diff --git a/xds/internal/balancer/clustermanager/clustermanager.go b/xds/internal/balancer/clustermanager/clustermanager.go
index 8d71200d8c61..930427df1b72 100644
--- a/xds/internal/balancer/clustermanager/clustermanager.go
+++ b/xds/internal/balancer/clustermanager/clustermanager.go
@@ -93,6 +93,11 @@ func (b *bal) updateChildren(s balancer.ClientConnState, newConfig *lbConfig) {
 			b.stateAggregator.add(name)
 			// Then add to the balancer group.
 			b.bg.Add(name, balancer.Get(newT.ChildPolicy.Name))
+		} else {
+			// Already present, check for type change and if so send down a new builder.
+			if newT.ChildPolicy.Name != b.children[name].ChildPolicy.Name {
+				b.bg.UpdateBuilder(name, balancer.Get(newT.ChildPolicy.Name))
+			}
 		}
 		// TODO: handle error? How to aggregate errors and return?
 		_ = b.bg.UpdateClientConnState(name, balancer.ClientConnState{
diff --git a/xds/internal/balancer/clustermanager/clustermanager_test.go b/xds/internal/balancer/clustermanager/clustermanager_test.go
index 771152b7bb97..e8e551a0ca17 100644
--- a/xds/internal/balancer/clustermanager/clustermanager_test.go
+++ b/xds/internal/balancer/clustermanager/clustermanager_test.go
@@ -25,6 +25,7 @@ import (
 	"time"
 
 	"github.com/google/go-cmp/cmp"
+	"google.golang.org/grpc"
 	"google.golang.org/grpc/balancer"
 	"google.golang.org/grpc/balancer/roundrobin"
 	"google.golang.org/grpc/codes"
@@ -48,6 +49,11 @@ func Test(t *testing.T) {
 	grpctest.RunSubTests(t, s{})
 }
 
+const (
+	defaultTestTimeout      = 5 * time.Second
+	defaultTestShortTimeout = 10 * time.Millisecond
+)
+
 var (
 	rtBuilder           balancer.Builder
 	rtParser            balancer.ConfigParser
@@ -102,6 +108,7 @@ func init() {
 	rtParser = rtBuilder.(balancer.ConfigParser)
 
 	balancer.Register(&ignoreAttrsRRBuilder{balancer.Get(roundrobin.Name)})
+	balancer.Register(wrappedPickFirstBalancerBuilder{})
 
