diff --git a/pkg/providers/v1/aws_loadbalancer.go b/pkg/providers/v1/aws_loadbalancer.go
index f9dd598450..62f68690ad 100644
--- a/pkg/providers/v1/aws_loadbalancer.go
+++ b/pkg/providers/v1/aws_loadbalancer.go
@@ -859,18 +859,7 @@ func (c *Cloud) ensureTargetGroup(ctx context.Context, targetGroup *elbv2types.T
 
 func (c *Cloud) ensureTargetGroupTargets(ctx context.Context, tgARN string, expectedTargets []*elbv2types.TargetDescription, actualTargets []*elbv2types.TargetDescription) error {
 	targetsToRegister, targetsToDeregister := c.diffTargetGroupTargets(expectedTargets, actualTargets)
-	if len(targetsToRegister) > 0 {
-		targetsToRegisterChunks := c.chunkTargetDescriptions(targetsToRegister, defaultRegisterTargetsChunkSize)
-		for _, targetsChunk := range targetsToRegisterChunks {
-			req := &elbv2.RegisterTargetsInput{
-				TargetGroupArn: aws.String(tgARN),
-				Targets:        targetsChunk,
-			}
-			if _, err := c.elbv2.RegisterTargets(ctx, req); err != nil {
-				return fmt.Errorf("error trying to register targets in target group: %q", err)
-			}
-		}
-	}
+	// deregister targets prior to registering to allow instance replacements when the LB is at max instance capacity
 	if len(targetsToDeregister) > 0 {
 		targetsToDeregisterChunks := c.chunkTargetDescriptions(targetsToDeregister, defaultDeregisterTargetsChunkSize)
 		for _, targetsChunk := range targetsToDeregisterChunks {
@@ -883,6 +872,18 @@ func (c *Cloud) ensureTargetGroupTargets(ctx context.Context, tgARN string, expe
 			}
 		}
 	}
+	if len(targetsToRegister) > 0 {
+		targetsToRegisterChunks := c.chunkTargetDescriptions(targetsToRegister, defaultRegisterTargetsChunkSize)
+		for _, targetsChunk := range targetsToRegisterChunks {
+			req := &elbv2.RegisterTargetsInput{
+				TargetGroupArn: aws.String(tgARN),
+				Targets:        targetsChunk,
+			}
+			if _, err := c.elbv2.RegisterTargets(ctx, req); err != nil {
+				return fmt.Errorf("error trying to register targets in target group: %q", err)
+			}
+		}
+	}
 	return nil
 }
 
diff --git a/pkg/providers/v1/aws_loadbalancer_test.go b/pkg/providers/v1/aws_loadbalancer_test.go
index 39037205e8..1b19e93d33 100644
--- a/pkg/providers/v1/aws_loadbalancer_test.go
+++ b/pkg/providers/v1/aws_loadbalancer_test.go
@@ -1921,3 +1921,157 @@ func TestCloud_reconcileTargetGroupsAttributes(t *testing.T) {
 		})
 	}
 }
+
+// Test-specific mock for ELB v2 client that embeds MockedFakeELBV2
+type mockELBV2ClientForEnsureTargetGroupTargets struct {
+	*MockedFakeELBV2
+
+	MaxTargets int
+	NumTargets int
+}
+
+func (m *mockELBV2ClientForEnsureTargetGroupTargets) RegisterTargets(ctx context.Context, input *elbv2.RegisterTargetsInput, optFns ...func(*elbv2.Options)) (*elbv2.RegisterTargetsOutput, error) {
+	m.NumTargets += len(input.Targets)
+
+	if m.NumTargets > m.MaxTargets {
+		return nil, fmt.Errorf("TooManyTargets")
+	}
+
+	return m.MockedFakeELBV2.RegisterTargets(ctx, input, optFns...)
+}
+
+func (m *mockELBV2ClientForEnsureTargetGroupTargets) DeregisterTargets(ctx context.Context, input *elbv2.DeregisterTargetsInput, optFns ...func(*elbv2.Options)) (*elbv2.DeregisterTargetsOutput, error) {
+	m.NumTargets -= len(input.Targets)
+
+	return m.MockedFakeELBV2.DeregisterTargets(ctx, input, optFns...)
+}
+
+func TestCloud_ensureTargetGroupTargets(t *testing.T) {
+	testTargetGroupArn := "arn:aws:elasticloadbalancing:us-east-1:123456789012:targetgroup/test-tg/1234567890123456"
+
+	tests := []struct {
+		name            string
+		maxTargets      int
+		expectedTargets []*elbv2types.TargetDescription
+		actualTargets   []*elbv2types.TargetDescription
+		expectedError   string
+		description     string
+	}{
+		{
+			name:       "target replacement at max target limit should not fail",
+			maxTargets: 4,
+			expectedTargets: []*elbv2types.TargetDescription{
+				{
+					Id:   aws.String("i-abcdefg1"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg2"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg3"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg4"),
+					Port: aws.Int32(8080),
+				},
+			},
+			actualTargets: []*elbv2types.TargetDescription{
+				{
+					Id:   aws.String("i-replacement"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg2"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg3"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg4"),
+					Port: aws.Int32(8080),
+				},
+			},
+			description: "Function should succeed when replacing an instance for a LB at max capacity",
+		},
+		{
+			name:       "exceeding max target limit should fail",
+			maxTargets: 4,
+			expectedTargets: []*elbv2types.TargetDescription{
+				{
+					Id:   aws.String("i-abcdefg1"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg2"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg3"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg4"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg5"),
+					Port: aws.Int32(8080),
+				},
+			},
+			actualTargets: []*elbv2types.TargetDescription{
+				{
+					Id:   aws.String("i-replacement"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg2"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg3"),
+					Port: aws.Int32(8080),
+				},
+				{
+					Id:   aws.String("i-abcdefg4"),
+					Port: aws.Int32(8080),
+				},
+			},
+			expectedError: "TooManyTargets",
+			description:   "Function should fail when adding an instance to a LB at max capacity",
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			mockClient := &mockELBV2ClientForEnsureTargetGroupTargets{
+				MockedFakeELBV2: &MockedFakeELBV2{
+					LoadBalancers:          []*elbv2types.LoadBalancer{},
+					TargetGroups:           []*elbv2types.TargetGroup{},
+					Listeners:              []*elbv2types.Listener{},
+					LoadBalancerAttributes: make(map[string]map[string]string),
+					Tags:                   make(map[string][]elbv2types.Tag),
+					RegisteredInstances:    make(map[string][]string),
+				},
+				MaxTargets: tt.maxTargets,
+				NumTargets: len(tt.actualTargets),
+			}
+			c := &Cloud{
+				elbv2: mockClient,
+			}
+
+			err := c.ensureTargetGroupTargets(context.TODO(), testTargetGroupArn, tt.expectedTargets, tt.actualTargets)
+
+			if len(tt.expectedError) > 0 {
+				assert.Error(t, err, "Expected error for test case: %s", tt.description)
+				assert.Contains(t, err.Error(), tt.expectedError, "Error message should contain expected text for test case: %s", tt.description)
+			} else {
+				assert.NoError(t, err, "Expected no error for test case: %s", tt.description)
+			}
+		})
+	}
+}