diff --git a/configure.ac b/configure.ac
index c189114..289f34a 100644
--- a/configure.ac
+++ b/configure.ac
@@ -161,8 +161,13 @@
 )
 
 # When a sensor read fails, set the Value on dbus with -errno.
+# It will also skip the "Remove RCs" check.
+# Incompatible with update-functional-on-fail.
 AC_ARG_ENABLE([negative-errno-on-fail],
-    AS_HELP_STRING([--enable-negative-errno-on-fail], [Set sensor value to -errno on read failures])
+    AS_HELP_STRING(
+        [--enable-negative-errno-on-fail],
+        [Set sensor value to -errno on read failures. Incompatible with update-functional-on-fail]
+    )
 )
 
 AC_ARG_VAR(NEGATIVE_ERRNO_ON_FAIL, [Set sensor value to -errno on read failures])
@@ -171,10 +176,40 @@
     [NEGATIVE_ERRNO_ON_FAIL="yes"]
     AC_DEFINE_UNQUOTED(
         [NEGATIVE_ERRNO_ON_FAIL],
-        ["$NEGATIVE_ERRNO_ON_FAIL"], [Set sensor value to -errno on read failures]
+        ["$NEGATIVE_ERRNO_ON_FAIL"],
+        [Set sensor value to -errno on read failures]
     )
 )
 
+# When a sensor read fails, update the OperationalState interface's Functional property.
+# This will mark the sensor as not functional and skip reading from that sensor.
+# It will skip the "Remove RCs" check during value interface creation in MainLoop::getObject.
+# However, it will perform the "Remove RCs" checks during MainLoop::read.
+# Incompatible with negative-errno-on-fail.
+AC_ARG_ENABLE([update-functional-on-fail],
+    AS_HELP_STRING(
+        [--enable-update-functional-on-fail],
+        [Update functional property on read failures. Incompatible with negative-errno-on-fail]
+    )
+)
+
+AC_ARG_VAR(UPDATE_FUNCTIONAL_ON_FAIL, [Update functional property on read failures])
+AS_IF(
+    [test "x$enable_update_functional_on_fail" == "xyes"],
+    [UPDATE_FUNCTIONAL_ON_FAIL="yes"]
+    AC_DEFINE_UNQUOTED(
+        [UPDATE_FUNCTIONAL_ON_FAIL],
+        ["$UPDATE_FUNCTIONAL_ON_FAIL"],
+        [Update functional property on sensor read failures]
+    )
+)
+
+AS_IF([test "x$enable_negative_errno_on_fail" == "xyes"], [
+    AS_IF([test "x$enable_update_functional_on_fail" == "xyes"], [
+        AC_MSG_ERROR([Invalid configuration enabling both negative-errno-on-fail and update-functional-on-fail.])
+    ])
+])
+
 AC_ARG_VAR(BUSNAME_PREFIX, [The DBus busname prefix.])
 AC_ARG_VAR(SENSOR_ROOT, [The DBus sensors namespace root.])
 AS_IF(
diff --git a/mainloop.cpp b/mainloop.cpp
index 5fa66cd..d961a10 100644
--- a/mainloop.cpp
+++ b/mainloop.cpp
@@ -393,21 +393,19 @@
                 input = "";
             }
 
+            int64_t value;
+            auto& objInfo = std::get<ObjectInfo>(i.second);
+            auto& obj = std::get<InterfaceMap>(objInfo);
+            std::unique_ptr<sensor::Sensor>& sensor = _sensorObjects[i.first];
+
+            auto& statusIface = std::any_cast<std::shared_ptr<StatusObject>&>(
+                obj[InterfaceType::STATUS]);
+            // As long as addStatus is called before addValue, statusIface
+            // should never be nullptr.
+            assert(statusIface);
+
             try
             {
-                int64_t value;
-                auto& objInfo = std::get<ObjectInfo>(i.second);
-                auto& obj = std::get<InterfaceMap>(objInfo);
-                std::unique_ptr<sensor::Sensor>& sensor =
-                    _sensorObjects[i.first];
-
-                auto& statusIface =
-                    std::any_cast<std::shared_ptr<StatusObject>&>(
-                        obj[InterfaceType::STATUS]);
-                // As long as addStatus is called before addValue, statusIface
-                // should never be nullptr.
-                assert(statusIface);
-
                 if (sensor->hasFaultFile())
                 {
                     auto fault = _ioAccess->read(
@@ -430,6 +428,8 @@
                     value =
                         _ioAccess->read(i.first.first, i.first.second, input,
                                         hwmonio::retries, hwmonio::delay);
+                    // Set functional property to true if we could read sensor
+                    statusIface->functional(true);
 
                     value = sensor->adjustValue(value);
                 }
@@ -438,6 +438,13 @@
             }
             catch (const std::system_error& e)
             {
+#ifdef UPDATE_FUNCTIONAL_ON_FAIL
+                // If UPDATE_FUNCTIONAL_ON_FAIL is defined and an exception was
+                // thrown, set the functional property to false.
+                // We cannot set this with the 'continue' in the lower block
+                // as the code may exit before reaching it.
+                statusIface->functional(false);
+#endif
                 auto file = sysfs::make_sysfs_path(
                     _ioAccess->path(), i.first.first, i.first.second,
                     hwmon::entry::cinput);
@@ -459,7 +466,10 @@
                     }
                     continue;
                 }
-
+#ifdef UPDATE_FUNCTIONAL_ON_FAIL
+                // Do not exit with failure if UPDATE_FUNCTIONAL_ON_FAIL is set
+                continue;
+#endif
                 using namespace sdbusplus::xyz::openbmc_project::Sensor::
                     Device::Error;
                 report<ReadFailure>(
diff --git a/sensor.cpp b/sensor.cpp
index a88410b..6e5e841 100644
--- a/sensor.cpp
+++ b/sensor.cpp
@@ -146,16 +146,32 @@
     // Only read the input value if the status is functional
     if (statusIface->functional())
     {
-        // RAII object for GPIO unlock / lock
-        GpioLock gpioLock(getGpio());
+#ifdef UPDATE_FUNCTIONAL_ON_FAIL
+        try
+#endif
+        {
+            // RAII object for GPIO unlock / lock
+            GpioLock gpioLock(getGpio());
 
-        // Retry for up to a second if device is busy
-        // or has a transient error.
-        val = _ioAccess->read(_sensor.first, _sensor.second,
-                              hwmon::entry::cinput, std::get<size_t>(retryIO),
-                              std::get<std::chrono::milliseconds>(retryIO));
+            // Retry for up to a second if device is busy
+            // or has a transient error.
+            val =
+                _ioAccess->read(_sensor.first, _sensor.second,
+                                hwmon::entry::cinput, std::get<size_t>(retryIO),
+                                std::get<std::chrono::milliseconds>(retryIO));
 
-        val = adjustValue(val);
+            val = adjustValue(val);
+        }
+#ifdef UPDATE_FUNCTIONAL_ON_FAIL
+        catch (const std::system_error& e)
+        {
+            // Catch the exception here and update the functional property.
+            // By catching the exception, it will not propagate it up the stack
+            // and thus the code will skip the "Remove RCs" check in
+            // MainLoop::getObject and will not exit on failure.
+            statusIface->functional(false);
+        }
+#endif
     }
 
     auto iface =