diff --git a/node/env_test.go b/node/env_test.go
index 4c73bcf90..7a3448351 100644
--- a/node/env_test.go
+++ b/node/env_test.go
@@ -16,6 +16,7 @@ import (
 	corev1 "k8s.io/api/core/v1"
 	"k8s.io/apimachinery/pkg/api/errors"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	"k8s.io/apimachinery/pkg/fields"
 	"k8s.io/client-go/kubernetes"
 	klogv2 "k8s.io/klog/v2"
 	"sigs.k8s.io/controller-runtime/pkg/envtest"
@@ -42,9 +43,11 @@ func TestEnvtest(t *testing.T) {
 	t.Run("E2ERunWithLeases", wrapE2ETest(ctx, env, func(ctx context.Context, t *testing.T, environment *envtest.Environment) {
 		testNodeE2ERun(t, env, true)
 	}))
+
+	t.Run("E2EPodStatusUpdate", wrapE2ETest(ctx, env, testPodStatusUpdate))
 }
 
-func nodeNameForTest(t *testing.T) string {
+func kubernetesNameForTest(t *testing.T) string {
 	name := t.Name()
 	name = strings.ToLower(name)
 	name = strings.ReplaceAll(name, "/", "-")
@@ -67,6 +70,72 @@ func wrapE2ETest(ctx context.Context, env *envtest.Environment, f func(context.C
 	}
 }
 
+func testPodStatusUpdate(ctx context.Context, t *testing.T, env *envtest.Environment) {
+	provider := newMockProvider()
+
+	clientset, err := kubernetes.NewForConfig(env.Config)
+	assert.NilError(t, err)
+	pods := clientset.CoreV1().Pods(testNamespace)
+
+	assert.NilError(t, wireUpSystemWithClient(ctx, provider, clientset, func(ctx context.Context, s *system) {
+		p := newPod(forRealAPIServer, nameBasedOnTest(t))
+		// In real API server, we don't set the resource version
+		p.ResourceVersion = ""
+		newPod, err := pods.Create(ctx, p, metav1.CreateOptions{})
+		assert.NilError(t, err)
+
+		key, err := buildKey(newPod)
+		assert.NilError(t, err)
+
+		listOptions := metav1.ListOptions{
+			FieldSelector: fields.OneTermEqualSelector("metadata.name", p.ObjectMeta.Name).String(),
+		}
+
+		// Setup a watch to check if the pod is in running
+		watcher, err := s.client.CoreV1().Pods(testNamespace).Watch(ctx, listOptions)
+		assert.NilError(t, err)
+		defer watcher.Stop()
+		// Start the pod controller
+		assert.NilError(t, s.start(ctx))
+		var serverPod *corev1.Pod
+		for {
+			select {
+			case <-ctx.Done():
+				t.Fatalf("Context ended early: %s", ctx.Err().Error())
+			case ev := <-watcher.ResultChan():
+				serverPod = ev.Object.(*corev1.Pod)
+				if serverPod.Status.Phase == corev1.PodRunning {
+					goto running
+				}
+			}
+		}
+	running:
+		t.Log("Observed pod in running state")
+
+		providerPod, ok := provider.pods.Load(key)
+		assert.Assert(t, ok)
+		providerPodCopy := providerPod.(*corev1.Pod).DeepCopy()
+		providerPodCopy.Status = serverPod.Status
+		if providerPodCopy.Annotations == nil {
+			providerPodCopy.Annotations = make(map[string]string, 1)
+		}
+		providerPodCopy.Annotations["testannotation"] = "testvalue"
+		provider.notifier(providerPodCopy)
+
+		for {
+			select {
+			case <-ctx.Done():
+				t.Fatalf("Context ended early: %s", ctx.Err().Error())
+			case ev := <-watcher.ResultChan():
+				annotations := ev.Object.(*corev1.Pod).Annotations
+				if annotations != nil && annotations["testannotation"] == "testvalue" {
+					return
+				}
+			}
+		}
+	}))
+}
+
 func testNodeE2ERun(t *testing.T, env *envtest.Environment, withLeases bool) {
 	ctx, cancel := context.WithCancel(context.Background())
 	defer cancel()
@@ -81,7 +150,7 @@ func testNodeE2ERun(t *testing.T, env *envtest.Environment, withLeases bool) {
 
