diff --git a/test/e2e/azure_test.go b/test/e2e/azure_test.go
index 0717dc1978a..9fc53783458 100644
--- a/test/e2e/azure_test.go
+++ b/test/e2e/azure_test.go
@@ -1154,7 +1154,56 @@ var _ = Describe("Workload cluster creation", func() {
 		})
 	})
 
-	Context("Creating a self-managed VM based cluster using API Server ILB feature gate [OPTIONAL][API-Server-ILB]", func() {
+	Context("Creating a self-managed VM based cluster using API Server ILB feature gate using default template [OPTIONAL][API-Server-ILB]", func() {
+		It("with three controlplane node and three worker nodes", func() {
+			clusterName = getClusterName(clusterNamePrefix, "apiserver-ilb")
+
+			// Set the environment variables required for the API Server ILB feature gate
+			Expect(os.Setenv("EXP_APISERVER_ILB", "true")).To(Succeed())
+			// Expect(os.Setenv("AZURE_INTERNAL_LB_PRIVATE_IP", "40.0.0.100")).To(Succeed())
+			// Expect(os.Setenv("AZURE_VNET_CIDR", "40.0.0.0/8")).To(Succeed())
+			// Expect(os.Setenv("AZURE_CP_SUBNET_CIDR", "40.0.0.0/16")).To(Succeed())
+			// Expect(os.Setenv("AZURE_NODE_SUBNET_CIDR", "40.1.0.0/16")).To(Succeed())
+
+			clusterctl.ApplyClusterTemplateAndWait(ctx, createApplyClusterTemplateInput(
+				specName,
+				withNamespace(namespace.Name),
+				withClusterName(clusterName),
+				withControlPlaneMachineCount(3),
+				withWorkerMachineCount(2),
+				withControlPlaneInterval(specName, "wait-control-plane-ha"),
+				withControlPlaneWaiters(clusterctl.ControlPlaneWaiters{
+					WaitForControlPlaneInitialized: EnsureControlPlaneInitializedNoAddons,
+				}),
+				withPostMachinesProvisioned(func() {
+					EnsureDaemonsets(ctx, func() DaemonsetsSpecInput {
+						return DaemonsetsSpecInput{
+							BootstrapClusterProxy: bootstrapClusterProxy,
+							Namespace:             namespace,
+							ClusterName:           clusterName,
+						}
+					})
+				}),
+			), result)
+
+			By("Probing workload cluster with APIServerILB feature gate", func() {
+				AzureAPIServerILBSpec(ctx, func() AzureAPIServerILBSpecInput {
+					return AzureAPIServerILBSpecInput{
+						BootstrapClusterProxy: bootstrapClusterProxy,
+						Cluster:               result.Cluster,
+						Namespace:             namespace,
+						ClusterName:           clusterName,
+						ExpectedWorkerNodes:   result.ExpectedWorkerNodes(),
+						WaitIntervals:         e2eConfig.GetIntervals(specName, "wait-worker-nodes"),
+					}
+				})
+			})
+
+			By("PASSED!")
+		})
+	})
+
+	Context("Creating a self-managed VM based cluster using API Server ILB feature gate and fully spec-ed out template [OPTIONAL][API-Server-ILB]", func() {
 		It("with three controlplane node and three worker nodes", func() {
 			clusterName = getClusterName(clusterNamePrefix, "apiserver-ilb")