diff --git a/xds/src/main/java/io/grpc/xds/PriorityLoadBalancer.java b/xds/src/main/java/io/grpc/xds/PriorityLoadBalancer.java
index 845c167a64..c72cef9f63 100644
--- a/xds/src/main/java/io/grpc/xds/PriorityLoadBalancer.java
+++ b/xds/src/main/java/io/grpc/xds/PriorityLoadBalancer.java
@@ -154,7 +154,8 @@ final class PriorityLoadBalancer extends LoadBalancer {
         ChildLbState child =
             new ChildLbState(priority, priorityConfigs.get(priority).ignoreReresolution);
         children.put(priority, child);
-        updateOverallState(priority, CONNECTING, new FixedResultPicker(PickResult.withNoResult()));
+        // Child is created in CONNECTING with pending failOverTimer
+        updateOverallState(priority, child.connectivityState, child.picker);
         // Calling the child's updateResolvedAddresses() can result in tryNextPriority() being
         // called recursively. We need to be sure to be done with processing here before it is
         // called.
@@ -173,21 +174,23 @@ final class PriorityLoadBalancer extends LoadBalancer {
         }
         return Status.OK;
       }
-      if (child.failOverTimer != null && child.failOverTimer.isPending()) {
+      if (child.failOverTimer.isPending()) {
         updateOverallState(priority, child.connectivityState, child.picker);
         return Status.OK; // Give priority i time to connect.
       }
-      if (priority.equals(currentPriority) && child.connectivityState != TRANSIENT_FAILURE) {
-        // If the current priority is not changed into TRANSIENT_FAILURE, keep using it.
+    }
+    for (int i = 0; i < priorityNames.size(); i++) {
+      String priority = priorityNames.get(i);
+      ChildLbState child = children.get(priority);
+      if (child.connectivityState.equals(CONNECTING)) {
         updateOverallState(priority, child.connectivityState, child.picker);
         return Status.OK;
       }
     }
-    // TODO(zdapeng): Include error details of each priority.
     logger.log(XdsLogLevel.DEBUG, "All priority failed");
     String lastPriority = priorityNames.get(priorityNames.size() - 1);
-    SubchannelPicker errorPicker = children.get(lastPriority).picker;
-    updateOverallState(lastPriority, TRANSIENT_FAILURE, errorPicker);
+    ChildLbState child = children.get(lastPriority);
+    updateOverallState(lastPriority, child.connectivityState, child.picker);
     return Status.OK;
   }
 
@@ -231,10 +234,7 @@ final class PriorityLoadBalancer extends LoadBalancer {
           // The child is deactivated.
           return;
         }
-        picker = new FixedResultPicker(PickResult.withError(
-            Status.UNAVAILABLE.withDescription("Connection timeout for priority " + priority)));
         logger.log(XdsLogLevel.DEBUG, "Priority {0} failed over to next", priority);
-        currentPriority = null; // reset currentPriority to guarantee failover happen
         Status status = tryNextPriority();
         if (!status.isOk()) {
           // A child had a problem with the addresses/config. Request it to be refreshed
diff --git a/xds/src/test/java/io/grpc/xds/PriorityLoadBalancerTest.java b/xds/src/test/java/io/grpc/xds/PriorityLoadBalancerTest.java
index 08d4863d19..ab4c00398f 100644
--- a/xds/src/test/java/io/grpc/xds/PriorityLoadBalancerTest.java
+++ b/xds/src/test/java/io/grpc/xds/PriorityLoadBalancerTest.java
@@ -376,6 +376,7 @@ public class PriorityLoadBalancerTest {
     assertThat(fooBalancers).hasSize(2);
     assertThat(fooHelpers).hasSize(2);
     LoadBalancer balancer1 = Iterables.getLast(fooBalancers);
+    Helper helper1 = Iterables.getLast(fooHelpers);
 
     // p1 timeout, and fails over to p2
     fakeClock.forwardTime(10, TimeUnit.SECONDS);
@@ -423,14 +424,20 @@ public class PriorityLoadBalancerTest {
     LoadBalancer balancer3 = Iterables.getLast(fooBalancers);
     Helper helper3 = Iterables.getLast(fooHelpers);
 
