diff --git a/src/main/kotlin/org/opensearch/indexmanagement/indexstatemanagement/ISMActionsParser.kt b/src/main/kotlin/org/opensearch/indexmanagement/indexstatemanagement/ISMActionsParser.kt
index e520c58ff..9b0160658 100644
--- a/src/main/kotlin/org/opensearch/indexmanagement/indexstatemanagement/ISMActionsParser.kt
+++ b/src/main/kotlin/org/opensearch/indexmanagement/indexstatemanagement/ISMActionsParser.kt
@@ -91,9 +91,9 @@ class ISMActionsParser private constructor() {
                 Action.CUSTOM_ACTION_FIELD -> {
                     // The "custom" wrapper allows extensions to create arbitrary actions without updating the config mappings
                     // We consume the full custom wrapper and parse the action in this step
-                    XContentParserUtils.ensureExpectedToken(XContentParser.Token.START_OBJECT, xcp.nextToken(), xcp)
-                    val customActionType = xcp.currentName()
                     XContentParserUtils.ensureExpectedToken(XContentParser.Token.FIELD_NAME, xcp.nextToken(), xcp)
+                    val customActionType = xcp.currentName()
+                    XContentParserUtils.ensureExpectedToken(XContentParser.Token.START_OBJECT, xcp.nextToken(), xcp)
                     action = parseAction(xcp, totalActions, customActionType)
                     XContentParserUtils.ensureExpectedToken(XContentParser.Token.END_OBJECT, xcp.nextToken(), xcp)
                 }
diff --git a/src/test/kotlin/org/opensearch/indexmanagement/indexstatemanagement/extension/ISMActionsParserTests.kt b/src/test/kotlin/org/opensearch/indexmanagement/indexstatemanagement/extension/ISMActionsParserTests.kt
index 69d238aa5..103cd92a9 100644
--- a/src/test/kotlin/org/opensearch/indexmanagement/indexstatemanagement/extension/ISMActionsParserTests.kt
+++ b/src/test/kotlin/org/opensearch/indexmanagement/indexstatemanagement/extension/ISMActionsParserTests.kt
@@ -72,4 +72,19 @@ class ISMActionsParserTests : OpenSearchTestCase() {
         assertEquals("Round tripping custom action doesn't work", customAction.convertToMap(), parsedCustomAction.convertToMap())
         assertTrue("Custom action did not have custom keyword after parsing", parsedCustomAction.convertToMap().containsKey("custom"))
     }
+
+    fun `test parsing custom action with custom flag`() {
+        val customActionParser = SampleCustomActionParser()
+        ISMActionsParser.instance.addParser(customActionParser, extensionName)
+        val customAction = SampleCustomActionParser.SampleCustomAction(randomInt(), 0)
+        customAction.customAction = true
+
+        val customActionString = "{\"retry\":{\"count\":3,\"backoff\":\"exponential\",\"delay\":\"1m\"},\"custom\": {\"some_custom_action\":{\"some_int_field\":${customAction.someInt}}}}"
+        val parser = XContentType.JSON.xContent().createParser(xContentRegistry(), LoggingDeprecationHandler.INSTANCE, customActionString)
+        parser.nextToken()
+        val parsedCustomAction = ISMActionsParser.instance.parse(parser, 1)
+        assertTrue("Action was not set to be custom after parsing", parsedCustomAction.customAction)
+        assertEquals("Round tripping custom action doesn't work", customAction.convertToMap(), parsedCustomAction.convertToMap())
+        assertTrue("Custom action did not have custom keyword after parsing", parsedCustomAction.convertToMap().containsKey("custom"))
+    }
 }