diff --git a/python/ray/autoscaler/v2/tests/test_e2e.py b/python/ray/autoscaler/v2/tests/test_e2e.py
index 0e47200b0223..01899cf4334a 100644
--- a/python/ray/autoscaler/v2/tests/test_e2e.py
+++ b/python/ray/autoscaler/v2/tests/test_e2e.py
@@ -3,7 +3,9 @@
 import time
 from typing import Dict
 
+import grpc
 import pytest
+from grpc._channel import _InactiveRpcError
 
 import ray
 from ray._private.resource_spec import HEAD_NODE_RESOURCE_NAME
@@ -12,6 +14,7 @@
 from ray._raylet import GcsClient
 from ray.autoscaler.v2.sdk import get_cluster_status
 from ray.cluster_utils import AutoscalingCluster
+from ray.core.generated import node_manager_pb2, node_manager_pb2_grpc
 from ray.core.generated.usage_pb2 import TagKey
 from ray.util.placement_group import placement_group, remove_placement_group
 from ray.util.state.api import list_placement_groups, list_tasks
@@ -323,6 +326,104 @@ def verify():
         cluster.shutdown()
 
 
+@pytest.mark.parametrize("autoscaler_v2", [False, True], ids=["v1", "v2"])
+def test_placement_group_reschedule_node_dead(autoscaler_v2):
+    # Test autoscaler reschedules placement group when node dies.
+    # Note that it should only provision nodes for the bundles that haven't been placed.
+
+    cluster = AutoscalingCluster(
+        head_resources={"CPU": 0},
+        worker_node_types={
+            "type-1": {
+                "resources": {"R1": 1},
+                "node_config": {},
+                "min_workers": 0,
+                "max_workers": 2,
+            },
+            "type-2": {
+                "resources": {"R2": 1},
+                "node_config": {},
+                "min_workers": 0,
+                "max_workers": 2,
+            },
+            "type-3": {
+                "resources": {"R3": 1},
+                "node_config": {},
+                "min_workers": 0,
+                "max_workers": 2,
+            },
+        },
+        autoscaler_v2=autoscaler_v2,
+    )
+
+    try:
+        cluster.start()
+        ray.init("auto")
+        gcs_address = ray.get_runtime_context().gcs_address
+
+        pg = placement_group([{"R1": 1}, {"R2": 1}, {"R3": 1}])
+
+        ray.get(pg.ready())
+
+        from ray.autoscaler.v2.sdk import get_cluster_status
+
+        def verify_nodes(active=3, idle=1):
+            cluster_state = get_cluster_status(gcs_address)
+            assert len(cluster_state.active_nodes) == active
+            assert len(cluster_state.idle_nodes) == idle
+            return True
+
+        # 3 worker nodes, 1 head node (idle)
+        wait_for_condition(lambda: verify_nodes(3, 1))
+
+        # Kill a node
+        def kill_raylet(ip, port, graceful=True):
+            raylet_address = f"{ip}:{port}"
+            channel = grpc.insecure_channel(raylet_address)
+            stub = node_manager_pb2_grpc.NodeManagerServiceStub(channel)
+            print(f"Sending a shutdown request to {ip}:{port}")
+            try:
+                stub.ShutdownRaylet(
+                    node_manager_pb2.ShutdownRayletRequest(graceful=graceful)
+                )
+            except _InactiveRpcError:
+                assert not graceful
+
+        def kill_node(node_id):
+            # kill -9
+            import subprocess
+
+            cmd = f"ps aux | grep {node_id} | grep -v grep | awk '{{print $2}}'"
+            pid = subprocess.check_output(cmd, shell=True).decode("utf-8").strip()
+            print(f"Killing pid {pid}")
+            # kill the pid
+            cmd = f"kill -9 {pid}"
+            subprocess.check_output(cmd, shell=True)
+
+        # Kill a worker node with 'R1' in resources
+        for n in ray.nodes():
+            if "R1" in n["Resources"]:
+                node = n
+                break
+
+        # TODO(mimi): kill_raylet won't trigger reschedule in autoscaler v1
+        # kill_raylet(node["NodeManagerAddress"], node["NodeManagerPort"])
+        kill_node(node["NodeID"])
+
+        # Wait for the node to be removed
+        wait_for_condition(lambda: verify_nodes(2, 1), 20)
+
+        # Check that the placement group is rescheduled
+
+        # Only provision nodes for unplaced bundles;
+        # avoid rescheduling the whole placement group.
+        wait_for_condition(lambda: verify_nodes(3, 1))
+
+    finally:
+        ray.shutdown()
+        cluster.shutdown()
+
+
 def test_object_store_memory_idle_node(shutdown_only):
 
     ray.init()