diff --git a/components/esp_rainmaker/CHANGELOG.md b/components/esp_rainmaker/CHANGELOG.md
index 911d90b..259dafd 100644
--- a/components/esp_rainmaker/CHANGELOG.md
+++ b/components/esp_rainmaker/CHANGELOG.md
@@ -1,5 +1,25 @@
 # Changelog
 
+## 1.9.0
+
+### New Features
+
+- Implemented option to report 'failed' status on OTA rollback due to MQTT timeout.
+    - Enable via `CONFIG_ESP_RMAKER_OTA_ROLLBACK_REPORT_FAILED` in menuconfig.
+    - When enabled, if a rollback happens because MQTT did not connect within the configured timeout,
+      the rolled-back firmware will report 'failed' status instead of 'rejected'.
+    - Ensures backward compatibility: older firmware versions (without this feature) will not
+      report any status, preventing incorrect 'rejected' reports.
+    - Only applicable for `OTA_USING_TOPICS` type.
+    - Implementation details:
+        - New firmware stores failure reason and job ID in separate NVS keys before rollback.
+        - Rolled-back firmware reads these keys and reports 'failed' status with appropriate job ID.
+        - Main job ID key is erased before rollback to prevent old firmware from reporting 'rejected'.
+    - **WARNING**: Use this option with caution. If the new firmware has issues that cause persistent
+      MQTT connection failures, enabling this feature may cause the device to toggle between two
+      firmware versions indefinitely (new firmware boots → MQTT fails → rollback → OTA retry →
+      new firmware boots again).
+
 ## 1.8.9
 
 ### New Features
diff --git a/components/esp_rainmaker/Kconfig.projbuild b/components/esp_rainmaker/Kconfig.projbuild
index 4d77412..ed73cf4 100644
--- a/components/esp_rainmaker/Kconfig.projbuild
+++ b/components/esp_rainmaker/Kconfig.projbuild
@@ -419,6 +419,20 @@ menu "ESP RainMaker Config"
                 this wait period (in seconds), the firmware will be marked as invalid and the older
                 firmware will be booted into.
 
+        config ESP_RMAKER_OTA_ROLLBACK_REPORT_FAILED
+            bool "Report 'failed' status on MQTT timeout rollback"
+            default n
+            help
+                When enabled, if a rollback happens due to MQTT connection timeout, the rolled back firmware
+                will report 'failed' status instead of 'rejected'. This also ensures backward compatibility
+                by erasing the job ID before rollback, so older firmware versions (without this feature)
+                will not report any status.
+
+                WARNING: Use this option with caution. If the new firmware has issues that cause persistent
+                MQTT connection failures, enabling this feature may cause the device to toggle between two
+                firmware versions indefinitely (new firmware boots → MQTT fails → rollback → OTA retry →
+                new firmware boots again).
+
         config ESP_RMAKER_OTA_DISABLE_AUTO_REBOOT
             bool "Disable auto reboot"
             default n
diff --git a/components/esp_rainmaker/idf_component.yml b/components/esp_rainmaker/idf_component.yml
index 8b80c81..0852404 100644
--- a/components/esp_rainmaker/idf_component.yml
+++ b/components/esp_rainmaker/idf_component.yml
@@ -1,5 +1,5 @@
 ## IDF Component Manager Manifest File
-version: "1.8.9"
+version: "1.9.0"
 description: ESP RainMaker firmware agent
 url: https://github.com/espressif/esp-rainmaker/tree/master/components/esp_rainmaker
 repository: https://github.com/espressif/esp-rainmaker.git
diff --git a/components/esp_rainmaker/src/ota/esp_rmaker_ota.c b/components/esp_rainmaker/src/ota/esp_rmaker_ota.c
index 20b6e68..6fd08ca 100644
--- a/components/esp_rainmaker/src/ota/esp_rmaker_ota.c
+++ b/components/esp_rainmaker/src/ota/esp_rmaker_ota.c
@@ -550,6 +550,39 @@ static void esp_ota_rollback(TimerHandle_t handle)
 {
     ESP_LOGE(TAG, "Could not verify firmware even after %d seconds since boot-up. Rolling back.",
             RMAKER_OTA_ROLLBACK_WAIT_PERIOD);
+#ifdef CONFIG_ESP_RMAKER_OTA_ROLLBACK_REPORT_FAILED
+    /* Store failure reason and job_id in separate NVS keys so that after rollback,
+     * new firmware (with this feature) can report "failed" status with the correct job_id.
+     * Also erase the main job_id key so that old firmware (without this feature) won't
+     * report "rejected" status.
+     */
+    nvs_handle nvs_handle_fail;
+    esp_err_t err = nvs_open_from_partition(ESP_RMAKER_NVS_PART_NAME, RMAKER_OTA_NVS_NAMESPACE, NVS_READWRITE, &nvs_handle_fail);
+    if (err == ESP_OK) {
+        /* Store failure reason */
+        char fail_reason[64];
+        snprintf(fail_reason, sizeof(fail_reason), "MQTT did not connect within %d seconds", RMAKER_OTA_ROLLBACK_WAIT_PERIOD);
+        esp_err_t set_err = nvs_set_str(nvs_handle_fail, RMAKER_OTA_FAIL_REASON_NVS_NAME, fail_reason);
+        if (set_err != ESP_OK) {
+            ESP_LOGW(TAG, "Failed to store failure reason: %s", esp_err_to_name(set_err));
+        }
+
+        /* Copy job_id to a separate key for new firmware to use */
+        char job_id[64] = {0};
+        size_t job_id_len = sizeof(job_id);
+        if (nvs_get_blob(nvs_handle_fail, RMAKER_OTA_JOB_ID_NVS_NAME, job_id, &job_id_len) == ESP_OK) {
+            set_err = nvs_set_str(nvs_handle_fail, RMAKER_OTA_FAIL_JOB_ID_NVS_NAME, job_id);
+            if (set_err != ESP_OK) {
+                ESP_LOGW(TAG, "Failed to store failure job ID: %s", esp_err_to_name(set_err));
+            }
+        }
+
+        /* Erase main job_id key to prevent old firmware (without this feature) from reporting "rejected" */
+        nvs_erase_key(nvs_handle_fail, RMAKER_OTA_JOB_ID_NVS_NAME);
+        nvs_commit(nvs_handle_fail);
+        nvs_close(nvs_handle_fail);
+    }
+#endif /* CONFIG_ESP_RMAKER_OTA_ROLLBACK_REPORT_FAILED */
     esp_rmaker_ota_mark_invalid();
 }
 
