diff --git a/homeassistant/components/apsystems/coordinator.py b/homeassistant/components/apsystems/coordinator.py
index b6e951343f7..e56cb826840 100644
--- a/homeassistant/components/apsystems/coordinator.py
+++ b/homeassistant/components/apsystems/coordinator.py
@@ -5,12 +5,17 @@ from __future__ import annotations
 from dataclasses import dataclass
 from datetime import timedelta
 
-from APsystemsEZ1 import APsystemsEZ1M, ReturnAlarmInfo, ReturnOutputData
+from APsystemsEZ1 import (
+    APsystemsEZ1M,
+    InverterReturnedError,
+    ReturnAlarmInfo,
+    ReturnOutputData,
+)
 
 from homeassistant.core import HomeAssistant
 from homeassistant.helpers.update_coordinator import DataUpdateCoordinator, UpdateFailed
 
-from .const import LOGGER
+from .const import DOMAIN, LOGGER
 
 
 @dataclass
@@ -43,6 +48,11 @@ class ApSystemsDataCoordinator(DataUpdateCoordinator[ApSystemsSensorData]):
         self.api.min_power = device_info.minPower
 
     async def _async_update_data(self) -> ApSystemsSensorData:
-        output_data = await self.api.get_output_data()
-        alarm_info = await self.api.get_alarm_info()
+        try:
+            output_data = await self.api.get_output_data()
+            alarm_info = await self.api.get_alarm_info()
+        except InverterReturnedError:
+            raise UpdateFailed(
+                translation_domain=DOMAIN, translation_key="inverter_error"
+            ) from None
         return ApSystemsSensorData(output_data=output_data, alarm_info=alarm_info)
diff --git a/homeassistant/components/apsystems/strings.json b/homeassistant/components/apsystems/strings.json
index e02f86c2730..b3a10ca49a7 100644
--- a/homeassistant/components/apsystems/strings.json
+++ b/homeassistant/components/apsystems/strings.json
@@ -72,5 +72,10 @@
         "name": "Inverter status"
       }
     }
+  },
+  "exceptions": {
+    "inverter_error": {
+      "message": "Inverter returned an error"
+    }
   }
 }
diff --git a/tests/components/apsystems/test_init.py b/tests/components/apsystems/test_init.py
new file mode 100644
index 00000000000..c85c4094e30
--- /dev/null
+++ b/tests/components/apsystems/test_init.py
@@ -0,0 +1,25 @@
+"""Test the APSystem setup."""
+
+from unittest.mock import AsyncMock
+
+from APsystemsEZ1 import InverterReturnedError
+
+from homeassistant.components.apsystems.const import DOMAIN
+from homeassistant.config_entries import ConfigEntryState
+from homeassistant.core import HomeAssistant
+
+from . import setup_integration
+
+from tests.common import MockConfigEntry
+
+
+async def test_update_failed(
+    hass: HomeAssistant,
+    mock_apsystems: AsyncMock,
+    mock_config_entry: MockConfigEntry,
+) -> None:
+    """Test update failed."""
+    mock_apsystems.get_output_data.side_effect = InverterReturnedError
+    await setup_integration(hass, mock_config_entry)
+    entry = hass.config_entries.async_entries(DOMAIN)[0]
+    assert entry.state is ConfigEntryState.SETUP_RETRY