diff --git a/xds/src/main/java/io/grpc/xds/XdsClientImpl.java b/xds/src/main/java/io/grpc/xds/XdsClientImpl.java
index 70fcd0451e..20bdf06988 100644
--- a/xds/src/main/java/io/grpc/xds/XdsClientImpl.java
+++ b/xds/src/main/java/io/grpc/xds/XdsClientImpl.java
@@ -1077,6 +1077,19 @@ final class XdsClientImpl extends XdsClient {
       }
       logger.log(Level.FINE, error.getDescription(), error.getCause());
       closed = true;
+      if (configWatcher != null) {
+        configWatcher.onError(error);
+      }
+      for (Set<ClusterWatcher> watchers : clusterWatchers.values()) {
+        for (ClusterWatcher watcher : watchers) {
+          watcher.onError(error);
+        }
+      }
+      for (Set<EndpointWatcher> watchers : endpointWatchers.values()) {
+        for (EndpointWatcher watcher : watchers) {
+          watcher.onError(error);
+        }
+      }
       cleanUp();
       cleanUpResources();
       if (responseReceived || retryBackoffPolicy == null) {
diff --git a/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java b/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java
index 7395a364cb..a9c139eaae 100644
--- a/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java
+++ b/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java
@@ -2618,6 +2618,7 @@ public class XdsClientImplTest {
     StreamObserver<DiscoveryRequest> requestObserver = requestObservers.poll();
 
     waitUntilConfigResolved(responseObserver);
+    ArgumentCaptor<Status> statusCaptor = ArgumentCaptor.forClass(null);
 
     // Start watching cluster information.
     xdsClient.watchClusterData("cluster.googleapis.com", clusterWatcher);
@@ -2637,6 +2638,12 @@ public class XdsClientImplTest {
 
     // Management server closes the RPC stream with an error.
     responseObserver.onError(Status.UNKNOWN.asException());
+    verify(configWatcher).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNKNOWN);
+    verify(clusterWatcher).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNKNOWN);
+    verify(endpointWatcher).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNKNOWN);
 
     // Resets backoff and retry immediately.
     inOrder.verify(backoffPolicyProvider).get();
@@ -2659,6 +2666,12 @@ public class XdsClientImplTest {
 
     // Management server becomes unreachable.
     responseObserver.onError(Status.UNAVAILABLE.asException());
+    verify(configWatcher, times(2)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
+    verify(clusterWatcher, times(2)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
+    verify(endpointWatcher, times(2)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
     inOrder.verify(backoffPolicy1).nextBackoffNanos();
     assertThat(fakeClock.getPendingTasks(RPC_RETRY_TASK_FILTER)).hasSize(1);
 
@@ -2682,6 +2695,12 @@ public class XdsClientImplTest {
 
     // Management server is still not reachable.
     responseObserver.onError(Status.UNAVAILABLE.asException());
+    verify(configWatcher, times(3)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
+    verify(clusterWatcher, times(3)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
+    verify(endpointWatcher, times(3)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
     inOrder.verify(backoffPolicy1).nextBackoffNanos();
     assertThat(fakeClock.getPendingTasks(RPC_RETRY_TASK_FILTER)).hasSize(1);
 
@@ -2714,6 +2733,9 @@ public class XdsClientImplTest {
 
     // Management server closes the RPC stream.
     responseObserver.onCompleted();
+    verify(configWatcher, times(4)).onError(any(Status.class));
+    verify(clusterWatcher, times(4)).onError(any(Status.class));
+    verify(endpointWatcher, times(4)).onError(any(Status.class));
 
     // Resets backoff and retry immediately
     inOrder.verify(backoffPolicyProvider).get();
@@ -2735,6 +2757,12 @@ public class XdsClientImplTest {
 
     // Management server becomes unreachable again.
     responseObserver.onError(Status.UNAVAILABLE.asException());
+    verify(configWatcher, times(5)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
+    verify(clusterWatcher, times(5)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
+    verify(endpointWatcher, times(5)).onError(statusCaptor.capture());
+    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.UNAVAILABLE);
     inOrder.verify(backoffPolicy2).nextBackoffNanos();
     assertThat(fakeClock.getPendingTasks(RPC_RETRY_TASK_FILTER)).hasSize(1);
 
@@ -3044,11 +3072,6 @@ public class XdsClientImplTest {
     assertThat(cdsRespTimeoutTask.getDelay(TimeUnit.SECONDS))
         .isEqualTo(XdsClientImpl.INITIAL_RESOURCE_FETCH_TIMEOUT_SEC);
 
-    fakeClock.forwardTime(XdsClientImpl.INITIAL_RESOURCE_FETCH_TIMEOUT_SEC, TimeUnit.SECONDS);
-    ArgumentCaptor<Status> statusCaptor = ArgumentCaptor.forClass(null);
-    verify(clusterWatcher).onError(statusCaptor.capture());
-    assertThat(statusCaptor.getValue().getCode()).isEqualTo(Code.NOT_FOUND);
-
     // Start watching endpoint data.
     xdsClient.watchEndpointData("cluster-foo.googleapis.com", endpointWatcher);
     ScheduledTask edsTimeoutTask =