-    // p3 timeout then the channel should go to TRANSIENT_FAILURE
+    // p3 timeout then the channel should stay in CONNECTING
     fakeClock.forwardTime(10, TimeUnit.SECONDS);
-    assertCurrentPickerReturnsError(Status.Code.UNAVAILABLE, "timeout");
+    assertCurrentPicker(CONNECTING, PickResult.withNoResult());
 
-    // p3 fails then the picker should have error status updated
+    // p3 fails then the picker should still be waiting on p1
     helper3.updateBalancingState(
         TRANSIENT_FAILURE,
         new FixedResultPicker(PickResult.withError(Status.DATA_LOSS.withDescription("foo"))));
+    assertCurrentPicker(CONNECTING, PickResult.withNoResult());
+
+    // p1 fails then the picker should have error status updated to p3
+    helper1.updateBalancingState(
+        TRANSIENT_FAILURE,
+        new FixedResultPicker(PickResult.withError(Status.DATA_LOSS.withDescription("bar"))));
     assertCurrentPickerReturnsError(Status.Code.DATA_LOSS, "foo");
 
     // p2 gets back to READY
@@ -642,6 +649,7 @@ public class PriorityLoadBalancerTest {
     assertThat(fooBalancers).hasSize(2);
     assertThat(fooHelpers).hasSize(2);
     LoadBalancer balancer1 = Iterables.getLast(fooBalancers);
+    Helper helper1 = Iterables.getLast(fooHelpers);
 
     // p1 timeout, and fails over to p2
     fakeClock.forwardTime(10, TimeUnit.SECONDS);
@@ -677,14 +685,20 @@ public class PriorityLoadBalancerTest {
     LoadBalancer balancer3 = Iterables.getLast(fooBalancers);
     Helper helper3 = Iterables.getLast(fooHelpers);
 
-    // p3 timeout then the channel should go to TRANSIENT_FAILURE
+    // p3 timeout then the channel should stay in CONNECTING
     fakeClock.forwardTime(10, TimeUnit.SECONDS);
-    assertCurrentPickerReturnsError(Status.Code.UNAVAILABLE, "timeout");
+    assertCurrentPicker(CONNECTING, PickResult.withNoResult());
 
-    // p3 fails then the picker should have error status updated
+    // p3 fails then the picker should still be waiting on p1
     helper3.updateBalancingState(
         TRANSIENT_FAILURE,
         new FixedResultPicker(PickResult.withError(Status.DATA_LOSS.withDescription("foo"))));
+    assertCurrentPicker(CONNECTING, PickResult.withNoResult());
+
+    // p1 fails then the picker should have error status updated to p3
+    helper1.updateBalancingState(
+        TRANSIENT_FAILURE,
+        new FixedResultPicker(PickResult.withError(Status.DATA_LOSS.withDescription("bar"))));
     assertCurrentPickerReturnsError(Status.Code.DATA_LOSS, "foo");
 
     // p2 gets back to IDLE
@@ -863,15 +877,17 @@ public class PriorityLoadBalancerTest {
   }
 
   private void assertCurrentPickerPicksSubchannel(Subchannel expectedSubchannelToPick) {
-    assertLatestConnectivityState(READY);
-    PickResult pickResult = pickerCaptor.getValue().pickSubchannel(mock(PickSubchannelArgs.class));
-    assertThat(pickResult.getSubchannel()).isEqualTo(expectedSubchannelToPick);
+    assertCurrentPicker(READY, PickResult.withSubchannel(expectedSubchannelToPick));
   }
 
   private void assertCurrentPickerIsBufferPicker() {
-    assertLatestConnectivityState(IDLE);
+    assertCurrentPicker(IDLE, PickResult.withNoResult());
+  }
+
+  private void assertCurrentPicker(ConnectivityState state, PickResult result) {
+    assertLatestConnectivityState(state);
     PickResult pickResult = pickerCaptor.getValue().pickSubchannel(mock(PickSubchannelArgs.class));
-    assertThat(pickResult).isEqualTo(PickResult.withNoResult());
+    assertThat(pickResult).isEqualTo(result);
   }
 
   private Object newChildConfig(LoadBalancerProvider provider, Object config) {