diff --git a/include/bluetooth/conn.h b/include/bluetooth/conn.h
index afeaa7bacf903..8c6df6d28e966 100644
--- a/include/bluetooth/conn.h
+++ b/include/bluetooth/conn.h
@@ -751,6 +751,9 @@ enum bt_security_err {
 	/** Invalid parameters. */
 	BT_SECURITY_ERR_INVALID_PARAM,
 
+	/** Distributed Key Rejected */
+	BT_SECURITY_ERR_KEY_REJECTED,
+
 	/** Pairing failed but the exact reason could not be specified. */
 	BT_SECURITY_ERR_UNSPECIFIED,
 };
diff --git a/subsys/bluetooth/host/smp.c b/subsys/bluetooth/host/smp.c
index 3cdbc537b7049..c879f88d00ab5 100644
--- a/subsys/bluetooth/host/smp.c
+++ b/subsys/bluetooth/host/smp.c
@@ -430,6 +430,8 @@ static enum bt_security_err security_err_get(uint8_t smp_err)
 		return BT_SECURITY_ERR_PAIR_NOT_ALLOWED;
 	case BT_SMP_ERR_INVALID_PARAMS:
 		return BT_SECURITY_ERR_INVALID_PARAM;
+	case BT_SMP_ERR_KEY_REJECTED:
+		return BT_SECURITY_ERR_KEY_REJECTED;
 	case BT_SMP_ERR_UNSPECIFIED:
 	default:
 		return BT_SECURITY_ERR_UNSPECIFIED;
diff --git a/subsys/bluetooth/host/smp.h b/subsys/bluetooth/host/smp.h
index 6660f76bb20e1..e1f20094bc455 100644
--- a/subsys/bluetooth/host/smp.h
+++ b/subsys/bluetooth/host/smp.h
@@ -27,6 +27,7 @@ struct bt_smp_hdr {
 #define BT_SMP_ERR_NUMERIC_COMP_FAILED		0x0c
 #define BT_SMP_ERR_BREDR_PAIRING_IN_PROGRESS	0x0d
 #define BT_SMP_ERR_CROSS_TRANSP_NOT_ALLOWED	0x0e
+#define BT_SMP_ERR_KEY_REJECTED			0x0f
 
 #define BT_SMP_IO_DISPLAY_ONLY			0x00
 #define BT_SMP_IO_DISPLAY_YESNO			0x01
diff --git a/tests/bluetooth/tester/src/bttester.h b/tests/bluetooth/tester/src/bttester.h
index acbc5b8f2a8a7..71e51cd1fc2a7 100644
--- a/tests/bluetooth/tester/src/bttester.h
+++ b/tests/bluetooth/tester/src/bttester.h
@@ -373,6 +373,13 @@ struct gap_bond_lost_ev {
 	uint8_t address[6];
 } __packed;
 
+#define GAP_EV_PAIRING_FAILED		0x8c
+struct gap_bond_pairing_failed_ev {
+	uint8_t address_type;
+	uint8_t address[6];
+	uint8_t reason;
+} __packed;
+
 /* GATT Service */
 /* commands */
 #define GATT_READ_SUPPORTED_COMMANDS	0x01
diff --git a/tests/bluetooth/tester/src/gap.c b/tests/bluetooth/tester/src/gap.c
index 6cbb3a7587948..c40ec69dc257a 100644
--- a/tests/bluetooth/tester/src/gap.c
+++ b/tests/bluetooth/tester/src/gap.c
@@ -825,6 +825,19 @@ enum bt_security_err auth_pairing_accept(struct bt_conn *conn,
 	return BT_SECURITY_ERR_SUCCESS;
 }
 
+void auth_pairing_failed(struct bt_conn *conn, enum bt_security_err reason)
+{
+	struct gap_bond_pairing_failed_ev ev;
+	const bt_addr_le_t *addr = bt_conn_get_dst(conn);
+
+	memcpy(ev.address, addr->a.val, sizeof(ev.address));
+	ev.address_type = addr->type;
+	ev.reason = reason;
+
+	tester_send(BTP_SERVICE_ID_GAP, GAP_EV_PAIRING_FAILED, CONTROLLER_INDEX,
+		    (uint8_t *)&ev, sizeof(ev));
+}
+
 static void set_io_cap(const uint8_t *data, uint16_t len)
 {
 	const struct gap_set_io_cap_cmd *cmd = (void *) data;
@@ -862,6 +875,7 @@ static void set_io_cap(const uint8_t *data, uint16_t len)
 	}
 
 	cb.pairing_accept = auth_pairing_accept;
+	cb.pairing_failed = auth_pairing_failed;
 
 	if (bt_conn_auth_cb_register(&cb)) {
 		status = BTP_STATUS_FAILED;