diff --git a/e2e/vmss.go b/e2e/vmss.go
index 4138a0659d1..3b1b9202d45 100644
--- a/e2e/vmss.go
+++ b/e2e/vmss.go
@@ -274,9 +274,22 @@ func CreateVMSSWithRetry(ctx context.Context, s *Scenario) (*ScenarioVM, error)
 	delay := 5 * time.Second
 	retryOn := func(err error) bool {
 		var respErr *azcore.ResponseError
+		// only retry on Azure API errors with specific error codes
+		if !errors.As(err, &respErr) {
+			return false
+		}
 		// AllocationFailed sometimes happens for exotic SKUs (new GPUs) with limited availability, sometimes retrying helps
 		// It's not a quota issue
-		return errors.As(err, &respErr) && respErr.StatusCode == 200 && respErr.ErrorCode == "AllocationFailed"
+		if respErr.StatusCode == 200 && respErr.ErrorCode == "AllocationFailed" {
+			return true
+		}
+		// GalleryImageNotFound can happen transiently after image replication completes
+		// due to Azure eventual consistency - the gallery API reports success but the
+		// compute fabric in the target region hasn't fully propagated the image yet
+		if respErr.StatusCode == 404 && respErr.ErrorCode == "GalleryImageNotFound" {
+			return true
+		}
+		return false
 	}
 
 	maxAttempts := 10