diff --git a/drivers/gpu/drm/xe/xe_debugfs.c b/drivers/gpu/drm/xe/xe_debugfs.c
index e91da9589c5f..63fd8bf13c70 100644
--- a/drivers/gpu/drm/xe/xe_debugfs.c
+++ b/drivers/gpu/drm/xe/xe_debugfs.c
@@ -256,14 +256,64 @@ static ssize_t wedged_mode_show(struct file *f, char __user *ubuf,
 	return simple_read_from_buffer(ubuf, size, pos, buf, len);
 }
 
+static int __wedged_mode_set_reset_policy(struct xe_gt *gt, enum xe_wedged_mode mode)
+{
+	bool enable_engine_reset;
+	int ret;
+
+	enable_engine_reset = (mode != XE_WEDGED_MODE_UPON_ANY_HANG_NO_RESET);
+	ret = xe_guc_ads_scheduler_policy_toggle_reset(&gt->uc.guc.ads,
+						       enable_engine_reset);
+	if (ret)
+		xe_gt_err(gt, "Failed to update GuC ADS scheduler policy (%pe)\n", ERR_PTR(ret));
+
+	return ret;
+}
+
+static int wedged_mode_set_reset_policy(struct xe_device *xe, enum xe_wedged_mode mode)
+{
+	struct xe_gt *gt;
+	int ret;
+	u8 id;
+
+	guard(xe_pm_runtime)(xe);
+	for_each_gt(gt, xe, id) {
+		ret = __wedged_mode_set_reset_policy(gt, mode);
+		if (ret) {
+			if (id > 0) {
+				xe->wedged.inconsistent_reset = true;
+				drm_err(&xe->drm, "Inconsistent reset policy state between GTs\n");
+			}
+			return ret;
+		}
+	}
+
+	xe->wedged.inconsistent_reset = false;
+
+	return 0;
+}
+
+static bool wedged_mode_needs_policy_update(struct xe_device *xe, enum xe_wedged_mode mode)
+{
+	if (xe->wedged.inconsistent_reset)
+		return true;
+
+	if (xe->wedged.mode == mode)
+		return false;
+
+	if (xe->wedged.mode == XE_WEDGED_MODE_UPON_ANY_HANG_NO_RESET ||
+	    mode == XE_WEDGED_MODE_UPON_ANY_HANG_NO_RESET)
+		return true;
+
+	return false;
+}
+
 static ssize_t wedged_mode_set(struct file *f, const char __user *ubuf,
 			       size_t size, loff_t *pos)
 {
 	struct xe_device *xe = file_inode(f)->i_private;
-	struct xe_gt *gt;
 	u32 wedged_mode;
 	ssize_t ret;
-	u8 id;
 
 	ret = kstrtouint_from_user(ubuf, size, 0, &wedged_mode);
 	if (ret)
@@ -272,22 +322,14 @@ static ssize_t wedged_mode_set(struct file *f, const char __user *ubuf,
 	if (wedged_mode > 2)
 		return -EINVAL;
 
-	if (xe->wedged.mode == wedged_mode)
-		return size;
+	if (wedged_mode_needs_policy_update(xe, wedged_mode)) {
+		ret = wedged_mode_set_reset_policy(xe, wedged_mode);
+		if (ret)
+			return ret;
+	}
 
 	xe->wedged.mode = wedged_mode;
 
-	xe_pm_runtime_get(xe);
-	for_each_gt(gt, xe, id) {
-		ret = xe_guc_ads_scheduler_policy_toggle_reset(&gt->uc.guc.ads);
-		if (ret) {
-			xe_gt_err(gt, "Failed to update GuC ADS scheduler policy. GuC may still cause engine reset even with wedged_mode=2\n");
-			xe_pm_runtime_put(xe);
-			return -EIO;
-		}
-	}
-	xe_pm_runtime_put(xe);
-
 	return size;
 }
 
diff --git a/drivers/gpu/drm/xe/xe_device_types.h b/drivers/gpu/drm/xe/xe_device_types.h
index 0b2fa7c56d38..047e86e22133 100644
--- a/drivers/gpu/drm/xe/xe_device_types.h
+++ b/drivers/gpu/drm/xe/xe_device_types.h
@@ -44,6 +44,22 @@ struct xe_pat_ops;
 struct xe_pxp;
 struct xe_vram_region;
 
