diff --git a/npm/pkg/dataplane/dataplane-test-cases_windows_test.go b/npm/pkg/dataplane/dataplane-test-cases_windows_test.go
index 6aae19e33f..e403eb8dd1 100644
--- a/npm/pkg/dataplane/dataplane-test-cases_windows_test.go
+++ b/npm/pkg/dataplane/dataplane-test-cases_windows_test.go
@@ -15,6 +15,7 @@ const (
 	podCrudTag    Tag = "pod-crud"
 	nsCrudTag     Tag = "namespace-crud"
 	netpolCrudTag Tag = "netpol-crud"
+	reconcileTag  Tag = "reconcile"
 )
 
 const (
@@ -155,6 +156,7 @@ func getAllSerialTests() []*SerialTestCase {
 			TestCaseMetadata: &TestCaseMetadata{
 				Tags: []Tag{
 					podCrudTag,
+					reconcileTag,
 				},
 				DpCfg:            defaultWindowsDPCfg,
 				InitialEndpoints: nil,
@@ -482,6 +484,33 @@ func getAllSerialTests() []*SerialTestCase {
 				},
 			},
 		},
+		{
+			Description: "issue 1613: remove last instance of label, then reconcile IPSets, then apply DP",
+			Actions: []*Action{
+				CreateEndpoint(endpoint1, ip1),
+				CreatePod("x", "a", ip1, thisNode, map[string]string{"k1": "v1"}),
+				ApplyDP(),
+				UpdatePodLabels("x", "a", ip1, thisNode, map[string]string{"k1": "v1"}, nil),
+				ReconcileDP(),
+				ApplyDP(),
+			},
+			TestCaseMetadata: &TestCaseMetadata{
+				Tags: []Tag{
+					podCrudTag,
+					reconcileTag,
+				},
+				DpCfg:            defaultWindowsDPCfg,
+				InitialEndpoints: nil,
+				ExpectedSetPolicies: []*hcn.SetPolicySetting{
+					dptestutils.SetPolicy(emptySet),
+					dptestutils.SetPolicy(allNamespaces, emptySet.GetHashedName(), nsXSet.GetHashedName()),
+					dptestutils.SetPolicy(nsXSet, ip1),
+				},
+				ExpectedEnpdointACLs: map[string][]*hnswrapper.FakeEndpointPolicy{
+					endpoint1: {},
+				},
+			},
+		},
 	}
 }
 
diff --git a/npm/pkg/dataplane/dataplane.go b/npm/pkg/dataplane/dataplane.go
index 8227da2abf..1d5a4ccdae 100644
--- a/npm/pkg/dataplane/dataplane.go
+++ b/npm/pkg/dataplane/dataplane.go
@@ -217,7 +217,8 @@ func (dp *DataPlane) ApplyDataPlane() error {
 		err := dp.refreshPodEndpoints()
 		if err != nil {
 			metrics.SendErrorLogAndMetric(util.DaemonDataplaneID, "[DataPlane] failed to refresh endpoints while updating pods. err: [%s]", err.Error())
-			return fmt.Errorf("[DataPlane] failed to refresh endpoints while updating pods. err: [%w]", err)
+			// return as success since this can be retried irrespective of other operations
+			return nil
 		}
 
 		// lock updatePodCache while driving goal state to kernel
@@ -225,23 +226,16 @@ func (dp *DataPlane) ApplyDataPlane() error {
 		dp.updatePodCache.Lock()
 		defer dp.updatePodCache.Unlock()
 
-		var aggregateErr error
 		for podKey, pod := range dp.updatePodCache.cache {
 			err := dp.updatePod(pod)
 			if err != nil {
-				if aggregateErr == nil {
-					aggregateErr = fmt.Errorf("failed to update pod while applying the dataplane. key: [%s], err: [%w]", podKey, err)
-				} else {
-					aggregateErr = fmt.Errorf("failed to update pod while applying the dataplane. key: [%s], err: [%s]. previous err: [%w]", podKey, err.Error(), aggregateErr)
-				}
+				// move on to the next and later return as success since this can be retried irrespective of other operations
 				metrics.SendErrorLogAndMetric(util.DaemonDataplaneID, "failed to update pod while applying the dataplane. key: [%s], err: [%s]", podKey, err.Error())
 				continue
 			}
+
 			delete(dp.updatePodCache.cache, podKey)
 		}
-		if aggregateErr != nil {
-			return fmt.Errorf("[DataPlane] error while updating pods: %w", aggregateErr)
-		}
 	}
 	return nil
 }
@@ -393,17 +387,18 @@ func (dp *DataPlane) createIPSetsAndReferences(sets []*ipsets.TranslatedIPSet, n
 }
 
 func (dp *DataPlane) deleteIPSetsAndReferences(sets []*ipsets.TranslatedIPSet, netpolName string, referenceType ipsets.ReferenceType) error {
+	for _, set := range sets {
+		prefixName := set.Metadata.GetPrefixName()
+		if err := dp.ipsetMgr.DeleteReference(prefixName, netpolName, referenceType); err != nil {
+			// with current implementation of DeleteReference(), err will be ipsets.ErrSetDoesNotExist
+			klog.Infof("[DataPlane] ignoring delete reference on non-existent set. ipset: %s. netpol: %s. referenceType: %s", prefixName, netpolName, referenceType)
+		}
+	}
+
 	npmErrorString := npmerrors.DeleteSelectorReference
 	if referenceType == ipsets.NetPolType {
 		npmErrorString = npmerrors.DeleteNetPolReference
 	}
-	for _, set := range sets {
-		// TODO ignore set does not exist error
-		err := dp.ipsetMgr.DeleteReference(set.Metadata.GetPrefixName(), netpolName, referenceType)
-		if err != nil {
-			return npmerrors.Errorf(npmErrorString, false, fmt.Sprintf("[DataPlane] failed to deleteIPSetReferences with err: %s", err.Error()))
-		}
-	}
 
 	// Check if any list sets are provided with members to delete
 	// NOTE: every translated member will be deleted, even if the member is part of the same set in another policy
diff --git a/npm/pkg/dataplane/dataplane_windows.go b/npm/pkg/dataplane/dataplane_windows.go
index 856f96065e..60552a3876 100644
--- a/npm/pkg/dataplane/dataplane_windows.go
+++ b/npm/pkg/dataplane/dataplane_windows.go
@@ -167,7 +167,9 @@ func (dp *DataPlane) updatePod(pod *updateNPMPod) error {
 		*/
 		selectorReference, err := dp.ipsetMgr.GetSelectorReferencesBySet(setName)
 		if err != nil {
-			return err
+			// ignore this set since it may have been deleted in the background reconcile thread
+			klog.Infof("[DataPlane] ignoring pod update for ipset to remove since the set does not exist. pod: %+v. set: %s", pod, setName)
+			continue
 		}
 
 		for policyKey := range selectorReference {
@@ -204,7 +206,9 @@ func (dp *DataPlane) updatePod(pod *updateNPMPod) error {
 		*/
 		selectorReference, err := dp.ipsetMgr.GetSelectorReferencesBySet(setName)
 		if err != nil {
-			return err
+			// ignore this set since it may have been deleted in the background reconcile thread
+			klog.Infof("[DataPlane] ignoring pod update for ipset to remove since the set does not exist. pod: %+v. set: %s", pod, setName)
+			continue
 		}
 
 		for policyKey := range selectorReference {