diff --git a/controllers/managedclusteradopt_controller_test.go b/controllers/managedclusteradopt_controller_test.go
new file mode 100644
index 00000000000..58245a0ecf6
--- /dev/null
+++ b/controllers/managedclusteradopt_controller_test.go
@@ -0,0 +1,89 @@
+/*
+Copyright 2024 The Kubernetes Authors.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+package controllers
+
+import (
+	"context"
+	"testing"
+
+	asocontainerservicev1 "github.com/Azure/azure-service-operator/v2/api/containerservice/v1api20231001"
+	asoresourcesv1 "github.com/Azure/azure-service-operator/v2/api/resources/v1api20200601"
+	"github.com/Azure/azure-service-operator/v2/pkg/genruntime"
+	. "github.com/onsi/gomega"
+	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	"k8s.io/apimachinery/pkg/runtime"
+	"k8s.io/apimachinery/pkg/types"
+	clusterv1 "sigs.k8s.io/cluster-api/api/v1beta1"
+	ctrl "sigs.k8s.io/controller-runtime"
+	"sigs.k8s.io/controller-runtime/pkg/client/fake"
+
+	"sigs.k8s.io/cluster-api-provider-azure/api/v1alpha1"
+)
+
+func TestManagedClusterAdoptReconcile(t *testing.T) {
+	ctx := context.Background()
+	g := NewWithT(t)
+	req := ctrl.Request{
+		NamespacedName: types.NamespacedName{
+			Name:      "fake-mc",
+			Namespace: "fake-ns",
+		},
+	}
+	managedCluster := &asocontainerservicev1.ManagedCluster{
+		ObjectMeta: metav1.ObjectMeta{
+			Name:      "fake-mc",
+			Namespace: "fake-ns",
+			Annotations: map[string]string{
+				adoptAnnotation: adoptAnnotationValue,
+			},
+		},
+		Spec: asocontainerservicev1.ManagedCluster_Spec{
+			Owner: &genruntime.KnownResourceReference{
+				Name: "fake-mc",
+			},
+		},
+	}
+
+	rg := &asoresourcesv1.ResourceGroup{
+		ObjectMeta: metav1.ObjectMeta{
+			Name:      "fake-mc",
+			Namespace: "fake-ns",
+		},
+	}
+
+	s := runtime.NewScheme()
+	err := asocontainerservicev1.AddToScheme(s)
+	g.Expect(err).ToNot(HaveOccurred())
+	err = clusterv1.AddToScheme(s)
+	g.Expect(err).ToNot(HaveOccurred())
+	err = asoresourcesv1.AddToScheme(s)
+	g.Expect(err).ToNot(HaveOccurred())
+	err = v1alpha1.AddToScheme(s)
+	g.Expect(err).ToNot(HaveOccurred())
+	client := fake.NewClientBuilder().WithScheme(s).WithObjects(managedCluster, rg).Build()
+	rec := ManagedClusterAdoptReconciler{
+		Client: client,
+	}
+	_, err = rec.Reconcile(ctx, req)
+	g.Expect(err).ToNot(HaveOccurred())
+	mcp := &v1alpha1.AzureASOManagedControlPlane{}
+	err = rec.Get(ctx, types.NamespacedName{Name: managedCluster.Name, Namespace: managedCluster.Namespace}, mcp)
+	g.Expect(err).ToNot(HaveOccurred())
+	asomc := &v1alpha1.AzureASOManagedCluster{}
+	err = rec.Get(ctx, types.NamespacedName{Name: managedCluster.Name, Namespace: managedCluster.Namespace}, asomc)
+	g.Expect(err).ToNot(HaveOccurred())
+}