@@ -617,9 +650,11 @@ static void esp_rmaker_ota_manage_rollback(esp_rmaker_ota_t *ota)
             if (ota->validation_in_progress) {
                 ota->rolled_back = true;
                 esp_rmaker_erase_rollback_flag();
+
                 if (ota->type == OTA_USING_PARAMS) {
-                    /* Calling this only for OTA_USING_PARAMS, because for OTA_USING_TOPICS,
-                     * the work queue function will manage the status reporting later.
+                    /* For OTA_USING_PARAMS, just report "rejected" as it doesn't use job IDs.
+                     * For OTA_USING_TOPICS, the work queue function will handle reading
+                     * failure info from NVS and reporting appropriate status.
                      */
                     esp_rmaker_ota_report_status((esp_rmaker_ota_handle_t )ota,
                             OTA_STATUS_REJECTED, "Firmware rolled back");
diff --git a/components/esp_rainmaker/src/ota/esp_rmaker_ota_internal.h b/components/esp_rainmaker/src/ota/esp_rmaker_ota_internal.h
index 35d4f22..c4a8350 100644
--- a/components/esp_rainmaker/src/ota/esp_rmaker_ota_internal.h
+++ b/components/esp_rainmaker/src/ota/esp_rmaker_ota_internal.h
@@ -22,6 +22,8 @@ extern "C" {
 #define RMAKER_OTA_NVS_NAMESPACE            "rmaker_ota"
 #define RMAKER_OTA_JOB_ID_NVS_NAME          "rmaker_ota_id"
 #define RMAKER_OTA_UPDATE_FLAG_NVS_NAME     "ota_update"
+#define RMAKER_OTA_FAIL_REASON_NVS_NAME     "ota_fail_rsn"
+#define RMAKER_OTA_FAIL_JOB_ID_NVS_NAME     "ota_fail_jid"
 #define RMAKER_OTA_FETCH_DELAY              5
 