+/**
+ * enum xe_wedged_mode - possible wedged modes
+ * @XE_WEDGED_MODE_NEVER: Device will never be declared wedged.
+ * @XE_WEDGED_MODE_UPON_CRITICAL_ERROR: Device will be declared wedged only
+ *	when critical error occurs like GT reset failure or firmware failure.
+ *	This is the default mode.
+ * @XE_WEDGED_MODE_UPON_ANY_HANG_NO_RESET: Device will be declared wedged on
+ *	any hang. In this mode, engine resets are disabled to avoid automatic
+ *	recovery attempts. This mode is primarily intended for debugging hangs.
+ */
+enum xe_wedged_mode {
+	XE_WEDGED_MODE_NEVER = 0,
+	XE_WEDGED_MODE_UPON_CRITICAL_ERROR = 1,
+	XE_WEDGED_MODE_UPON_ANY_HANG_NO_RESET = 2,
+};
+
 #define XE_BO_INVALID_OFFSET	LONG_MAX
 
 #define GRAPHICS_VER(xe) ((xe)->info.graphics_verx100 / 100)
@@ -587,6 +603,8 @@ struct xe_device {
 		int mode;
 		/** @wedged.method: Recovery method to be sent in the drm device wedged uevent */
 		unsigned long method;
+		/** @wedged.inconsistent_reset: Inconsistent reset policy state between GTs */
+		bool inconsistent_reset;
 	} wedged;
 
 	/** @bo_device: Struct to control async free of BOs */
diff --git a/drivers/gpu/drm/xe/xe_guc_ads.c b/drivers/gpu/drm/xe/xe_guc_ads.c
index bcb85a1bf26d..3f7f1b5602d5 100644
--- a/drivers/gpu/drm/xe/xe_guc_ads.c
+++ b/drivers/gpu/drm/xe/xe_guc_ads.c
@@ -983,16 +983,17 @@ static int guc_ads_action_update_policies(struct xe_guc_ads *ads, u32 policy_off
 /**
  * xe_guc_ads_scheduler_policy_toggle_reset - Toggle reset policy
  * @ads: Additional data structures object
+ * @enable_engine_reset: true to enable engine resets, false otherwise
  *
- * This function update the GuC's engine reset policy based on wedged.mode.
+ * This function update the GuC's engine reset policy.
  *
  * Return: 0 on success, and negative error code otherwise.
  */
-int xe_guc_ads_scheduler_policy_toggle_reset(struct xe_guc_ads *ads)
+int xe_guc_ads_scheduler_policy_toggle_reset(struct xe_guc_ads *ads,
+					     bool enable_engine_reset)
 {
 	struct guc_policies *policies;
 	struct xe_guc *guc = ads_to_guc(ads);
-	struct xe_device *xe = ads_to_xe(ads);
 	CLASS(xe_guc_buf, buf)(&guc->buf, sizeof(*policies));
 
 	if (!xe_guc_buf_is_valid(buf))
@@ -1004,10 +1005,11 @@ int xe_guc_ads_scheduler_policy_toggle_reset(struct xe_guc_ads *ads)
 	policies->dpc_promote_time = ads_blob_read(ads, policies.dpc_promote_time);
 	policies->max_num_work_items = ads_blob_read(ads, policies.max_num_work_items);
 	policies->is_valid = 1;
-	if (xe->wedged.mode == 2)
-		policies->global_flags |= GLOBAL_POLICY_DISABLE_ENGINE_RESET;
-	else
+
+	if (enable_engine_reset)
 		policies->global_flags &= ~GLOBAL_POLICY_DISABLE_ENGINE_RESET;
+	else
+		policies->global_flags |= GLOBAL_POLICY_DISABLE_ENGINE_RESET;
 
 	return guc_ads_action_update_policies(ads, xe_guc_buf_flush(buf));
 }
diff --git a/drivers/gpu/drm/xe/xe_guc_ads.h b/drivers/gpu/drm/xe/xe_guc_ads.h
index 2e6674c760ff..7a39f361cb17 100644
--- a/drivers/gpu/drm/xe/xe_guc_ads.h
+++ b/drivers/gpu/drm/xe/xe_guc_ads.h
@@ -6,6 +6,8 @@
 #ifndef _XE_GUC_ADS_H_
 #define _XE_GUC_ADS_H_
 
+#include <linux/types.h>
+
 struct xe_guc_ads;
 
 int xe_guc_ads_init(struct xe_guc_ads *ads);
@@ -13,6 +15,7 @@ int xe_guc_ads_init_post_hwconfig(struct xe_guc_ads *ads);
 void xe_guc_ads_populate(struct xe_guc_ads *ads);
 void xe_guc_ads_populate_minimal(struct xe_guc_ads *ads);
 void xe_guc_ads_populate_post_load(struct xe_guc_ads *ads);
-int xe_guc_ads_scheduler_policy_toggle_reset(struct xe_guc_ads *ads);
+int xe_guc_ads_scheduler_policy_toggle_reset(struct xe_guc_ads *ads,
+					     bool enable_engine_reset);
 
 #endif