diff --git a/cluster-autoscaler/cloudprovider/azure/azure_scale_set.go b/cluster-autoscaler/cloudprovider/azure/azure_scale_set.go
index 64a04e77e118..87656cc565dc 100644
--- a/cluster-autoscaler/cloudprovider/azure/azure_scale_set.go
+++ b/cluster-autoscaler/cloudprovider/azure/azure_scale_set.go
@@ -17,6 +17,8 @@ limitations under the License.
 package azure
 
 import (
+	"context"
+	"errors"
 	"fmt"
 	"math/rand"
 	"strings"
@@ -39,6 +41,7 @@ import (
 var (
 	defaultVmssInstancesRefreshPeriod = 5 * time.Minute
 	vmssContextTimeout                = 3 * time.Minute
+	syncContextTimeout                = 1 * time.Minute
 	asyncContextTimeout               = 30 * time.Minute
 	vmssSizeMutex                     sync.Mutex
 )
@@ -268,10 +271,15 @@ func (scaleSet *ScaleSet) getScaleSetSize() (int64, error) {
 }
 
 // waitForCreateOrUpdate waits for the outcome of VMSS capacity update initiated via CreateOrUpdateAsync.
-func (scaleSet *ScaleSet) waitForCreateOrUpdateInstances(future *azure.Future) {
+func (scaleSet *ScaleSet) waitForCreateOrUpdateInstances(ctx context.Context, async bool, future *azure.Future) error {
 	var err error
 
 	defer func() {
+		// Don't invalidate caches in sync mode for context deadline exceeded error, expected to continue in async mode.
+		if !async && errors.Is(err, context.DeadlineExceeded) {
+			return
+		}
+
 		// Invalidate instanceCache on success and failure. Failure might have created a few instances, but it is very rare.
 		scaleSet.invalidateInstanceCache()
 		if err != nil {
@@ -282,19 +290,12 @@ func (scaleSet *ScaleSet) waitForCreateOrUpdateInstances(future *azure.Future) {
 		}
 	}()
 
-	ctx, cancel := getContextWithTimeout(asyncContextTimeout)
-	defer cancel()
-
 	klog.V(3).Infof("Calling virtualMachineScaleSetsClient.WaitForCreateOrUpdateResult(%s)", scaleSet.Name)
 	httpResponse, err := scaleSet.manager.azClient.virtualMachineScaleSetsClient.WaitForCreateOrUpdateResult(ctx, future, scaleSet.manager.config.ResourceGroup)
 
-	isSuccess, err := isSuccessHTTPResponse(httpResponse, err)
-	if isSuccess {
-		klog.V(3).Infof("waitForCreateOrUpdateInstances(%s) success", scaleSet.Name)
-		return
-	}
+	_, rerr := isSuccessHTTPResponse(httpResponse, err)
 
-	klog.Errorf("waitForCreateOrUpdateInstances(%s) failed, err: %v", scaleSet.Name, err)
+	return rerr
 }
 
 // setScaleSetSize sets ScaleSet size.
@@ -312,11 +313,37 @@ func (scaleSet *ScaleSet) setScaleSetSize(size int64, delta int) error {
 	if requiredInstances > 0 {
 		klog.V(3).Infof("Remaining unsatisfied count is %d. Attempting to increase scale set %q "+
 			"capacity", requiredInstances, scaleSet.Name)
-		err := scaleSet.createOrUpdateInstances(&vmssInfo, size)
+		future, err := scaleSet.createOrUpdateInstances(&vmssInfo, size)
 		if err != nil {
+			klog.Errorf("Failed to request capacity for scale set %q to %d: %v", scaleSet.Name, requiredInstances, err)
+			return err
+		}
+
+		ctx, cancel := getContextWithTimeout(syncContextTimeout)
+		defer cancel()
+		err = scaleSet.waitForCreateOrUpdateInstances(ctx, false, future)
+		if err == nil {
+			klog.V(3).Infof("Increased capacity for scale set %q to %d", scaleSet.Name, requiredInstances)
+			return nil
+		}
+
+		if !errors.Is(err, context.DeadlineExceeded) {
 			klog.Errorf("Failed to increase capacity for scale set %q to %d: %v", scaleSet.Name, requiredInstances, err)
 			return err
 		}
+
+		// Switch to async wait for the outcome of VMSS capacity update.
+		go func() {
+			ctx, cancel := getContextWithTimeout(asyncContextTimeout)
+			defer cancel()
+
+			err = scaleSet.waitForCreateOrUpdateInstances(ctx, true, future)
+			if err != nil {
+				klog.Errorf("Failed to increase capacity for scale set %q to %d: %v", scaleSet.Name, requiredInstances, err)
+			} else {
+				klog.V(3).Infof("Increased capacity for scale set %q to %d", scaleSet.Name, requiredInstances)
+			}
+		}()
 	}
 	return nil
 }
@@ -435,9 +462,9 @@ func (scaleSet *ScaleSet) Belongs(node *apiv1.Node) (bool, error) {
 	return true, nil
 }
 
-func (scaleSet *ScaleSet) createOrUpdateInstances(vmssInfo *compute.VirtualMachineScaleSet, newSize int64) error {
+func (scaleSet *ScaleSet) createOrUpdateInstances(vmssInfo *compute.VirtualMachineScaleSet, newSize int64) (*azure.Future, error) {
 	if vmssInfo == nil {
-		return fmt.Errorf("vmssInfo cannot be nil while increating scaleSet capacity")
+		return nil, fmt.Errorf("vmssInfo cannot be nil while increating scaleSet capacity")
 	}
 
 	scaleSet.sizeMutex.Lock()
@@ -470,15 +497,14 @@ func (scaleSet *ScaleSet) createOrUpdateInstances(vmssInfo *compute.VirtualMachi
 	future, rerr := scaleSet.manager.azClient.virtualMachineScaleSetsClient.CreateOrUpdateAsync(ctx, scaleSet.manager.config.ResourceGroup, scaleSet.Name, op)
 	if rerr != nil {
 		klog.Errorf("virtualMachineScaleSetsClient.CreateOrUpdate for scale set %q failed: %+v", scaleSet.Name, rerr)
-		return rerr.Error()
+		return nil, rerr.Error()
 	}
 
 	// Proactively set the VMSS size so autoscaler makes better decisions.
 	scaleSet.curSize = newSize
 	scaleSet.lastSizeRefresh = time.Now()
 
-	go scaleSet.waitForCreateOrUpdateInstances(future)
-	return nil
+	return future, nil
 }
 
 // DeleteInstances deletes the given instances. All instances must be controlled by the same nodegroup.