diff --git a/test/e2e/functional/workflow-exit-handler-sleep.yaml b/test/e2e/functional/workflow-exit-handler-sleep.yaml
new file mode 100644
index 000000000000..260b60b2e331
--- /dev/null
+++ b/test/e2e/functional/workflow-exit-handler-sleep.yaml
@@ -0,0 +1,20 @@
+apiVersion: argoproj.io/v1alpha1
+kind: Workflow
+metadata:
+  name: workflow-exit-handler-sleep
+spec:
+  entrypoint: argosay-template
+  onExit: exit-handler
+  templates:
+  - name: argosay-template
+    container:
+      image: argoproj/argosay:v2
+      args: ["echo", "hello-world"]
+  - name: sleep
+    container:
+      image: argoproj/argosay:v2
+      args: ["sleep", "600"]
+  - name: exit-handler
+    steps:
+      - - name: exit-handler-task
+          template: sleep
diff --git a/test/e2e/functional_test.go b/test/e2e/functional_test.go
index 76b270394fb1..30e872f1b707 100644
--- a/test/e2e/functional_test.go
+++ b/test/e2e/functional_test.go
@@ -12,6 +12,7 @@ import (
 	"github.com/stretchr/testify/suite"
 	apiv1 "k8s.io/api/core/v1"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	v1 "k8s.io/apimachinery/pkg/apis/meta/v1"
 	"k8s.io/apimachinery/pkg/types"
 
 	"github.com/argoproj/argo-workflows/v3/pkg/apis/workflow"
@@ -1346,3 +1347,28 @@ func (s *FunctionalSuite) TestWithItemsWithHooks() {
 		SubmitWorkflow().
 		WaitForWorkflow(fixtures.ToBeSucceeded)
 }
+
+// when you terminate a workflow with onexit handler,
+// then the onexit handler should fail along with steps and stepsGroup
+func (s *FunctionalSuite) TestTerminateWorkflowWhileOnExitHandlerRunning() {
+	s.Given().
+		Workflow("@functional/workflow-exit-handler-sleep.yaml").
+		When().
+		SubmitWorkflow().
+		WaitForWorkflow(fixtures.ToBeRunning).
+		WaitForWorkflow(fixtures.Condition(func(wf *wfv1.Workflow) (bool, string) {
+			a := wf.Status.Nodes.FindByDisplayName("workflow-exit-handler-sleep")
+			return wfv1.NodeSucceeded == a.Phase, "nodes succeeded"
+		})).
+		ShutdownWorkflow(wfv1.ShutdownStrategyTerminate).
+		WaitForWorkflow(fixtures.ToBeFailed).
+		Then().
+		ExpectWorkflow(func(t *testing.T, metadata *v1.ObjectMeta, status *wfv1.WorkflowStatus) {
+			for _, node := range status.Nodes {
+				if node.Type == wfv1.NodeTypeStepGroup || node.Type == wfv1.NodeTypeSteps {
+					assert.Equal(t, node.Phase, wfv1.NodeFailed)
+				}
+			}
+			assert.Equal(t, status.Phase, wfv1.WorkflowFailed)
+		})
+}
diff --git a/workflow/controller/operator.go b/workflow/controller/operator.go
index 6e3bc5adfbac..c400c556f03b 100644
--- a/workflow/controller/operator.go
+++ b/workflow/controller/operator.go
@@ -438,38 +438,42 @@ func (woc *wfOperationCtx) operate(ctx context.Context) {
 	}
 
 	var onExitNode *wfv1.NodeStatus
-	if woc.execWf.Spec.HasExitHook() && woc.GetShutdownStrategy().ShouldExecute(true) {
+	if woc.execWf.Spec.HasExitHook() {
 		woc.log.Infof("Running OnExit handler: %s", woc.execWf.Spec.OnExit)
 		onExitNodeName := common.GenerateOnExitNodeName(woc.wf.ObjectMeta.Name)
-		exitHook := woc.execWf.Spec.GetExitHook(woc.execWf.Spec.Arguments)
-		onExitNode, err = woc.executeTemplate(ctx, onExitNodeName, &wfv1.WorkflowStep{Template: exitHook.Template, TemplateRef: exitHook.TemplateRef}, tmplCtx, exitHook.Arguments, &executeTemplateOpts{
-			onExitTemplate: true, nodeFlag: &wfv1.NodeFlag{Hooked: true}})
-		if err != nil {
-			x := fmt.Errorf("error in exit template execution : %w", err)
-			switch err {
-			case ErrDeadlineExceeded:
-				woc.eventRecorder.Event(woc.wf, apiv1.EventTypeWarning, "WorkflowTimedOut", x.Error())
-			case ErrParallelismReached:
-			default:
-				if !errorsutil.IsTransientErr(err) && !woc.wf.Status.Phase.Completed() && os.Getenv("BUBBLE_ENTRY_TEMPLATE_ERR") != "false" {
-					woc.markWorkflowError(ctx, x)
-
-					// Garbage collect PVCs if Onexit template execution returns error
-					if err := woc.deletePVCs(ctx); err != nil {
-						woc.log.WithError(err).Warn("failed to delete PVCs")
+		onExitNode, _ = woc.execWf.GetNodeByName(onExitNodeName)
+		if onExitNode != nil || woc.GetShutdownStrategy().ShouldExecute(true) {
+			exitHook := woc.execWf.Spec.GetExitHook(woc.execWf.Spec.Arguments)
+			onExitNode, err = woc.executeTemplate(ctx, onExitNodeName, &wfv1.WorkflowStep{Template: exitHook.Template, TemplateRef: exitHook.TemplateRef}, tmplCtx, exitHook.Arguments, &executeTemplateOpts{
+				onExitTemplate: true, nodeFlag: &wfv1.NodeFlag{Hooked: true},
+			})
+			if err != nil {
+				x := fmt.Errorf("error in exit template execution : %w", err)
+				switch err {
+				case ErrDeadlineExceeded:
+					woc.eventRecorder.Event(woc.wf, apiv1.EventTypeWarning, "WorkflowTimedOut", x.Error())
+				case ErrParallelismReached:
+				default:
+					if !errorsutil.IsTransientErr(err) && !woc.wf.Status.Phase.Completed() && os.Getenv("BUBBLE_ENTRY_TEMPLATE_ERR") != "false" {
+						woc.markWorkflowError(ctx, x)
+
+						// Garbage collect PVCs if Onexit template execution returns error
+						if err := woc.deletePVCs(ctx); err != nil {
+							woc.log.WithError(err).Warn("failed to delete PVCs")
+						}
 					}
 				}
+				return
 			}
-			return
-		}
 
-		// If the onExit node (or any child of the onExit node) requires HTTP reconciliation, do it here
-		if onExitNode != nil && woc.nodeRequiresTaskSetReconciliation(onExitNode.Name) {
-			woc.taskSetReconciliation(ctx)
-		}
+			// If the onExit node (or any child of the onExit node) requires HTTP reconciliation, do it here
+			if onExitNode != nil && woc.nodeRequiresTaskSetReconciliation(onExitNode.Name) {
+				woc.taskSetReconciliation(ctx)
+			}
 
-		if onExitNode == nil || !onExitNode.Fulfilled() {
-			return
+			if onExitNode == nil || !onExitNode.Fulfilled() {
+				return
+			}
 		}
 	}