diff --git a/controllers/machine_controller.go b/controllers/machine_controller.go
index ccd94b3475c2..a6940ee188ec 100644
--- a/controllers/machine_controller.go
+++ b/controllers/machine_controller.go
@@ -81,6 +81,7 @@ type MachineReconciler struct {
 	// WatchFilterValue is the label value used to filter events prior to reconciliation.
 	WatchFilterValue string
 
+	// WaitForNodeDeletion causes the reconciler to error when a node deletion fails, instead of ignoring it.
 	WaitForNodeDeletion bool
 
 	controller      controller.Controller
diff --git a/controllers/machine_controller_test.go b/controllers/machine_controller_test.go
index 645be1fcb516..3b06fd5ab38c 100644
--- a/controllers/machine_controller_test.go
+++ b/controllers/machine_controller_test.go
@@ -17,6 +17,7 @@ limitations under the License.
 package controllers
 
 import (
+	"context"
 	"testing"
 	"time"
 
@@ -1853,6 +1854,115 @@ func TestNodeToMachine(t *testing.T) {
 	}
 }
 
+// TODO: We should add a test for the --wait-for-node-deletion flag. This requires error injection
+// in the fakeclient, which isn't supported yet. There is a very recent issue to track this:
+// https://github.com/kubernetes-sigs/controller-runtime/issues/1702
+func TestNodeDeletion(t *testing.T) {
+	g := NewWithT(t)
+
+	time := metav1.Now()
+
+	testCluster := clusterv1.Cluster{
+		ObjectMeta: metav1.ObjectMeta{
+			Name:      "test-cluster",
+			Namespace: metav1.NamespaceDefault,
+		},
+	}
+
+	node := &corev1.Node{
+		ObjectMeta: metav1.ObjectMeta{
+			Name: "test",
+		},
+		Spec: corev1.NodeSpec{ProviderID: "test://id-1"},
+	}
+
+	testMachine := clusterv1.Machine{
+		ObjectMeta: metav1.ObjectMeta{
+			Name:      "test",
+			Namespace: metav1.NamespaceDefault,
+			Labels: map[string]string{
+				clusterv1.MachineControlPlaneLabelName: "",
+			},
+			Annotations: map[string]string{
+				"machine.cluster.x-k8s.io/exclude-node-draining": "",
+			},
+			Finalizers:        []string{clusterv1.MachineFinalizer},
+			DeletionTimestamp: &time,
+		},
+		Spec: clusterv1.MachineSpec{
+			ClusterName: "test-cluster",
+			InfrastructureRef: corev1.ObjectReference{
+				APIVersion: "infrastructure.cluster.x-k8s.io/v1beta1",
+				Kind:       "GenericInfrastructureMachine",
+				Name:       "infra-config1",
+			},
+			Bootstrap: clusterv1.Bootstrap{DataSecretName: pointer.StringPtr("data")},
+		},
+		Status: clusterv1.MachineStatus{
+			NodeRef: &corev1.ObjectReference{
+				Name: "test",
+			},
+		},
+	}
+
+	cpmachine1 := &clusterv1.Machine{
+		ObjectMeta: metav1.ObjectMeta{
+			Name:      "cp1",
+			Namespace: metav1.NamespaceDefault,
+			Labels: map[string]string{
+				clusterv1.ClusterLabelName:             "test-cluster",
+				clusterv1.MachineControlPlaneLabelName: "",
+			},
+			Finalizers: []string{clusterv1.MachineFinalizer},
+		},
+		Spec: clusterv1.MachineSpec{
+			ClusterName:       "test-cluster",
+			InfrastructureRef: corev1.ObjectReference{},
+			Bootstrap:         clusterv1.Bootstrap{DataSecretName: pointer.StringPtr("data")},
+		},
+		Status: clusterv1.MachineStatus{
+			NodeRef: &corev1.ObjectReference{
+				Name: "cp1",
+			},
+		},
+	}
+
+	testCases := []struct {
+		waitForDeletion bool
+		resultErr       bool
+	}{
+		{
+			waitForDeletion: false,
+			resultErr:       false,
+		},
+	}
+
+	for _, tc := range testCases {
+		m := testMachine.DeepCopy()
+
+		fc := fake.NewClientBuilder().
+			WithObjects(node, m, cpmachine1).
+			Build()
+		tracker := remote.NewTestClusterCacheTracker(log.NullLogger{}, fc, fakeScheme, client.ObjectKeyFromObject(&testCluster))
+
+		r := &MachineReconciler{
+			WaitForNodeDeletion: tc.waitForDeletion,
+			Client:              fc,
+			Tracker:             tracker,
+		}
+
+		_, err := r.reconcileDelete(context.Background(), &testCluster, m)
+
+		if tc.resultErr {
+			g.Expect(err).To(HaveOccurred())
+		} else {
+			g.Expect(err).NotTo(HaveOccurred())
+			n := &corev1.Node{}
+			g.Expect(fc.Get(context.Background(), client.ObjectKeyFromObject(node), n)).NotTo(Succeed())
+		}
+	}
+}
+
 // adds a condition list to an external object.
 func addConditionsToExternal(u *unstructured.Unstructured, newConditions clusterv1.Conditions) {
 	existingConditions := clusterv1.Conditions{}