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
diff --git a/test/openpower-pels/mocks.hpp b/test/openpower-pels/mocks.hpp
index 103d7e8..5a12c7e 100644
--- a/test/openpower-pels/mocks.hpp
+++ b/test/openpower-pels/mocks.hpp
@@ -76,6 +76,11 @@
     {
         _hmcManaged = managed;
     }
+
+    void fruPresent(const std::string& locationCode)
+    {
+        setFruPresent(locationCode);
+    }
 };
 
 /**
diff --git a/test/openpower-pels/pel_manager_test.cpp b/test/openpower-pels/pel_manager_test.cpp
index 5f0e579..ee44c34 100644
--- a/test/openpower-pels/pel_manager_test.cpp
+++ b/test/openpower-pels/pel_manager_test.cpp
@@ -1131,3 +1131,107 @@
     // convert the last four chars to spaces
     EXPECT_EQ(Manager::sanitizeFieldForDBus(string), base + "    ");
 }
+
+TEST_F(ManagerTest, TestFruPlug)
+{
+    const auto registry = R"(
+{
+    "PELs":
+    [{
+        "Name": "xyz.openbmc_project.Fan.Error.Fault",
+        "Subsystem": "power_fans",
+        "ComponentID": "0x2800",
+        "SRC":
+        {
+            "Type": "11",
+            "ReasonCode": "0x76F0",
+            "Words6To9": {},
+            "DeconfigFlag": true
+        },
+        "Callouts": [{
+                "CalloutList": [
+                    {"Priority": "low", "LocCode": "P0"},
+                    {"Priority": "high", "LocCode": "A3"}
+                ]
+            }],
+        "Documentation": {
+            "Description": "A Fan Fault",
+            "Message": "Fan had a Fault"
+        }
+     }]
+}
+)";
+
+    auto path = getPELReadOnlyDataPath();
+    fs::create_directories(path);
+    path /= "message_registry.json";
+
+    std::ofstream registryFile{path};
+    registryFile << registry;
+    registryFile.close();
+
+    std::unique_ptr<DataInterfaceBase> dataIface =
+        std::make_unique<MockDataInterface>();
+
+    MockDataInterface* mockIface =
+        reinterpret_cast<MockDataInterface*>(dataIface.get());
+
+    // Set up the mock calls used when building callouts
+    EXPECT_CALL(*mockIface, getInventoryFromLocCode("P0", 0, false))
+        .WillRepeatedly(Return(std::vector<std::string>{"motherboard"}));
+    EXPECT_CALL(*mockIface, expandLocationCode("P0", 0))
+        .WillRepeatedly(Return("U1234-P0"));
+    EXPECT_CALL(*mockIface, getInventoryFromLocCode("U1234-P0", 0, true))
+        .WillRepeatedly(Return(std::vector<std::string>{"motherboard"}));
+
+    EXPECT_CALL(*mockIface, getInventoryFromLocCode("A3", 0, false))
+        .WillRepeatedly(Return(std::vector<std::string>{"fan"}));
+    EXPECT_CALL(*mockIface, expandLocationCode("A3", 0))
+        .WillRepeatedly(Return("U1234-A3"));
+    EXPECT_CALL(*mockIface, getInventoryFromLocCode("U1234-A3", 0, true))
+        .WillRepeatedly(Return(std::vector<std::string>{"fan"}));
+
+    std::unique_ptr<JournalBase> journal = std::make_unique<MockJournal>();
+
+    openpower::pels::Manager manager{
+        logManager, std::move(dataIface),
+        std::bind(std::mem_fn(&TestLogger::log), &logger, std::placeholders::_1,
+                  std::placeholders::_2, std::placeholders::_3),
+        std::move(journal)};
+
+    std::vector<std::string> additionalData;
+    std::vector<std::string> associations;
+
+    auto checkDeconfigured = [](bool deconfigured) {
+        auto pelFile = findAnyPELInRepo();
+        ASSERT_TRUE(pelFile);
+
+        auto data = readPELFile(*pelFile);
+        PEL pel(*data);
+        ASSERT_TRUE(pel.valid());
+
+        EXPECT_EQ(pel.primarySRC().value()->getErrorStatusFlag(
+                      SRC::ErrorStatusFlags::deconfigured),
+                  deconfigured);
+    };
+
+    manager.create("xyz.openbmc_project.Fan.Error.Fault", 42, 0,
+                   phosphor::logging::Entry::Level::Error, additionalData,
+                   associations);
+    checkDeconfigured(true);
+
+    // Replace A3 so PEL deconfigured flag should be set to false
+    mockIface->fruPresent("U1234-A3");
+    checkDeconfigured(false);
+
+    manager.erase(42);
+
+    // Create it again and replace a FRU not in the callout list.
+    // Deconfig flag should stay on.
+    manager.create("xyz.openbmc_project.Fan.Error.Fault", 43, 0,
+                   phosphor::logging::Entry::Level::Error, additionalData,
+                   associations);
+    checkDeconfigured(true);
+    mockIface->fruPresent("U1234-A4");
+    checkDeconfigured(true);
+}