diff --git a/applicationset/controllers/applicationset_controller.go b/applicationset/controllers/applicationset_controller.go
index be73c81ca0c3f..5f1205caf384a 100644
--- a/applicationset/controllers/applicationset_controller.go
+++ b/applicationset/controllers/applicationset_controller.go
@@ -108,6 +108,18 @@ func (r *ApplicationSetReconciler) Reconcile(ctx context.Context, req ctrl.Reque
 
 	// Do not attempt to further reconcile the ApplicationSet if it is being deleted.
 	if applicationSetInfo.ObjectMeta.DeletionTimestamp != nil {
+		if controllerutil.ContainsFinalizer(&applicationSetInfo, argov1alpha1.ResourcesFinalizerName) {
+			deleteAllowed := utils.DefaultPolicy(applicationSetInfo.Spec.SyncPolicy, r.Policy, r.EnablePolicyOverride).AllowDelete()
+			if !deleteAllowed {
+				if err := r.removeOwnerReferencesOnDeleteAppSet(ctx, applicationSetInfo); err != nil {
+					return ctrl.Result{}, err
+				}
+				controllerutil.RemoveFinalizer(&applicationSetInfo, argov1alpha1.ResourcesFinalizerName)
+				if err := r.Update(ctx, &applicationSetInfo); err != nil {
+					return ctrl.Result{}, err
+				}
+			}
+		}
 		return ctrl.Result{}, nil
 	}
 
@@ -731,10 +743,9 @@ func (r *ApplicationSetReconciler) createInCluster(ctx context.Context, logCtx *
 	return r.createOrUpdateInCluster(ctx, logCtx, applicationSet, createApps)
 }
 
-func (r *ApplicationSetReconciler) getCurrentApplications(_ context.Context, applicationSet argov1alpha1.ApplicationSet) ([]argov1alpha1.Application, error) {
-	// TODO: Should this use the context param?
+func (r *ApplicationSetReconciler) getCurrentApplications(ctx context.Context, applicationSet argov1alpha1.ApplicationSet) ([]argov1alpha1.Application, error) {
 	var current argov1alpha1.ApplicationList
-	err := r.Client.List(context.Background(), &current, client.MatchingFields{".metadata.controller": applicationSet.Name}, client.InNamespace(applicationSet.Namespace))
+	err := r.Client.List(ctx, &current, client.MatchingFields{".metadata.controller": applicationSet.Name}, client.InNamespace(applicationSet.Namespace))
 
 	if err != nil {
 		return nil, fmt.Errorf("error retrieving applications: %w", err)
@@ -875,6 +886,23 @@ func (r *ApplicationSetReconciler) removeFinalizerOnInvalidDestination(ctx conte
 	return nil
 }
 
+func (r *ApplicationSetReconciler) removeOwnerReferencesOnDeleteAppSet(ctx context.Context, applicationSet argov1alpha1.ApplicationSet) error {
+	applications, err := r.getCurrentApplications(ctx, applicationSet)
+	if err != nil {
+		return err
+	}
+
+	for _, app := range applications {
+		app.SetOwnerReferences([]metav1.OwnerReference{})
+		err := r.Client.Update(ctx, &app)
+		if err != nil {
+			return err
+		}
+	}
+
+	return nil
+}
+
 func (r *ApplicationSetReconciler) performProgressiveSyncs(ctx context.Context, logCtx *log.Entry, appset argov1alpha1.ApplicationSet, applications []argov1alpha1.Application, desiredApplications []argov1alpha1.Application, appMap map[string]argov1alpha1.Application) (map[string]bool, error) {
 
 	appDependencyList, appStepMap, err := r.buildAppDependencyList(logCtx, appset, desiredApplications)
diff --git a/applicationset/controllers/applicationset_controller_test.go b/applicationset/controllers/applicationset_controller_test.go
index add37780e7077..65acce4b38edc 100644
--- a/applicationset/controllers/applicationset_controller_test.go
+++ b/applicationset/controllers/applicationset_controller_test.go
@@ -1593,6 +1593,81 @@ func TestRemoveFinalizerOnInvalidDestination_DestinationTypes(t *testing.T) {
 	}
 }
 
+func TestRemoveOwnerReferencesOnDeleteAppSet(t *testing.T) {
+	scheme := runtime.NewScheme()
+	err := v1alpha1.AddToScheme(scheme)
+	assert.Nil(t, err)
+
+	err = v1alpha1.AddToScheme(scheme)
+	assert.Nil(t, err)
+
+	for _, c := range []struct {
+		// name is human-readable test name
+		name string
+	}{
+		{
+			name: "ownerReferences cleared",
+		},
+	} {
+		t.Run(c.name, func(t *testing.T) {
+			appSet := v1alpha1.ApplicationSet{
+				ObjectMeta: metav1.ObjectMeta{
+					Name:       "name",
+					Namespace:  "namespace",
+					Finalizers: []string{v1alpha1.ResourcesFinalizerName},
+				},
+				Spec: v1alpha1.ApplicationSetSpec{
+					Template: v1alpha1.ApplicationSetTemplate{
+						Spec: v1alpha1.ApplicationSpec{
+							Project: "project",
+						},
+					},
+				},
+			}
+
+			app := v1alpha1.Application{
+				ObjectMeta: metav1.ObjectMeta{
+					Name:      "app1",
+					Namespace: "namespace",
+				},
+				Spec: v1alpha1.ApplicationSpec{
+					Project: "project",
+					Source:  &v1alpha1.ApplicationSource{Path: "path", TargetRevision: "revision", RepoURL: "repoURL"},
+					Destination: v1alpha1.ApplicationDestination{
+						Namespace: "namespace",
+						Server:    "https://kubernetes.default.svc",
+					},
+				},
+			}
+
+			err := controllerutil.SetControllerReference(&appSet, &app, scheme)
+			assert.NoError(t, err, "Unexpected error")
+
+			initObjs := []crtclient.Object{&app, &appSet}
+
+			client := fake.NewClientBuilder().WithScheme(scheme).WithObjects(initObjs...).WithIndex(&v1alpha1.Application{}, ".metadata.controller", appControllerIndexer).Build()
+
+			r := ApplicationSetReconciler{
+				Client:        client,
+				Scheme:        scheme,
+				Recorder:      record.NewFakeRecorder(10),
+				KubeClientset: nil,
+				Cache:         &fakeCache{},
+			}
+
+			err = r.removeOwnerReferencesOnDeleteAppSet(context.Background(), appSet)
+			assert.NoError(t, err, "Unexpected error")
+
+			retrievedApp := v1alpha1.Application{}
+			err = client.Get(context.Background(), crtclient.ObjectKeyFromObject(&app), &retrievedApp)
+			assert.NoError(t, err, "Unexpected error")
+
+			ownerReferencesRemoved := len(retrievedApp.OwnerReferences) == 0
+			assert.True(t, ownerReferencesRemoved)
+		})
+	}
+}
+
 func TestCreateApplications(t *testing.T) {
 
 	scheme := runtime.NewScheme()