diff --git a/azurelinuxagent/common/version.py b/azurelinuxagent/common/version.py
index c056425432..6450c4cab1 100644
--- a/azurelinuxagent/common/version.py
+++ b/azurelinuxagent/common/version.py
@@ -56,14 +56,16 @@ def get_daemon_version():
     else:
         # The agent process which execute the extensions can have different version(after upgrades) and importing version from that process may provide wrong version for daemon.
         # so launching new process with sys.executable python provides the correct version for daemon which preinstalled in the image.
+        daemon_version = "0.0.0.0"
         try:
             cmd = ["{0}".format(sys.executable), "-c", "from azurelinuxagent.common.version import AGENT_VERSION; print(AGENT_VERSION)"]
-            version = shellutil.run_command(cmd)
-            return FlexibleVersion(version)
-        except Exception as e:  # Make the best effort to get the daemon version, but don't fail the update if we can't. So default to 2.2.53 as env variable is not set < 2.2.53
+            daemon_version = shellutil.run_command(cmd)
+        except Exception as e:  # Make the best effort to get the daemon version, otherwise default to 0.0.0.0(unknown)
             logger.warn("Failed to get the daemon version: {0}", ustr(e))
-            return FlexibleVersion("2.2.53")
-        
+        # set the daemon version to the environment variable to cache it for future calls.
+        set_daemon_version(daemon_version)
+        return FlexibleVersion(os.environ[__DAEMON_VERSION_ENV_VARIABLE])
+
 
 def get_f5_platform():
     """
diff --git a/azurelinuxagent/ga/agent_update_handler.py b/azurelinuxagent/ga/agent_update_handler.py
index 5ec44fab51..d311a5c43e 100644
--- a/azurelinuxagent/ga/agent_update_handler.py
+++ b/azurelinuxagent/ga/agent_update_handler.py
@@ -9,7 +9,7 @@
 from azurelinuxagent.common.future import ustr
 from azurelinuxagent.common.logger import LogLevel
 from azurelinuxagent.common.protocol.extensions_goal_state import GoalStateSource
-from azurelinuxagent.common.protocol.restapi import VMAgentUpdateStatuses, VMAgentUpdateStatus
+from azurelinuxagent.common.protocol.restapi import VMAgentUpdateStatuses, VMAgentUpdateStatus, VERSION_0
 from azurelinuxagent.common.utils import fileutil, textutil
 from azurelinuxagent.common.utils.flexible_version import FlexibleVersion
 from azurelinuxagent.common.version import get_daemon_version, CURRENT_VERSION, AGENT_NAME, AGENT_DIR_PATTERN
@@ -113,6 +113,15 @@ def __get_agent_upgrade_type(requested_version):
             return AgentUpgradeType.Hotfix
         return AgentUpgradeType.Normal
 
+    @staticmethod
+    def __get_daemon_version_for_update():
+        daemon_version = get_daemon_version()
+        if daemon_version != FlexibleVersion(VERSION_0):
+            return daemon_version
+        # We return 0.0.0.0 if we failed to retrieve daemon version. In that case,
+        # use the min version as 2.2.53 as we started setting the daemon version starting 2.2.53.
+        return FlexibleVersion("2.2.53")
+
     def __get_next_upgrade_times(self, now):
         """
         Get the next upgrade times
@@ -326,7 +335,7 @@ def run(self, goal_state):
                 if not self.__check_if_downgrade_is_requested_and_allowed(requested_version):
                     return
 
-                daemon_version = get_daemon_version()
+                daemon_version = self.__get_daemon_version_for_update()
                 if requested_version < daemon_version:
                     # Don't process the update if the requested version is less than daemon version,
                     # as historically we don't support downgrades below daemon versions. So daemon will not pickup that requested version rather start with
diff --git a/tests/common/test_version.py b/tests/common/test_version.py
index bdc07c0046..89156f65c1 100644
--- a/tests/common/test_version.py
+++ b/tests/common/test_version.py
@@ -137,11 +137,15 @@ def test_get_daemon_version_should_return_the_version_that_was_previously_set(se
             os.environ.pop(DAEMON_VERSION_ENV_VARIABLE)
 
     def test_get_daemon_version_from_fallback_when_the_version_has_not_been_set(self):
-        with patch("azurelinuxagent.common.utils.shellutil.run_command", return_value=FlexibleVersion("2.2.53")):
+        with patch("azurelinuxagent.common.utils.shellutil.run_command", return_value="2.3.53") as mock_run_command:
             self.assertEqual(
-                FlexibleVersion("2.2.53"), get_daemon_version(),
-                "The daemon version should not be defined. Environment={0}".format(os.environ)
+                FlexibleVersion("2.3.53"), get_daemon_version(),
+                "The daemon version should be defined. Environment={0}".format(os.environ)
             )
+            self.assertEqual(FlexibleVersion("2.3.53"), get_daemon_version(), "The daemon version should be 2.3.53")
+            self.assertEqual(1, mock_run_command.call_count, "The daemon version should be read from env value on second time")
+
+        os.environ.pop(DAEMON_VERSION_ENV_VARIABLE)
 
 
 class TestCurrentAgentName(AgentTestCase):