diff --git a/controllers/nutanixmachine_controller.go b/controllers/nutanixmachine_controller.go
index 7a17878dda..3dd2bcadf7 100644
--- a/controllers/nutanixmachine_controller.go
+++ b/controllers/nutanixmachine_controller.go
@@ -513,8 +513,14 @@ func (r *NutanixMachineReconciler) reconcileNode(rctx *nctx.MachineContext) (rec
 }
 
 func (r *NutanixMachineReconciler) validateMachineConfig(rctx *nctx.MachineContext) error {
-	if rctx.Machine.Spec.FailureDomain == nil && len(rctx.NutanixMachine.Spec.Subnets) == 0 {
-		return fmt.Errorf("atleast one subnet is needed to create the VM %s if no failure domain is set", rctx.NutanixMachine.Name)
+	if rctx.Machine.Spec.FailureDomain == nil {
+		if len(rctx.NutanixMachine.Spec.Subnets) == 0 {
+			return fmt.Errorf("atleast one subnet is needed to create the VM %s if no failure domain is set", rctx.NutanixMachine.Name)
+		}
+		if (rctx.NutanixMachine.Spec.Cluster.Name == nil || *rctx.NutanixMachine.Spec.Cluster.Name == "") &&
+			(rctx.NutanixMachine.Spec.Cluster.UUID == nil || *rctx.NutanixMachine.Spec.Cluster.UUID == "") {
+			return fmt.Errorf("cluster name or uuid are required to create the VM %s if no failure domain is set", rctx.NutanixMachine.Name)
+		}
 	}
 
 	diskSize := rctx.NutanixMachine.Spec.SystemDiskSize
diff --git a/controllers/nutanixmachine_controller_test.go b/controllers/nutanixmachine_controller_test.go
index 640a40364f..6fc270e9a0 100644
--- a/controllers/nutanixmachine_controller_test.go
+++ b/controllers/nutanixmachine_controller_test.go
@@ -55,10 +55,18 @@ func TestNutanixMachineReconciler(t *testing.T) {
 				Scheme: runtime.NewScheme(),
 			}
 
-			ntnxMachine = &infrav1.NutanixMachine{ObjectMeta: metav1.ObjectMeta{
-				Name:      "test",
-				Namespace: "default",
-			}}
+			ntnxMachine = &infrav1.NutanixMachine{
+				ObjectMeta: metav1.ObjectMeta{
+					Name:      "test",
+					Namespace: "default",
+				},
+				Spec: infrav1.NutanixMachineSpec{
+					VCPUsPerSocket: int32(minVCPUsPerSocket),
+					MemorySize:     minMachineMemorySize,
+					SystemDiskSize: minMachineSystemDiskSize,
+					VCPUSockets:    int32(minVCPUSockets),
+				},
+			}
 			machine = &capiv1.Machine{ObjectMeta: metav1.ObjectMeta{
 				Name:      "test",
 				Namespace: "default",
@@ -101,6 +109,47 @@ func TestNutanixMachineReconciler(t *testing.T) {
 				})
 				g.Expect(err).To(HaveOccurred())
 			})
+			It("should error if no failure domain is present on machine and no cluster name is passed", func() {
+				ntnxMachine.Spec.Subnets = []infrav1.NutanixResourceIdentifier{
+					{
+						Type: infrav1.NutanixIdentifierName,
+						Name: &r,
+					},
+				}
+				err := reconciler.validateMachineConfig(&nctx.MachineContext{
+					Context:        ctx,
+					NutanixMachine: ntnxMachine,
+					Machine:        machine,
+				})
+				g.Expect(err).To(HaveOccurred())
+			})
+			It("returns no error if valid machine config is passed without failure domain", func() {
+				ntnxMachine.Spec.Subnets = []infrav1.NutanixResourceIdentifier{
+					{
+						Type: infrav1.NutanixIdentifierName,
+						Name: &r,
+					},
+				}
+				ntnxMachine.Spec.Cluster = infrav1.NutanixResourceIdentifier{
+					Type: infrav1.NutanixIdentifierName,
+					Name: &r,
+				}
+				err := reconciler.validateMachineConfig(&nctx.MachineContext{
+					Context:        ctx,
+					NutanixMachine: ntnxMachine,
+					Machine:        machine,
+				})
+				g.Expect(err).ToNot(HaveOccurred())
+			})
+			It("returns no error if valid machine config is passed with failure domain", func() {
+				machine.Spec.FailureDomain = &r
+				err := reconciler.validateMachineConfig(&nctx.MachineContext{
+					Context:        ctx,
+					NutanixMachine: ntnxMachine,
+					Machine:        machine,
+				})
+				g.Expect(err).ToNot(HaveOccurred())
+			})
 		})
 
 		Context("Gets the subnet and PE UUIDs", func() {