 	testNode := &corev1.Node{
 		ObjectMeta: metav1.ObjectMeta{
-			Name: nodeNameForTest(t),
+			Name: kubernetesNameForTest(t),
 		},
 	}
 
diff --git a/node/lifecycle_test.go b/node/lifecycle_test.go
index 2c8a951ed..e455117a7 100644
--- a/node/lifecycle_test.go
+++ b/node/lifecycle_test.go
@@ -628,6 +628,17 @@ func randomizeName(pod *corev1.Pod) {
 	pod.Name = name
 }
 
+func forRealAPIServer(pod *corev1.Pod) {
+	pod.ResourceVersion = ""
+	pod.ObjectMeta.UID = ""
+}
+
+func nameBasedOnTest(t *testing.T) podModifier {
+	return func(pod *corev1.Pod) {
+		pod.Name = kubernetesNameForTest(t)
+	}
+}
+
 func newPod(podmodifiers ...podModifier) *corev1.Pod {
 	var terminationGracePeriodSeconds int64 = 30
 	pod := &corev1.Pod{
diff --git a/node/pod.go b/node/pod.go
index e323b468e..bd538c5cb 100644
--- a/node/pod.go
+++ b/node/pod.go
@@ -215,14 +215,7 @@ func (pc *PodController) updatePodStatus(ctx context.Context, podFromKubernetes
 	}
 	kPod := obj.(*knownPod)
 	kPod.Lock()
-
 	podFromProvider := kPod.lastPodStatusReceivedFromProvider.DeepCopy()
-	if cmp.Equal(podFromKubernetes.Status, podFromProvider.Status) && podFromProvider.DeletionTimestamp == nil {
-		kPod.lastPodStatusUpdateSkipped = true
-		kPod.Unlock()
-		return nil
-	}
-	kPod.lastPodStatusUpdateSkipped = false
 	kPod.Unlock()
 	// Pod deleted by provider due some reasons. e.g. a K8s provider, pod created by deployment would be evicted when node is not ready.
 	// If we do not delete pod in K8s, deployment would not create a new one.
@@ -326,9 +319,11 @@ func (pc *PodController) enqueuePodStatusUpdate(ctx context.Context, pod *corev1
 	kpod := obj.(*knownPod)
 	kpod.Lock()
 	if cmp.Equal(kpod.lastPodStatusReceivedFromProvider, pod) {
+		kpod.lastPodStatusUpdateSkipped = true
 		kpod.Unlock()
 		return
 	}
+	kpod.lastPodStatusUpdateSkipped = false
 	kpod.lastPodStatusReceivedFromProvider = pod
 	kpod.Unlock()
 	pc.syncPodStatusFromProvider.Enqueue(ctx, key)
diff --git a/node/podcontroller.go b/node/podcontroller.go
index 4add45566..d1731bf65 100644
--- a/node/podcontroller.go
+++ b/node/podcontroller.go
@@ -339,7 +339,11 @@ func (pc *PodController) Run(ctx context.Context, podSyncWorkers int) (retErr er
 
 				kPod := obj.(*knownPod)
 				kPod.Lock()
-				if kPod.lastPodStatusUpdateSkipped && !cmp.Equal(newPod.Status, kPod.lastPodStatusReceivedFromProvider.Status) {
+				if kPod.lastPodStatusUpdateSkipped &&
+					(!cmp.Equal(newPod.Status, kPod.lastPodStatusReceivedFromProvider.Status) ||
+						!cmp.Equal(newPod.Annotations, kPod.lastPodStatusReceivedFromProvider.Annotations) ||
+						!cmp.Equal(newPod.Labels, kPod.lastPodStatusReceivedFromProvider.Labels) ||
+						!cmp.Equal(newPod.Finalizers, kPod.lastPodStatusReceivedFromProvider.Finalizers)) {
 					// The last pod from the provider -> kube api server was skipped, but we see they no longer match.
 					// This means that the pod in API server was changed by someone else [this can be okay], but we skipped
 					// a status update on our side because we compared the status received from the provider to the status