-eventing with major.minor spec.version not available",
 		component: &v1alpha1.KnativeEventing{
@@ -690,6 +757,17 @@ func TestTargetManifest(t *testing.T) {
 		expectedNumResources: 0,
 		expectedError: fmt.Errorf("The manifests of the target version %v are not available to this release.",
 			"0.12.1"),
+	}, {
+		name: "knative-eventing with the latest available",
+		component: &v1alpha1.KnativeEventing{
+			Spec: v1alpha1.KnativeEventingSpec{
+				CommonSpec: v1alpha1.CommonSpec{
+					Version: "latest",
+				},
+			},
+		},
+		expectedNumResources: 2,
+		expectedError:        nil,
 	}}
 
 	koPath := "testdata/kodata"
diff --git a/pkg/reconciler/common/testdata/kodata/knative-eventing/latest/eventing-core.yaml b/pkg/reconciler/common/testdata/kodata/knative-eventing/latest/eventing-core.yaml
new file mode 100644
index 0000000000..05c264336c
--- /dev/null
+++ b/pkg/reconciler/common/testdata/kodata/knative-eventing/latest/eventing-core.yaml
@@ -0,0 +1,20 @@
+# Copyright 2020 The Knative Authors
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+apiVersion: v1
+kind: Namespace
+metadata:
+  name: knative-eventing
+  labels:
+    eventing.knative.dev/release: "something-else"
diff --git a/pkg/reconciler/common/testdata/kodata/knative-eventing/latest/in-memory-channel.yaml b/pkg/reconciler/common/testdata/kodata/knative-eventing/latest/in-memory-channel.yaml
new file mode 100644
index 0000000000..781704c9df
--- /dev/null
+++ b/pkg/reconciler/common/testdata/kodata/knative-eventing/latest/in-memory-channel.yaml
@@ -0,0 +1,20 @@
+# Copyright 2020 The Knative Authors
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+apiVersion: v1
+kind: Namespace
+metadata:
+  name: knative-eventing
+  labels:
+    eventing.knative.dev/release: "somthing-else"
diff --git a/pkg/reconciler/common/testdata/kodata/knative-serving/latest/serving-core.yaml b/pkg/reconciler/common/testdata/kodata/knative-serving/latest/serving-core.yaml
new file mode 100644
index 0000000000..77327c36c7
--- /dev/null
+++ b/pkg/reconciler/common/testdata/kodata/knative-serving/latest/serving-core.yaml
@@ -0,0 +1,20 @@
+# Copyright 2020 The Knative Authors
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     https://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+apiVersion: v1
+kind: Namespace
+metadata:
+  name: knative-serving
+  labels:
+    serving.knative.dev/release: "v0.16.0"
diff --git a/pkg/reconciler/common/testdata/kodata/knative-serving/latest/serving-hpa.yaml b/pkg/reconciler/common/testdata/kodata/knative-serving/latest/serving-hpa.yaml
new file mode 100644
index 0000000000..834263ad05
--- /dev/null
+++ b/pkg/reconciler/common/testdata/kodata/knative-serving/latest/serving-hpa.yaml
@@ -0,0 +1,20 @@
+# Copyright 2020 The Knative Authors
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     https://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+apiVersion: v1
+kind: Namespace
+metadata:
+  name: knative-serving
+  labels:
+    serving.knative.dev/release: "something-else"
diff --git a/test/resources/knativeresources.go b/test/resources/knativeresources.go
index 3fe3de2ccb..50db082c2a 100644
--- a/test/resources/knativeresources.go
+++ b/test/resources/knativeresources.go
@@ -91,7 +91,7 @@ func IsKnativeDeploymentReady(dpList *v1.DeploymentList, expectedDeployments []s
 			// Currently, the network ingress resource is still specified together with the knative serving.
 			// It is possible that network ingress resource is not using the same version as knative serving.
 			// This is the reason why we skip the version checking for network ingress resource.
-			if val == fmt.Sprintf("v%s", version) || key == "networking.knative.dev/ingress-provider" {
+			if val == fmt.Sprintf("v%s", version) || version == common.LATEST_VERSION || key == "networking.knative.dev/ingress-provider" {
 				for _, c := range d.Status.Conditions {
 					if c.Type == v1.DeploymentAvailable && c.Status == corev1.ConditionTrue {
 						return true