diff --git a/homeassistant/components/reolink/__init__.py b/homeassistant/components/reolink/__init__.py
index 27bd504e9bb..a3e49f1f526 100644
--- a/homeassistant/components/reolink/__init__.py
+++ b/homeassistant/components/reolink/__init__.py
@@ -38,6 +38,7 @@ PLATFORMS = [
 ]
 DEVICE_UPDATE_INTERVAL = timedelta(seconds=60)
 FIRMWARE_UPDATE_INTERVAL = timedelta(hours=12)
+NUM_CRED_ERRORS = 3
 
 
 @dataclass
@@ -82,10 +83,16 @@ async def async_setup_entry(hass: HomeAssistant, config_entry: ConfigEntry) -> b
             try:
                 await host.update_states()
             except CredentialsInvalidError as err:
-                await host.stop()
-                raise ConfigEntryAuthFailed(err) from err
-            except ReolinkError as err:
+                host.credential_errors += 1
+                if host.credential_errors >= NUM_CRED_ERRORS:
+                    await host.stop()
+                    raise ConfigEntryAuthFailed(err) from err
                 raise UpdateFailed(str(err)) from err
+            except ReolinkError as err:
+                host.credential_errors = 0
+                raise UpdateFailed(str(err)) from err
+
+        host.credential_errors = 0
 
         async with asyncio.timeout(host.api.timeout * (RETRY_ATTEMPTS + 2)):
             await host.renew()
diff --git a/homeassistant/components/reolink/host.py b/homeassistant/components/reolink/host.py
index c69a80ce972..bccb5c5b684 100644
--- a/homeassistant/components/reolink/host.py
+++ b/homeassistant/components/reolink/host.py
@@ -79,6 +79,8 @@ class ReolinkHost:
         )
         self.firmware_ch_list: list[int | None] = []
 
+        self.credential_errors: int = 0
+
         self.webhook_id: str | None = None
         self._onvif_push_supported: bool = True
         self._onvif_long_poll_supported: bool = True
diff --git a/tests/components/reolink/test_init.py b/tests/components/reolink/test_init.py
index 466836e52ef..922fe0829f6 100644
--- a/tests/components/reolink/test_init.py
+++ b/tests/components/reolink/test_init.py
@@ -7,11 +7,16 @@ from unittest.mock import AsyncMock, MagicMock, Mock, patch
 import pytest
 from reolink_aio.exceptions import CredentialsInvalidError, ReolinkError
 
-from homeassistant.components.reolink import FIRMWARE_UPDATE_INTERVAL, const
+from homeassistant.components.reolink import (
+    DEVICE_UPDATE_INTERVAL,
+    FIRMWARE_UPDATE_INTERVAL,
+    NUM_CRED_ERRORS,
+    const,
+)
 from homeassistant.config import async_process_ha_core_config
 from homeassistant.config_entries import ConfigEntryState
 from homeassistant.const import STATE_OFF, STATE_UNAVAILABLE, Platform
-from homeassistant.core import HomeAssistant
+from homeassistant.core import DOMAIN as HA_DOMAIN, HomeAssistant
 from homeassistant.helpers import (
     device_registry as dr,
     entity_registry as er,
@@ -58,7 +63,7 @@ pytestmark = pytest.mark.usefixtures("reolink_connect", "reolink_platforms")
             ConfigEntryState.SETUP_RETRY,
         ),
         (
-            "get_states",
+            "get_host_data",
             AsyncMock(side_effect=CredentialsInvalidError("Test error")),
             ConfigEntryState.SETUP_ERROR,
         ),
@@ -113,6 +118,33 @@ async def test_firmware_error_twice(
     assert hass.states.is_state(entity_id, STATE_UNAVAILABLE)
 
 
+async def test_credential_error_three(
+    hass: HomeAssistant,
+    reolink_connect: MagicMock,
+    config_entry: MockConfigEntry,
+    issue_registry: ir.IssueRegistry,
+) -> None:
+    """Test when the update gives credential error 3 times."""
+    with patch("homeassistant.components.reolink.PLATFORMS", [Platform.SWITCH]):
+        assert await hass.config_entries.async_setup(config_entry.entry_id) is True
+    await hass.async_block_till_done()
+    assert config_entry.state is ConfigEntryState.LOADED
+
+    reolink_connect.get_states = AsyncMock(
+        side_effect=CredentialsInvalidError("Test error")
+    )
+
+    issue_id = f"config_entry_reauth_{const.DOMAIN}_{config_entry.entry_id}"
+    for _ in range(NUM_CRED_ERRORS):
+        assert (HA_DOMAIN, issue_id) not in issue_registry.issues
+        async_fire_time_changed(
+            hass, utcnow() + DEVICE_UPDATE_INTERVAL + timedelta(seconds=30)
+        )
+        await hass.async_block_till_done()
+
+    assert (HA_DOMAIN, issue_id) in issue_registry.issues
+
+
 async def test_entry_reloading(
     hass: HomeAssistant,
     config_entry: MockConfigEntry,