diff --git a/extensions/openpower-pels/manager.cpp b/extensions/openpower-pels/manager.cpp
index 9f2a13e..61eb36b 100644
--- a/extensions/openpower-pels/manager.cpp
+++ b/extensions/openpower-pels/manager.cpp
@@ -54,6 +54,8 @@
 } // namespace additional_data
 
 constexpr auto defaultLogMessage = "xyz.openbmc_project.Logging.Error.Default";
+constexpr uint32_t bmcThermalCompID = 0x2700;
+constexpr uint32_t bmcFansCompID = 0x2800;
 
 Manager::~Manager()
 {
@@ -1032,5 +1034,74 @@
     _obmcLogDeleteEventSource.reset();
 }
 
+bool Manager::clearPowerThermalDeconfigFlag(const std::string& locationCode,
+                                            openpower::pels::PEL& pel)
+{
+    // The requirements state that only power-thermal or
+    // fan PELs need their deconfig flag cleared.
+    static const std::vector<uint32_t> compIDs{bmcThermalCompID, bmcFansCompID};
+
+    if (std::find(compIDs.begin(), compIDs.end(),
+                  pel.privateHeader().header().componentID) == compIDs.end())
+    {
+        return false;
+    }
+
+    auto src = pel.primarySRC();
+    const auto& callouts = (*src)->callouts();
+    if (!callouts)
+    {
+        return false;
+    }
+
+    for (const auto& callout : callouts->callouts())
+    {
+        // Look for the passed in location code in a callout that
+        // is either a normal HW callout or a symbolic FRU with
+        // a trusted location code callout.
+        if ((callout->locationCode() != locationCode) ||
+            !callout->fruIdentity())
+        {
+            continue;
+        }
+
+        if ((callout->fruIdentity()->failingComponentType() !=
+             src::FRUIdentity::hardwareFRU) &&
+            (callout->fruIdentity()->failingComponentType() !=
+             src::FRUIdentity::symbolicFRUTrustedLocCode))
+        {
+            continue;
+        }
+
+        log<level::INFO>(
+            fmt::format(
+                "Clearing deconfig flag in PEL {:#x} with SRC {} because {} was replaced",
+                pel.id(), (*src)->asciiString().substr(0, 8), locationCode)
+                .c_str());
+        (*src)->clearErrorStatusFlag(SRC::ErrorStatusFlags::deconfigured);
+        return true;
+    }
+    return false;
+}
+
+void Manager::hardwarePresent(const std::string& locationCode)
+{
+    Repository::PELUpdateFunc handlePowerThermalHardwarePresent =
+        [locationCode](openpower::pels::PEL& pel) {
+        return Manager::clearPowerThermalDeconfigFlag(locationCode, pel);
+    };
+
+    // If the PEL was created by the BMC and has the deconfig flag set,
+    // it's a candidate to have the deconfig flag cleared.
+    for (const auto& [id, attributes] : _repo.getAttributesMap())
+    {
+        if ((attributes.creator == static_cast<uint8_t>(CreatorID::openBMC)) &&
+            attributes.deconfig)
+        {
+            _repo.updatePEL(attributes.path, handlePowerThermalHardwarePresent);
+        }
+    }
+}
+
 } // namespace pels
 } // namespace openpower
diff --git a/extensions/openpower-pels/manager.hpp b/extensions/openpower-pels/manager.hpp
index 8f439a5..ca7f12e 100644
--- a/extensions/openpower-pels/manager.hpp
+++ b/extensions/openpower-pels/manager.hpp
@@ -70,6 +70,10 @@
             std::bind(&Manager::updateResolution, this, std::placeholders::_1));
 
         setupPELDeleteWatch();
+
+        _dataIface->subscribeToFruPresent(
+            "Manager",
+            std::bind(&Manager::hardwarePresent, this, std::placeholders::_1));
     }
 
     /**
@@ -479,6 +483,30 @@
     void deleteObmcLog(sdeventplus::source::EventBase&, uint32_t obmcLogID);
 
     /**
+     * @brief Clears the deconfig flag in the PEL if necessary.
+     *
+     * If the passed in location code is in a callout and it's a PEL with
+     * the BMC power/thermal or fans component ID, clear the deconfig flag.
+     *
+     * @param[in] locationCode - The location code to look for
+     * @param[inout] pel - The PEL to check and modify.
+     * @return bool - true if the flag was cleared for this PEL
+     */
+    static bool clearPowerThermalDeconfigFlag(const std::string& locationCode,
+                                              openpower::pels::PEL& pel);
+
+    /**
+     * @brief Called by DataInterface when the presence of hotpluggable
+     *        hardware is detected.
+     *
+     * Clears the 'Deconfig' flag in any PEL that has the location code
+     * of the hardware in a callout.
+     *
+     * @param[in] locationCode - The location code of the hardware.
+     */
+    void hardwarePresent(const std::string& locationCode);
+
+    /**
      * @brief Reference to phosphor-logging's Manager class
      */
     phosphor::logging::internal::Manager& _logManager;
diff --git a/extensions/openpower-pels/repository.hpp b/extensions/openpower-pels/repository.hpp
index e1c565e..7bb7a11 100644
--- a/extensions/openpower-pels/repository.hpp
+++ b/extensions/openpower-pels/repository.hpp
@@ -312,6 +312,16 @@
         getPELAttributes(const LogID& id) const;
 
     /**
+     * @brief Returns the attributes map so that others can traverse PELs.
+     *
+     * @return - A const reference to the attributes map.
+     */
+    const std::map<LogID, PELAttributes>& getAttributesMap() const
+    {
+        return _pelAttributes;
+    }
+
+    /**
      * @brief Sets the host transmission state on a PEL file
      *
      * Writes the host transmission state field in the User Header
@@ -444,7 +454,6 @@
      */
     void archivePEL(const PEL& pel);
 
-  private:
     using PELUpdateFunc = std::function<bool(PEL&)>;
 
     /**
@@ -459,6 +468,7 @@
      */
     void updatePEL(const std::filesystem::path& path, PELUpdateFunc updateFunc);
 
+  private:
     /**
      * @brief Finds an entry in the _pelAttributes map.
      *
diff --git a/extensions/openpower-pels/src.hpp b/extensions/openpower-pels/src.hpp
index e12cab3..bc73fa2 100644
--- a/extensions/openpower-pels/src.hpp
+++ b/extensions/openpower-pels/src.hpp
@@ -327,6 +327,16 @@
         return _hexData[3] & static_cast<uint32_t>(flag);
     }
 
+    /**
+     * @brief Clears an error status flag in the SRC.
+     *
+     * @param[in] flag - The flag to set
+     */
+    void clearErrorStatusFlag(ErrorStatusFlags flag)
+    {
+        _hexData[3] &= ~static_cast<uint32_t>(flag);
+    }
+
   private:
     /**
      * @brief Fills in the user defined hex words from the