 #if defined(CONFIG_BT_ENABLED) && !defined(CONFIG_IDF_TARGET_ESP32P4)
diff --git a/components/esp_rainmaker/src/ota/esp_rmaker_ota_using_topics.c b/components/esp_rainmaker/src/ota/esp_rmaker_ota_using_topics.c
index 1fa8c6f..32a0ecb 100644
--- a/components/esp_rainmaker/src/ota/esp_rmaker_ota_using_topics.c
+++ b/components/esp_rainmaker/src/ota/esp_rmaker_ota_using_topics.c
@@ -548,7 +548,64 @@ static void esp_rmaker_ota_work_fn(void *priv_data)
     esp_rmaker_ota_t *ota = (esp_rmaker_ota_t *)priv_data;
     /* If the firmware was rolled back, indicate that first */
     if (ota->rolled_back) {
-        esp_rmaker_ota_report_status((esp_rmaker_ota_handle_t )ota, OTA_STATUS_REJECTED, "Firmware rolled back");
+        char *rollback_fail_job_id = NULL;
+        char *rollback_fail_reason = NULL;
+
+        /* Check if there's a failure job_id stored (from new firmware with ROLLBACK_REPORT_FAILED enabled).
+         * The presence of ota_fail_jid is the primary indicator that we should report "failed" instead of "rejected".
+         */
+        nvs_handle nvs_handle_fail;
+        esp_err_t err = nvs_open_from_partition(ESP_RMAKER_NVS_PART_NAME, RMAKER_OTA_NVS_NAMESPACE, NVS_READWRITE, &nvs_handle_fail);
+        if (err == ESP_OK) {
+            size_t job_id_len = 0;
+            if (nvs_get_str(nvs_handle_fail, RMAKER_OTA_FAIL_JOB_ID_NVS_NAME, NULL, &job_id_len) == ESP_OK) {
+                rollback_fail_job_id = MEM_CALLOC_EXTRAM(1, job_id_len);
+                if (rollback_fail_job_id) {
+                    nvs_get_str(nvs_handle_fail, RMAKER_OTA_FAIL_JOB_ID_NVS_NAME, rollback_fail_job_id, &job_id_len);
+                    ESP_LOGI(TAG, "Rollback failure job_id found: %s", rollback_fail_job_id);
+                }
+
+                /* Also try to read the failure reason if available */
+                size_t fail_reason_len = 0;
+                if (nvs_get_str(nvs_handle_fail, RMAKER_OTA_FAIL_REASON_NVS_NAME, NULL, &fail_reason_len) == ESP_OK) {
+                    rollback_fail_reason = MEM_CALLOC_EXTRAM(1, fail_reason_len);
+                    if (rollback_fail_reason) {
+                        nvs_get_str(nvs_handle_fail, RMAKER_OTA_FAIL_REASON_NVS_NAME, rollback_fail_reason, &fail_reason_len);
+                        ESP_LOGI(TAG, "Rollback failure reason found: %s", rollback_fail_reason);
+                    }
+                }
+            }
+            nvs_close(nvs_handle_fail);
+        }
+
+        if (rollback_fail_job_id) {
+            /* Report "failed" - presence of rollback_fail_job_id indicates new firmware had the feature enabled */
+            ota->transient_priv = rollback_fail_job_id;
+            /* Use stored reason if available, else use default */
+            const char *fail_reason = rollback_fail_reason ?
+                    rollback_fail_reason : "Firmware verification failed";
+            esp_rmaker_ota_report_status((esp_rmaker_ota_handle_t )ota, OTA_STATUS_FAILED, (char *)fail_reason);
+
+            /* Erase NVS keys after successful reporting */
+            err = nvs_open_from_partition(ESP_RMAKER_NVS_PART_NAME, RMAKER_OTA_NVS_NAMESPACE, NVS_READWRITE, &nvs_handle_fail);
+            if (err == ESP_OK) {
+                nvs_erase_key(nvs_handle_fail, RMAKER_OTA_FAIL_JOB_ID_NVS_NAME);
+                nvs_erase_key(nvs_handle_fail, RMAKER_OTA_FAIL_REASON_NVS_NAME);
+                /* Also erase the main job_id key for safety, in case it wasn't erased before rollback */
+                nvs_erase_key(nvs_handle_fail, RMAKER_OTA_JOB_ID_NVS_NAME);
+                nvs_commit(nvs_handle_fail);
+                nvs_close(nvs_handle_fail);
+            }
+
+            /* Clean up memory */
+            free(rollback_fail_job_id);
+            if (rollback_fail_reason) {
+                free(rollback_fail_reason);
+            }
+            ota->transient_priv = NULL;
+        } else {
+            esp_rmaker_ota_report_status((esp_rmaker_ota_handle_t )ota, OTA_STATUS_REJECTED, "Firmware rolled back");
+        }
         ota->rolled_back = false;
     }
     esp_rmaker_ota_subscribe(priv_data);