 	balancergroup.DefaultSubBalancerCloseTimeout = time.Millisecond
 }
@@ -632,3 +639,127 @@ func TestInitialIdle(t *testing.T) {
 		t.Fatalf("Received aggregated state: %v, want Idle", state1)
 	}
 }
+
+// TestClusterGracefulSwitch tests the graceful switch functionality for a child
+// of the cluster manager. At first, the child is configured as a round robin
+// load balancer, and thus should behave accordingly. The test then gracefully
+// switches this child to a pick first load balancer. Once that balancer updates
+// it's state and completes the graceful switch process the new picker should
+// reflect this change.
+func TestClusterGracefulSwitch(t *testing.T) {
+	cc := testutils.NewTestClientConn(t)
+	rtb := rtBuilder.Build(cc, balancer.BuildOptions{})
+
+	configJSON1 := `{
+"children": {
+	"csp:cluster":{ "childPolicy": [{"ignore_attrs_round_robin":""}] }
+}
+}`
+	config1, err := rtParser.ParseConfig([]byte(configJSON1))
+	if err != nil {
+		t.Fatalf("failed to parse balancer config: %v", err)
+	}
+	wantAddrs := []resolver.Address{
+		{Addr: testBackendAddrStrs[0], BalancerAttributes: nil},
+		{Addr: testBackendAddrStrs[1], BalancerAttributes: nil},
+	}
+	if err := rtb.UpdateClientConnState(balancer.ClientConnState{
+		ResolverState: resolver.State{Addresses: []resolver.Address{
+			hierarchy.Set(wantAddrs[0], []string{"csp:cluster"}),
+		}},
+		BalancerConfig: config1,
+	}); err != nil {
+		t.Fatalf("failed to update ClientConn state: %v", err)
+	}
+
+	sc1 := <-cc.NewSubConnCh
+	rtb.UpdateSubConnState(sc1, balancer.SubConnState{ConnectivityState: connectivity.Connecting})
+	rtb.UpdateSubConnState(sc1, balancer.SubConnState{ConnectivityState: connectivity.Ready})
+	p1 := <-cc.NewPickerCh
+	pi := balancer.PickInfo{
+		Ctx: SetPickedCluster(context.Background(), "csp:cluster"),
+	}
+	testPick(t, p1, pi, sc1, nil)
+
+	// Same cluster, different balancer type.
+	configJSON2 := `{
+"children": {
+	"csp:cluster":{ "childPolicy": [{"wrappedPickFirstBalancer":""}] }
+}
+}`
+	config2, err := rtParser.ParseConfig([]byte(configJSON2))
+	if err != nil {
+		t.Fatalf("failed to parse balancer config: %v", err)
+	}
+	if err := rtb.UpdateClientConnState(balancer.ClientConnState{
+		ResolverState: resolver.State{Addresses: []resolver.Address{
+			hierarchy.Set(wantAddrs[1], []string{"csp:cluster"}),
+		}},
+		BalancerConfig: config2,
+	}); err != nil {
+		t.Fatalf("failed to update ClientConn state: %v", err)
+	}
+	sc2 := <-cc.NewSubConnCh
+	// Update the pick first balancers SubConn as CONNECTING. This will cause
+	// the pick first balancer to UpdateState() with CONNECTING, which shouldn't send
+	// a Picker update back, as the Graceful Switch process is not complete.
+	rtb.UpdateSubConnState(sc2, balancer.SubConnState{ConnectivityState: connectivity.Connecting})
+	ctx, cancel := context.WithTimeout(context.Background(), defaultTestShortTimeout)
+	defer cancel()
+	select {
+	case <-cc.NewPickerCh:
+		t.Fatalf("No new picker should have been sent due to the Graceful Switch process not completing")
+	case <-ctx.Done():
+	}
+
+	// Update the pick first balancers SubConn as READY. This will cause
+	// the pick first balancer to UpdateState() with READY, which should send a
+	// Picker update back, as the Graceful Switch process is complete. This
+	// Picker should always pick the pick first's created SubConn.
+	rtb.UpdateSubConnState(sc2, balancer.SubConnState{ConnectivityState: connectivity.Ready})
+	p2 := <-cc.NewPickerCh
+	testPick(t, p2, pi, sc2, nil)
+	// The Graceful Switch process completing for the child should cause the
+	// SubConns for the balancer being gracefully switched from to get deleted.
+	ctx, cancel = context.WithTimeout(context.Background(), defaultTestTimeout)
+	defer cancel()
+	select {
+	case <-ctx.Done():
+		t.Fatalf("error waiting for RemoveSubConn()")
+	case rsc := <-cc.RemoveSubConnCh:
+		// The SubConn removed should have been the created SubConn
+		// from the child before switching.
+		if rsc != sc1 {
+			t.Fatalf("RemoveSubConn() got: %v, want %v", rsc, sc1)
+		}
+	}
+}
+
+type wrappedPickFirstBalancerBuilder struct{}
+
+func (wrappedPickFirstBalancerBuilder) Build(cc balancer.ClientConn, opts balancer.BuildOptions) balancer.Balancer {
+	builder := balancer.Get(grpc.PickFirstBalancerName)
+	wpfb := &wrappedPickFirstBalancer{
+		ClientConn: cc,
+	}
+	pf := builder.Build(wpfb, opts)
+	wpfb.Balancer = pf
+	return wpfb
+}
+
+func (wrappedPickFirstBalancerBuilder) Name() string {
+	return "wrappedPickFirstBalancer"
+}
+
+type wrappedPickFirstBalancer struct {
+	balancer.Balancer
+	balancer.ClientConn
+}
+
+func (wb *wrappedPickFirstBalancer) UpdateState(state balancer.State) {
+	// Eat it if IDLE - allows it to switch over only on a READY SubConn.
+	if state.ConnectivityState == connectivity.Idle {
+		return
+	}
+	wb.ClientConn.UpdateState(state)
+}