diff --git a/distributed/active_memory_manager.py b/distributed/active_memory_manager.py
index 126608a0173..82385354d4d 100644
--- a/distributed/active_memory_manager.py
+++ b/distributed/active_memory_manager.py
@@ -469,21 +469,31 @@ def run(self):
         nno_rec = 0
 
         for ts in ws.has_what:
-            if len(ts.who_has) == 1:
-                nrepl += 1
-                pending_repl, _ = self.manager.pending[ts]
-                if not pending_repl:
-                    rec_ws = (yield "replicate", ts, None)
-                    if not rec_ws:
-                        # replication was rejected by the AMM (see _find_recipient)
-                        nno_rec += 1
-            else:
-                # This may be rejected by either the AMM (see _find_dropper) or by the
-                # Worker; e.g. a running task may depend on this key. If so we'll try
-                # again at the next iteration. Anyway, this is just to facilitate
-                # spilled tasks to be moved back into memory and not mandatory for
-                # retirement.
-                yield "drop", ts, {ws}
+            if len(ts.who_has) > 1:
+                # Use cases:
+                # 1.  The suggestion is accepted by the AMM and by the Worker.
+                #     Replica is dropped.
+                # 2.  The suggestion is accepted by the AMM, but rejected by the Worker.
+                #     We'll try again at the next AMM iteration.
+                # 3.  The suggestion is rejected by the AMM, because:
+                # 3a. Another policy (e.g. ReduceReplicas) already suggested the same
+                # 3b. All replicas of the key are on workers being retired, and the
+                #     other RetireWorker instances already asked the same suggestion.
+                #     We need to deal with this case explicitly and create a replica
+                #     elsewhere.
+                drop_ws = (yield "drop", ts, {ws})
+                if drop_ws:
+                    continue
+
+            # Either the worker holds the only replica or all replicas are being held
+            # by workers that are being retired
+            nrepl += 1
+            pending_repl, _ = self.manager.pending[ts]
+            if not pending_repl:
+                rec_ws = (yield "replicate", ts, None)
+                if not rec_ws:
+                    # replication was rejected by the AMM (see _find_recipient)
+                    nno_rec += 1
 
         if nno_rec:
             # All workers are paused or closing_gracefully.
diff --git a/distributed/tests/test_active_memory_manager.py b/distributed/tests/test_active_memory_manager.py
index 344c446c1ef..9d9e813c6b3 100644
--- a/distributed/tests/test_active_memory_manager.py
+++ b/distributed/tests/test_active_memory_manager.py
@@ -616,9 +616,13 @@ async def test_RetireWorker_all_replicas_are_being_retired(c, s, w1, w2, w3):
     """There are multiple replicas of a key, but they all reside on workers that are
     being retired
     """
+    ws1 = s.workers[w1.address]
+    ws2 = s.workers[w2.address]
+    ws3 = s.workers[w3.address]
     fut = await c.scatter({"x": "x"}, workers=[w1.address, w2.address], broadcast=True)
+    assert s.tasks["x"].who_has == {ws1, ws2}
     await c.retire_workers([w1.address, w2.address])
-    assert s.tasks["x"].who_has == {s.workers[w3.address]}
+    assert s.tasks["x"].who_has == {ws3}
 
 
 @gen_cluster(client=True, nthreads=[("", 1)] * 4, config=NO_AMM_START)