diff --git a/pkg/cloudprovider/types.go b/pkg/cloudprovider/types.go
index bb42dd0372..6c7f986230 100644
--- a/pkg/cloudprovider/types.go
+++ b/pkg/cloudprovider/types.go
@@ -373,3 +373,16 @@ func IsNodeClassNotReadyError(err error) bool {
 	var nrError *NodeClassNotReadyError
 	return errors.As(err, &nrError)
 }
+
+// CreateError is an error type returned by CloudProviders when instance creation fails
+type CreateError struct {
+	error
+	ConditionMessage string
+}
+
+func NewCreateError(err error, message string) *CreateError {
+	return &CreateError{
+		error:            err,
+		ConditionMessage: message,
+	}
+}
diff --git a/pkg/controllers/nodeclaim/lifecycle/launch.go b/pkg/controllers/nodeclaim/lifecycle/launch.go
index da93b5cc18..fc5fe0baf3 100644
--- a/pkg/controllers/nodeclaim/lifecycle/launch.go
+++ b/pkg/controllers/nodeclaim/lifecycle/launch.go
@@ -18,6 +18,7 @@ package lifecycle
 
 import (
 	"context"
+	"errors"
 	"fmt"
 
 	"github.com/patrickmn/go-cache"
@@ -98,7 +99,12 @@ func (l *Launch) launchNodeClaim(ctx context.Context, nodeClaim *v1.NodeClaim) (
 			})
 			return nil, nil
 		default:
-			nodeClaim.StatusConditions().SetUnknownWithReason(v1.ConditionTypeLaunched, "LaunchFailed", truncateMessage(err.Error()))
+			var createError *cloudprovider.CreateError
+			if errors.As(err, &createError) {
+				nodeClaim.StatusConditions().SetUnknownWithReason(v1.ConditionTypeLaunched, "LaunchFailed", createError.ConditionMessage)
+			} else {
+				nodeClaim.StatusConditions().SetUnknownWithReason(v1.ConditionTypeLaunched, "LaunchFailed", truncateMessage(err.Error()))
+			}
 			return nil, fmt.Errorf("launching nodeclaim, %w", err)
 		}
 	}
diff --git a/pkg/controllers/nodeclaim/lifecycle/launch_test.go b/pkg/controllers/nodeclaim/lifecycle/launch_test.go
index c9b19c4ff6..2e69ceca87 100644
--- a/pkg/controllers/nodeclaim/lifecycle/launch_test.go
+++ b/pkg/controllers/nodeclaim/lifecycle/launch_test.go
@@ -82,4 +82,15 @@ var _ = Describe("Launch", func() {
 		ExpectFinalizersRemoved(ctx, env.Client, nodeClaim)
 		ExpectNotFound(ctx, env.Client, nodeClaim)
 	})
+	It("should set nodeClaim status condition from the condition message received if error returned is CreateError", func() {
+		conditionMessage := "instance creation failed"
+		cloudProvider.NextCreateErr = cloudprovider.NewCreateError(fmt.Errorf("error launching instance"), conditionMessage)
+		nodeClaim := test.NodeClaim()
+		ExpectApplied(ctx, env.Client, nodeClaim)
+		_ = ExpectObjectReconcileFailed(ctx, env.Client, nodeClaimController, nodeClaim)
+		nodeClaim = ExpectExists(ctx, env.Client, nodeClaim)
+		condition := ExpectStatusConditionExists(nodeClaim, v1.ConditionTypeLaunched)
+		Expect(condition.Status).To(Equal(metav1.ConditionUnknown))
+		Expect(condition.Message).To(Equal(conditionMessage))
+	})
 })