diff --git a/homeassistant/components/honeywell/climate.py b/homeassistant/components/honeywell/climate.py
index 934d41b238e..98cbae4eb7e 100644
--- a/homeassistant/components/honeywell/climate.py
+++ b/homeassistant/components/honeywell/climate.py
@@ -49,6 +49,10 @@ from .const import (
     RETRY,
 )
 
+MODE_PERMANENT_HOLD = 2
+MODE_TEMPORARY_HOLD = 1
+MODE_HOLD = {MODE_PERMANENT_HOLD, MODE_TEMPORARY_HOLD}
+
 ATTR_FAN_ACTION = "fan_action"
 
 ATTR_PERMANENT_HOLD = "permanent_hold"
@@ -175,6 +179,7 @@ class HoneywellUSThermostat(ClimateEntity):
         self._cool_away_temp = cool_away_temp
         self._heat_away_temp = heat_away_temp
         self._away = False
+        self._away_hold = False
         self._retry = 0
 
         self._attr_unique_id = str(device.deviceid)
@@ -323,11 +328,15 @@ class HoneywellUSThermostat(ClimateEntity):
     @property
     def preset_mode(self) -> str | None:
         """Return the current preset mode, e.g., home, away, temp."""
-        if self._away:
+        if self._away and self._is_hold():
+            self._away_hold = True
             return PRESET_AWAY
-        if self._is_permanent_hold():
+        if self._is_hold():
             return PRESET_HOLD
-
+        # Someone has changed the stat manually out of hold in away mode
+        if self._away and self._away_hold:
+            self._away = False
+            self._away_hold = False
         return PRESET_NONE
 
     @property
@@ -335,10 +344,15 @@ class HoneywellUSThermostat(ClimateEntity):
         """Return the fan setting."""
         return HW_FAN_MODE_TO_HA.get(self._device.fan_mode)
 
+    def _is_hold(self) -> bool:
+        heat_status = self._device.raw_ui_data.get("StatusHeat", 0)
+        cool_status = self._device.raw_ui_data.get("StatusCool", 0)
+        return heat_status in MODE_HOLD or cool_status in MODE_HOLD
+
     def _is_permanent_hold(self) -> bool:
         heat_status = self._device.raw_ui_data.get("StatusHeat", 0)
         cool_status = self._device.raw_ui_data.get("StatusCool", 0)
-        return heat_status == 2 or cool_status == 2
+        return MODE_PERMANENT_HOLD in (heat_status, cool_status)
 
     async def _set_temperature(self, **kwargs) -> None:
         """Set new target temperature."""
diff --git a/tests/components/honeywell/test_climate.py b/tests/components/honeywell/test_climate.py
index 9485f2f4302..73c5ff33dbc 100644
--- a/tests/components/honeywell/test_climate.py
+++ b/tests/components/honeywell/test_climate.py
@@ -5,6 +5,7 @@ from unittest.mock import MagicMock
 
 from aiohttp import ClientConnectionError
 import aiosomecomfort
+from freezegun.api import FrozenDateTimeFactory
 import pytest
 from syrupy.assertion import SnapshotAssertion
 from syrupy.filters import props
@@ -29,6 +30,8 @@ from homeassistant.components.climate import (
 )
 from homeassistant.components.honeywell.climate import (
     DOMAIN,
+    MODE_PERMANENT_HOLD,
+    MODE_TEMPORARY_HOLD,
     PRESET_HOLD,
     RETRY,
     SCAN_INTERVAL,
@@ -1207,3 +1210,59 @@ async def test_unique_id(
     await init_integration(hass, config_entry)
     entity_entry = entity_registry.async_get(f"climate.{device.name}")
     assert entity_entry.unique_id == str(device.deviceid)
+
+
+async def test_preset_mode(
+    hass: HomeAssistant,
+    device: MagicMock,
+    config_entry: er.EntityRegistry,
+    freezer: FrozenDateTimeFactory,
+) -> None:
+    """Test mode settings properly reflected."""
+    await init_integration(hass, config_entry)
+    entity_id = f"climate.{device.name}"
+
+    device.raw_ui_data["StatusHeat"] = 3
+    device.raw_ui_data["StatusCool"] = 3
+
+    freezer.tick(SCAN_INTERVAL)
+    async_fire_time_changed(hass)
+    await hass.async_block_till_done()
+    state = hass.states.get(entity_id)
+    assert state.attributes[ATTR_PRESET_MODE] == PRESET_NONE
+
+    device.raw_ui_data["StatusHeat"] = MODE_TEMPORARY_HOLD
+    device.raw_ui_data["StatusCool"] = MODE_TEMPORARY_HOLD
+
+    freezer.tick(SCAN_INTERVAL)
+    async_fire_time_changed(hass)
+    await hass.async_block_till_done()
+    state = hass.states.get(entity_id)
+    assert state.attributes[ATTR_PRESET_MODE] == PRESET_HOLD
+
+    device.raw_ui_data["StatusHeat"] = MODE_PERMANENT_HOLD
+    device.raw_ui_data["StatusCool"] = MODE_PERMANENT_HOLD
+
+    freezer.tick(SCAN_INTERVAL)
+    async_fire_time_changed(hass)
+    await hass.async_block_till_done()
+    state = hass.states.get(entity_id)
+    assert state.attributes[ATTR_PRESET_MODE] == PRESET_HOLD
+
+    await hass.services.async_call(
+        CLIMATE_DOMAIN,
+        SERVICE_SET_PRESET_MODE,
+        {ATTR_ENTITY_ID: entity_id, ATTR_PRESET_MODE: PRESET_AWAY},
+        blocking=True,
+    )
+
+    state = hass.states.get(entity_id)
+    assert state.attributes[ATTR_PRESET_MODE] == PRESET_AWAY
+
+    device.raw_ui_data["StatusHeat"] = 3
+    device.raw_ui_data["StatusCool"] = 3
+    freezer.tick(SCAN_INTERVAL)
+    async_fire_time_changed(hass)
+    await hass.async_block_till_done()
+    state = hass.states.get(entity_id)
+    assert state.attributes[ATTR_PRESET_MODE] == PRESET_NONE