diff --git a/releasenotes/notes/fix-action-plan-state-on-failure-69e498d902ada5c5.yaml b/releasenotes/notes/fix-action-plan-state-on-failure-69e498d902ada5c5.yaml
new file mode 100644
index 000000000..aa1a7bfdf
--- /dev/null
+++ b/releasenotes/notes/fix-action-plan-state-on-failure-69e498d902ada5c5.yaml
@@ -0,0 +1,13 @@
+---
+fixes:
+  - |
+    Previously, if an action failed in an action plan, the state of the
+    action plan was reported as SUCCEEDED if the execution of the action has
+    finished regardless of the outcome.
+
+    Watcher will now reflect the actual state of all the actions in the plan
+    after the execution has finished. If any action has status FAILED, it
+    will set the state of the action plan as FAILED. This is the expected
+    behavior according to Watcher documentation.
+
+    For more info see: https://bugs.launchpad.net/watcher/+bug/2106407
diff --git a/watcher/applier/action_plan/default.py b/watcher/applier/action_plan/default.py
index 012061a2c..be48ad538 100644
--- a/watcher/applier/action_plan/default.py
+++ b/watcher/applier/action_plan/default.py
@@ -56,12 +56,30 @@ class DefaultActionPlanHandler(base.BaseActionPlanHandler):
             applier = default.DefaultApplier(self.ctx, self.service)
             applier.execute(self.action_plan_uuid)
 
-            action_plan.state = objects.action_plan.State.SUCCEEDED
+            # If any action has failed the action plan should be FAILED
+            # Define default values for successful execution
+            ap_state = objects.action_plan.State.SUCCEEDED
+            notification_kwargs = {
+                'phase': fields.NotificationPhase.END
+            }
+
+            failed_filter = {'action_plan_uuid': self.action_plan_uuid,
+                             'state': objects.action.State.FAILED}
+            failed_actions = objects.Action.list(
+                self.ctx, filters=failed_filter, eager=True)
+            if failed_actions:
+                ap_state = objects.action_plan.State.FAILED
+                notification_kwargs = {
+                    'phase': fields.NotificationPhase.ERROR,
+                    'priority': fields.NotificationPriority.ERROR
+                }
+
+            action_plan.state = ap_state
             action_plan.save()
             notifications.action_plan.send_action_notification(
                 self.ctx, action_plan,
                 action=fields.NotificationAction.EXECUTION,
-                phase=fields.NotificationPhase.END)
+                **notification_kwargs)
 
         except exception.ActionPlanCancelled as e:
             LOG.exception(e)
diff --git a/watcher/tests/applier/action_plan/test_default_action_handler.py b/watcher/tests/applier/action_plan/test_default_action_handler.py
index 99c61ecaf..f9e505de0 100644
--- a/watcher/tests/applier/action_plan/test_default_action_handler.py
+++ b/watcher/tests/applier/action_plan/test_default_action_handler.py
@@ -142,10 +142,10 @@ class TestDefaultActionPlanHandler(base.DbTestCase):
                       phase=objects.fields.NotificationPhase.START),
             mock.call(self.context, self.action_plan,
                       action=objects.fields.NotificationAction.EXECUTION,
-                      phase=objects.fields.NotificationPhase.END)]
-        # (amoralej) the actual action_plan.state should beh FAILED. I am
-        # setting it to SUCCEEDDED and will change it in the fixing change.
-        self.assertEqual(ap_objects.State.SUCCEEDED, self.action_plan.state)
+                      priority=objects.fields.NotificationPriority.ERROR,
+                      phase=objects.fields.NotificationPhase.ERROR)]
+
+        self.assertEqual(ap_objects.State.FAILED, self.action_plan.state)
         self.assertEqual(
             expected_calls,
             self.m_action_plan_notifications