diff --git a/homeassistant/components/esphome/manager.py b/homeassistant/components/esphome/manager.py
index b897ffc9408..f197574c30a 100644
--- a/homeassistant/components/esphome/manager.py
+++ b/homeassistant/components/esphome/manager.py
@@ -383,6 +383,17 @@ class ESPHomeManager:
             self.voice_assistant_udp_server.stop()
 
     async def on_connect(self) -> None:
+        """Subscribe to states and list entities on successful API login."""
+        try:
+            await self._on_connnect()
+        except APIConnectionError as err:
+            _LOGGER.warning(
+                "Error getting setting up connection for %s: %s", self.host, err
+            )
+            # Re-connection logic will trigger after this
+            await self.cli.disconnect()
+
+    async def _on_connnect(self) -> None:
         """Subscribe to states and list entities on successful API login."""
         entry = self.entry
         unique_id = entry.unique_id
@@ -393,16 +404,10 @@ class ESPHomeManager:
         cli = self.cli
         stored_device_name = entry.data.get(CONF_DEVICE_NAME)
         unique_id_is_mac_address = unique_id and ":" in unique_id
-        try:
-            results = await asyncio.gather(
-                cli.device_info(),
-                cli.list_entities_services(),
-            )
-        except APIConnectionError as err:
-            _LOGGER.warning("Error getting device info for %s: %s", self.host, err)
-            # Re-connection logic will trigger after this
-            await cli.disconnect()
-            return
+        results = await asyncio.gather(
+            cli.device_info(),
+            cli.list_entities_services(),
+        )
 
         device_info: EsphomeDeviceInfo = results[0]
         entity_infos_services: tuple[list[EntityInfo], list[UserService]] = results[1]
@@ -487,18 +492,12 @@ class ESPHomeManager:
                 )
             )
 
-        try:
-            setup_results = await asyncio.gather(
-                *setup_coros_with_disconnect_callbacks,
-                cli.subscribe_states(entry_data.async_update_state),
-                cli.subscribe_service_calls(self.async_on_service_call),
-                cli.subscribe_home_assistant_states(self.async_on_state_subscription),
-            )
-        except APIConnectionError as err:
-            _LOGGER.warning("Error getting initial data for %s: %s", self.host, err)
-            # Re-connection logic will trigger after this
-            await cli.disconnect()
-            return
+        setup_results = await asyncio.gather(
+            *setup_coros_with_disconnect_callbacks,
+            cli.subscribe_states(entry_data.async_update_state),
+            cli.subscribe_service_calls(self.async_on_service_call),
+            cli.subscribe_home_assistant_states(self.async_on_state_subscription),
+        )
 
         for result_idx in range(len(setup_coros_with_disconnect_callbacks)):
             cancel_callback = setup_results[result_idx]
diff --git a/tests/components/esphome/conftest.py b/tests/components/esphome/conftest.py
index 0ac940018d7..8c46fac08d4 100644
--- a/tests/components/esphome/conftest.py
+++ b/tests/components/esphome/conftest.py
@@ -90,6 +90,10 @@ class BaseMockReconnectLogic(ReconnectLogic):
         self._cancel_connect("forced disconnect from test")
         self._is_stopped = True
 
+    async def stop(self) -> None:
+        """Stop the reconnect logic."""
+        self.stop_callback()
+
 
 @pytest.fixture
 def mock_device_info() -> DeviceInfo:
diff --git a/tests/components/esphome/test_manager.py b/tests/components/esphome/test_manager.py
index 96a8a341308..474b1a757fb 100644
--- a/tests/components/esphome/test_manager.py
+++ b/tests/components/esphome/test_manager.py
@@ -4,6 +4,7 @@ from unittest.mock import AsyncMock, call
 
 from aioesphomeapi import (
     APIClient,
+    APIConnectionError,
     DeviceInfo,
     EntityInfo,
     EntityState,
@@ -510,8 +511,11 @@ async def test_connection_aborted_wrong_device(
         "with mac address `11:22:33:44:55:ab`" in caplog.text
     )
 
+    assert "Error getting setting up connection for" not in caplog.text
+    assert len(mock_client.disconnect.mock_calls) == 1
+    mock_client.disconnect.reset_mock()
     caplog.clear()
-    # Make sure discovery triggers a reconnect to the correct device
+    # Make sure discovery triggers a reconnect
     service_info = dhcp.DhcpServiceInfo(
         ip="192.168.43.184",
         hostname="test",
@@ -533,6 +537,35 @@ async def test_connection_aborted_wrong_device(
     assert "Unexpected device found at" not in caplog.text
 
 
+async def test_failure_during_connect(
+    hass: HomeAssistant,
+    mock_client: APIClient,
+    mock_zeroconf: None,
+    caplog: pytest.LogCaptureFixture,
+) -> None:
+    """Test we disconnect when there is a failure during connection setup."""
+    entry = MockConfigEntry(
+        domain=DOMAIN,
+        data={
+            CONF_HOST: "192.168.43.183",
+            CONF_PORT: 6053,
+            CONF_PASSWORD: "",
+            CONF_DEVICE_NAME: "test",
+        },
+        unique_id="11:22:33:44:55:aa",
+    )
+    entry.add_to_hass(hass)
+
+    mock_client.device_info = AsyncMock(side_effect=APIConnectionError("fail"))
+
+    await hass.config_entries.async_setup(entry.entry_id)
+    await hass.async_block_till_done()
+
+    assert "Error getting setting up connection for" in caplog.text
+    # Ensure we disconnect so that the reconnect logic is triggered
+    assert len(mock_client.disconnect.mock_calls) == 1
+
+
 async def test_state_subscription(
     mock_client: APIClient,
     hass: HomeAssistant,