diff --git a/Assets/Tests/InputSystem/Plugins/XRTests.cs b/Assets/Tests/InputSystem/Plugins/XRTests.cs
index 65bc96c166..e90a742635 100644
--- a/Assets/Tests/InputSystem/Plugins/XRTests.cs
+++ b/Assets/Tests/InputSystem/Plugins/XRTests.cs
@@ -728,6 +728,35 @@ public void Components_TrackedPoseDriver_RetainsPoseWhenTrackedDeviceRemoved()
         }
     }
 
+    [Test]
+    [Category("Components")]
+    public void Components_TrackedPoseDriver_RetainsPoseWhenNoTrackedDeviceIsConnected()
+    {
+        // Tests/reproduces the scenario described in https://issuetracker.unity3d.com/product/unity/issues/guid/ISXB-699
+        // i.e. that rotation and/or position is not updated if device is not connected and track state isn't ignored.
+
+        var position = new Vector3(1f, 2f, 3f);
+        var rotation = new Quaternion(0.09853293f, 0.09853293f, 0.09853293f, 0.9853293f);
+
+        var go = new GameObject();
+        go.transform.position = position;
+        go.transform.rotation = rotation;
+
+        var tpd = go.AddComponent<TrackedPoseDriver>();
+        tpd.updateType = TrackedPoseDriver.UpdateType.Update;
+        tpd.trackingType = TrackedPoseDriver.TrackingType.RotationAndPosition;
+        tpd.ignoreTrackingState = false;
+        var transform = tpd.transform;
+
+        Assert.That(transform.position, Is.EqualTo(position));
+        Assert.That(transform.rotation, Is.EqualTo(rotation));
+
+        InputSystem.Update(InputUpdateType.Dynamic);
+
+        Assert.That(transform.position, Is.EqualTo(position));
+        Assert.That(transform.rotation, Is.EqualTo(rotation));
+    }
+
     [Test]
     [Category("Layouts")]
     public void Layouts_PoseControlsCanBeCreatedBySubcontrols()
diff --git a/Packages/com.unity.inputsystem/CHANGELOG.md b/Packages/com.unity.inputsystem/CHANGELOG.md
index caf4b4ec58..4d1afd63ec 100644
--- a/Packages/com.unity.inputsystem/CHANGELOG.md
+++ b/Packages/com.unity.inputsystem/CHANGELOG.md
@@ -17,6 +17,7 @@ however, it has to be formatted properly to pass verification tests.
 - Fixed pointerId staying the same when simultaneously releasing and then pressing in the same frame on mobile using touch. [ISXB-1006](https://issuetracker.unity3d.com/product/unity/issues/guid/ISXB-845)
 - Fixed ISubmitHandler.OnSubmit event processing when operating in Manual Update mode (ISXB-1141)
 - Fixed Rename mode is not entered and name is autocompleted to default when creating a new Action Map on 2022.3. [ISXB-1151](https://issuetracker.unity3d.com/product/unity/issues/guid/ISXB-1151)
+- Fixed a bug that would case `TrackedBasedDriver` to update position and rotation when no HMD device is connected [ISXB-699](https://issuetracker.unity3d.com/product/unity/issues/guid/ISXB-699) instead of keeping it unchanged.
 - Fixed unexpected control scheme switch when using `OnScreenControl` and pointer based schemes which registed "Cancel" event on every frame.[ISXB-656](https://issuetracker.unity3d.com/product/unity/issues/guid/ISXB-656)
 - Fixed an issue with The "Add Control Scheme..." popup window so that it now persists until any changes are explicitly Saved or Cancelled [case ISXB-1131](https://issuetracker.unity3d.com/product/unity/issues/guid/ISXB-1131)
 
@@ -245,6 +246,7 @@ however, it has to be formatted properly to pass verification tests.
 - Fixed incorrect documentation in InputSystem.actions and InputSystem.onActionsChanged property API contract.
 - Fixed an issue where `InputSystem.actions` could be incorrectly evaluated if the associated asset was deleted.
 
+
 ## [1.8.0-pre.2] - 2023-11-09
 
 ### Changed
diff --git a/Packages/com.unity.inputsystem/InputSystem/Plugins/XR/TrackedPoseDriver.cs b/Packages/com.unity.inputsystem/InputSystem/Plugins/XR/TrackedPoseDriver.cs
index 59b92283b5..428b2121fa 100644
--- a/Packages/com.unity.inputsystem/InputSystem/Plugins/XR/TrackedPoseDriver.cs
+++ b/Packages/com.unity.inputsystem/InputSystem/Plugins/XR/TrackedPoseDriver.cs
@@ -500,7 +500,27 @@ void ReadTrackingState()
             {
                 // Treat an Input Action Reference with no reference the same as
                 // an enabled Input Action with no authored bindings, and allow driving the Transform pose.
-                m_CurrentTrackingState = TrackingStates.Position | TrackingStates.Rotation;
+                // TODO Remove if suggested fix seems valid. m_CurrentTrackingState = TrackingStates.Position | TrackingStates.Rotation;
+
+                // Check if we have transform and rotation controls to drive the pose.
+                var positionInputAction = m_PositionInput.action;
+                var rotationInputAction = m_RotationInput.action;
+                if (positionInputAction != null && positionInputAction.m_BindingsCount > 0 && rotationInputAction != null && rotationInputAction.m_BindingsCount > 0)
+                {
+                    m_CurrentTrackingState = TrackingStates.Position | TrackingStates.Rotation;
+                }
+                else if (positionInputAction != null && positionInputAction.m_BindingsCount > 0)
+                {
+                    m_CurrentTrackingState = TrackingStates.Position;
+                }
+                else if (rotationInputAction != null && rotationInputAction.m_BindingsCount > 0)
+                {
+                    m_CurrentTrackingState = TrackingStates.Rotation;
+                }
+                else
+                {
+                    m_CurrentTrackingState = TrackingStates.None;
+                }
                 return;
             }