diff --git a/xds/src/main/java/io/grpc/xds/client/XdsClientImpl.java b/xds/src/main/java/io/grpc/xds/client/XdsClientImpl.java
index 4de8ead7c0a..2b25d4db977 100644
--- a/xds/src/main/java/io/grpc/xds/client/XdsClientImpl.java
+++ b/xds/src/main/java/io/grpc/xds/client/XdsClientImpl.java
@@ -592,12 +592,6 @@ private <T extends ResourceUpdate> void handleResourceUpdate(
         subscriber.onRejected(args.versionInfo, updateTime, errorDetail);
       }
 
-      // Nothing else to do for incremental ADS resources.
-      if (!xdsResourceType.isFullStateOfTheWorld()) {
-        continue;
-      }
-
-      // Handle State of the World ADS: invalid resources.
       if (invalidResources.contains(resourceName)) {
         // The resource is missing. Reuse the cached resource if possible.
         if (subscriber.data == null) {
@@ -607,6 +601,11 @@ private <T extends ResourceUpdate> void handleResourceUpdate(
         continue;
       }
 
+      // Nothing else to do for incremental ADS resources.
+      if (!xdsResourceType.isFullStateOfTheWorld()) {
+        continue;
+      }
+
       // For State of the World services, notify watchers when their watched resource is missing
       // from the ADS update. Note that we can only do this if the resource update is coming from
       // the same xDS server that the ResourceSubscriber is subscribed to.
diff --git a/xds/src/test/java/io/grpc/xds/GrpcXdsClientImplTestBase.java b/xds/src/test/java/io/grpc/xds/GrpcXdsClientImplTestBase.java
index 369763a21b7..006440be6c1 100644
--- a/xds/src/test/java/io/grpc/xds/GrpcXdsClientImplTestBase.java
+++ b/xds/src/test/java/io/grpc/xds/GrpcXdsClientImplTestBase.java
@@ -3270,6 +3270,8 @@ public void edsDuplicateLocalityInTheSamePriority() {
         + "locality:Locality{region=region2, zone=zone2, subZone=subzone2} for priority:1";
     call.verifyRequestNack(EDS, EDS_RESOURCE, "", "0001", NODE, ImmutableList.of(
         errorMsg));
+    verify(edsResourceWatcher).onError(errorCaptor.capture());
+    assertThat(errorCaptor.getValue().getDescription()).contains(errorMsg);
   }
 
   @Test