diff --git a/flox/xarray.py b/flox/xarray.py
index 0a299d6d..11cf706d 100644
--- a/flox/xarray.py
+++ b/flox/xarray.py
@@ -312,6 +312,7 @@ def xarray_reduce(
         # skipna is not supported for all reductions
         # https://github.com/pydata/xarray/issues/8819
         kwargs = {"skipna": skipna} if skipna is not None else {}
+        kwargs.update(finalize_kwargs)
         result = getattr(ds_broad, func)(dim=dim_tuple, **kwargs)
         if isinstance(obj, xr.DataArray):
             return obj._from_temp_dataset(result)
diff --git a/tests/test_xarray.py b/tests/test_xarray.py
index 97b5674b..ecd63bbf 100644
--- a/tests/test_xarray.py
+++ b/tests/test_xarray.py
@@ -736,7 +736,7 @@ def test_direct_reduction(func):
 
     data = xr.DataArray(rand, dims=("x", "y"), coords={"x": [10, 20], "y": [0, 1, 2]})
     with xr.set_options(use_flox=True):
-        actual = getattr(data.groupby("x", squeeze=False), func)(**kwargs)
+        actual = xarray_reduce(data, "x", func=func, **kwargs)
     with xr.set_options(use_flox=False):
         expected = getattr(data.groupby("x", squeeze=False), func)(**kwargs)
     xr.testing.assert_identical(expected, actual)