diff --git a/src/protocols/secure_channel/CASEServer.cpp b/src/protocols/secure_channel/CASEServer.cpp
index b0d74694a5196b..082be87c0a5f0e 100644
--- a/src/protocols/secure_channel/CASEServer.cpp
+++ b/src/protocols/secure_channel/CASEServer.cpp
@@ -73,6 +73,21 @@ CHIP_ERROR CASEServer::OnUnsolicitedMessageReceived(const PayloadHeader & payloa
 CHIP_ERROR CASEServer::OnMessageReceived(Messaging::ExchangeContext * ec, const PayloadHeader & payloadHeader,
                                          System::PacketBufferHandle && payload)
 {
+    if (GetSession().GetState() != CASESession::State::kInitialized)
+    {
+        // We are in the middle of CASE handshake
+
+        // Invoke watchdog to fix any stuck handshakes
+        bool watchdogFired = GetSession().InvokeBackgroundWorkWatchdog();
+        if (!watchdogFired)
+        {
+            // Handshake wasn't stuck, let it continue its work
+            // TODO: Send Busy response, #27473
+            ChipLogError(Inet, "CASE session is in establishing state, returning without responding");
+            return CHIP_NO_ERROR;
+        }
+    }
+
     if (!ec->GetSessionHandle()->IsUnauthenticatedSession())
     {
         ChipLogError(Inet, "CASE Server received Sigma1 message %s EC %p", "over encrypted session. Ignoring.", ec);
@@ -86,8 +101,6 @@ CHIP_ERROR CASEServer::OnMessageReceived(Messaging::ExchangeContext * ec, const
 
     // TODO - Enable multiple concurrent CASE session establishment
     // https://github.com/project-chip/connectedhomeip/issues/8342
-    ChipLogProgress(Inet, "CASE Server disabling CASE session setups");
-    mExchangeManager->UnregisterUnsolicitedMessageHandlerForType(Protocols::SecureChannel::MsgType::CASE_Sigma1);
 
     err = GetSession().OnMessageReceived(ec, payloadHeader, std::move(payload));
     SuccessOrExit(err);
diff --git a/src/protocols/secure_channel/CASESession.cpp b/src/protocols/secure_channel/CASESession.cpp
index def2ce11cf0c08..35597cde87241c 100644
--- a/src/protocols/secure_channel/CASESession.cpp
+++ b/src/protocols/secure_channel/CASESession.cpp
@@ -171,6 +171,9 @@ class CASESession::WorkHelper
     // No scheduling, no outstanding work, no shared lifetime management.
     CHIP_ERROR DoWork()
     {
+        // Ensure that this function is being called from main Matter thread
+        assertChipStackLockedByCurrentThread();
+
         VerifyOrReturnError(mSession && mWorkCallback && mAfterWorkCallback, CHIP_ERROR_INCORRECT_STATE);
         auto * helper   = this;
         bool cancel     = false;
@@ -203,6 +206,17 @@ class CASESession::WorkHelper
 
     bool IsCancelled() const { return mSession.load() == nullptr; }
 
+    // This API returns true when background thread fails to schedule the AfterWorkCallback
+    bool UnableToScheduleAfterWorkCallback() { return mScheduleAfterWorkFailed.load(); }
+
+    // Do after work immediately.
+    // No scheduling, no outstanding work, no shared lifetime management.
+    void DoAfterWork()
+    {
+        VerifyOrDie(UnableToScheduleAfterWorkCallback());
+        AfterWorkHandler(reinterpret_cast<intptr_t>(this));
+    }
+
 private:
     // Create a work helper using the specified session, work callback, after work callback, and data (template arg).
     // Lifetime is not managed, see `Create` for that option.
@@ -226,6 +240,12 @@ class CASESession::WorkHelper
         auto status = DeviceLayer::PlatformMgr().ScheduleWork(AfterWorkHandler, reinterpret_cast<intptr_t>(helper));
         if (status != CHIP_NO_ERROR)
         {
+            // We failed to schedule after work callback, so setting mScheduleAfterWorkFailed flag to true
+            // This can be checked from foreground thread and after work callback can be retried
+            helper->mStatus = status;
+            ChipLogError(SecureChannel, "Failed to Schedule the AfterWorkCallback on foreground thread");
+            helper->mScheduleAfterWorkFailed.store(true);
+
             // Release strong ptr since scheduling failed
             helper->mStrongPtr.reset();
         }
@@ -234,6 +254,9 @@ class CASESession::WorkHelper
     // Handler for the after work callback.
     static void AfterWorkHandler(intptr_t arg)
     {
+        // Ensure that this function is being called from main Matter thread
+        assertChipStackLockedByCurrentThread();
+
         auto * helper = reinterpret_cast<WorkHelper *>(arg);
         // Hold strong ptr while work is handled
         auto strongPtr(std::move(helper->mStrongPtr));
@@ -263,6 +286,10 @@ class CASESession::WorkHelper
     // Return value of `mWorkCallback`, passed to `mAfterWorkCallback`.
     CHIP_ERROR mStatus;
 
+    // If background thread fails to schedule AfterWorkCallback then this flag is set to true
+    // and CASEServer then can check this one and run the AfterWorkCallback for us.
+    std::atomic<bool> mScheduleAfterWorkFailed{ false };
+
 public:
     // Data passed to `mWorkCallback` and `mAfterWorkCallback`.
     DATA mData;
@@ -2179,4 +2206,25 @@ System::Clock::Timeout CASESession::ComputeSigma2ResponseTimeout(const ReliableM
         kExpectedHighProcessingTime;
 }
 
+bool CASESession::InvokeBackgroundWorkWatchdog()
+{
+    bool watchdogFired = false;
+
+    if (mSendSigma3Helper && mSendSigma3Helper->UnableToScheduleAfterWorkCallback())
+    {
+        ChipLogError(SecureChannel, "SendSigma3Helper was unable to schedule the AfterWorkCallback");
+        mSendSigma3Helper->DoAfterWork();
+        watchdogFired = true;
+    }
+
+    if (mHandleSigma3Helper && mHandleSigma3Helper->UnableToScheduleAfterWorkCallback())
+    {
+        ChipLogError(SecureChannel, "HandleSigma3Helper was unable to schedule the AfterWorkCallback");
+        mHandleSigma3Helper->DoAfterWork();
+        watchdogFired = true;
+    }
+
+    return watchdogFired;
+}
+
 } // namespace chip
diff --git a/src/protocols/secure_channel/CASESession.h b/src/protocols/secure_channel/CASESession.h
index f0caa1675f7845..7453b6b5002dc4 100644
--- a/src/protocols/secure_channel/CASESession.h
+++ b/src/protocols/secure_channel/CASESession.h
@@ -191,8 +191,6 @@ class DLL_EXPORT CASESession : public Messaging::UnsolicitedMessageHandler,
      **/
     void Clear();
 
-private:
-    friend class TestCASESession;
     enum class State : uint8_t
     {
         kInitialized         = 0,
@@ -207,6 +205,15 @@ class DLL_EXPORT CASESession : public Messaging::UnsolicitedMessageHandler,
         kHandleSigma3Pending = 9,
     };
 
+    State GetState() { return mState; }
+
+    // Returns true if the CASE session handshake was stuck due to failing to schedule work on the Matter thread.
+    // If this function returns true, the CASE session has been reset and is ready for a new session establishment.
+    bool InvokeBackgroundWorkWatchdog();
+
+private:
+    friend class TestCASESession;
+
     /*
      * Initialize the object given a reference to the SessionManager, certificate validity policy and a delegate which will be
      * notified of any further progress on this session.