diff --git a/internal/controllers/machinedeployment/machinedeployment_rolling.go b/internal/controllers/machinedeployment/machinedeployment_rolling.go
index 31bd697d8b24..8ab38b9e2c68 100644
--- a/internal/controllers/machinedeployment/machinedeployment_rolling.go
+++ b/internal/controllers/machinedeployment/machinedeployment_rolling.go
@@ -26,6 +26,7 @@ import (
 
 	clusterv1 "sigs.k8s.io/cluster-api/api/v1beta1"
 	"sigs.k8s.io/cluster-api/internal/controllers/machinedeployment/mdutil"
+	"sigs.k8s.io/cluster-api/util/patch"
 )
 
 // rolloutRolling implements the logic for rolling a new MachineSet.
@@ -85,6 +86,11 @@ func (r *Reconciler) reconcileNewMachineSet(ctx context.Context, allMSs []*clust
 		return nil
 	}
 
+	newMS, err := r.cleanupDisableMachineCreateAnnotation(ctx, newMS)
+	if err != nil {
+		return err
+	}
+
 	if *(newMS.Spec.Replicas) > *(deployment.Spec.Replicas) {
 		// Scale down.
 		return r.scaleMachineSet(ctx, newMS, *(deployment.Spec.Replicas), deployment)
@@ -293,3 +299,25 @@ func (r *Reconciler) scaleDownOldMachineSetsForRollingUpdate(ctx context.Context
 
 	return totalScaledDown, nil
 }
+
+// cleanupDisableMachineCreateAnnotation will remove the disable machine create annotation from new MachineSets that were created during reconcileOldMachineSetsOnDelete.
+func (r *Reconciler) cleanupDisableMachineCreateAnnotation(ctx context.Context, newMS *clusterv1.MachineSet) (*clusterv1.MachineSet, error) {
+	log := ctrl.LoggerFrom(ctx)
+
+	if newMS.Annotations != nil {
+		if _, ok := newMS.Annotations[clusterv1.DisableMachineCreateAnnotation]; ok {
+			log.V(4).Info("removing annotation on latest MachineSet to enable machine creation")
+			patchHelper, err := patch.NewHelper(newMS, r.Client)
+			if err != nil {
+				return nil, err
+			}
+			delete(newMS.Annotations, clusterv1.DisableMachineCreateAnnotation)
+			err = patchHelper.Patch(ctx, newMS)
+			if err != nil {
+				return nil, err
+			}
+		}
+	}
+
+	return newMS, nil
+}