diff --git a/gax/src/streamingCalls/streaming.ts b/gax/src/streamingCalls/streaming.ts
index 414e770b2..3b777d9e9 100644
--- a/gax/src/streamingCalls/streaming.ts
+++ b/gax/src/streamingCalls/streaming.ts
@@ -419,6 +419,7 @@ export class StreamProxy extends duplexify implements GRPCCallResult {
             this.destroy();
             return; //end chunk
           } else {
+            this.retries!++;
             retryStream = this.retry(stream, retry);
             this.stream = retryStream;
             return retryStream;
diff --git a/gax/test/test-application/src/index.ts b/gax/test/test-application/src/index.ts
index f7328414a..8df241036 100644
--- a/gax/test/test-application/src/index.ts
+++ b/gax/test/test-application/src/index.ts
@@ -150,6 +150,9 @@ async function testShowcase() {
   await testCollect(grpcClientWithServerStreamingRetries);
   await testChat(grpcClientWithServerStreamingRetries);
   await testWait(grpcClientWithServerStreamingRetries);
+  await testShouldFailOnThirdError(
+    grpcSequenceClientWithServerStreamingRetries
+  );
 }
 
 function createStreamingSequenceRequestFactory(
@@ -657,7 +660,7 @@ async function testServerStreamingRetrieswithRetryRequestOptions(
   const finalData: string[] = [];
   const retryRequestOptions = {
     objectMode: true,
-    retries: 1,
+    retries: 2,
     maxRetryDelay: 70,
     retryDelayMultiplier: 3,
     totalTimeout: 650,
@@ -711,6 +714,74 @@ async function testServerStreamingRetrieswithRetryRequestOptions(
   });
 }
 
+// When maxRetries are set to 2 then on the third error from the server gax
+// should throw an error that says the retry count has been exceeded.
+async function testShouldFailOnThirdError(client: SequenceServiceClient) {
+  const backoffSettings = createBackoffSettings(
+    100,
+    1.2,
+    1000,
+    null,
+    1.5,
+    3000,
+    null
+  );
+  const allowedCodes = [4, 5, 6];
+  const retryOptions = new RetryOptions(allowedCodes, backoffSettings);
+  backoffSettings.maxRetries = 2;
+
+  const settings = {
+    retry: retryOptions,
+  };
+
+  client.initialize();
+
+  const request = createStreamingSequenceRequestFactory(
+    [
+      Status.DEADLINE_EXCEEDED, // Error code 4
+      Status.NOT_FOUND, // Error code 5
+      Status.ALREADY_EXISTS, // Error code 6
+      Status.OK,
+    ],
+    [0.1, 0.1, 0.1, 0.1],
+    [0, 0, 0, 1],
+    'This is testing the brand new and shiny StreamingSequence server 3'
+  );
+  const response = await client.createStreamingSequence(request);
+  await new Promise<void>((resolve, reject) => {
+    const sequence = response[0];
+
+    const attemptRequest =
+      new protos.google.showcase.v1beta1.AttemptStreamingSequenceRequest();
+    attemptRequest.name = sequence.name!;
+
+    const attemptStream = client.attemptStreamingSequence(
+      attemptRequest,
+      settings
+    );
+    attemptStream.on('data', () => {
+      reject(new GoogleError('The stream should not receive any data'));
+    });
+    attemptStream.on('error', (error: GoogleError) => {
+      try {
+        assert.strictEqual(error.code, 4);
+        assert.strictEqual(
+          error.message,
+          'Exceeded maximum number of retries before any response was received'
+        );
+        resolve();
+      } catch (assertionError: unknown) {
+        reject(assertionError);
+      }
+    });
+    attemptStream.on('end', () => {
+      reject(
+        new GoogleError('The stream should not end before it receives an error')
+      );
+    });
+  });
+}
+
 // streaming call that retries twice with RetryRequestOpsions and resumes from where it left off
 async function testServerStreamingRetrieswithRetryRequestOptionsResumptionStrategy(
   client: SequenceServiceClient
diff --git a/gax/test/unit/streaming.ts b/gax/test/unit/streaming.ts
index e3807911e..6bc4f2f82 100644
--- a/gax/test/unit/streaming.ts
+++ b/gax/test/unit/streaming.ts
@@ -1348,19 +1348,20 @@ describe('handles server streaming retries in gax when gaxStreamingRetries is en
     );
 
     call.on('error', err => {
-      assert(err instanceof GoogleError);
-      if (err.code !== 14) {
-        // ignore the error we are expecting
-        assert.strictEqual(err.code, 4);
-        // even though max retries is 2
-        // the retry function will always be called maxRetries+1
-        // the final call is where the failure happens
-        assert.strictEqual(retrySpy.callCount, 3);
-        assert.strictEqual(
-          err.message,
-          'Exceeded maximum number of retries before any response was received'
-        );
-        done();
+      try {
+        assert(err instanceof GoogleError);
+        if (err.code !== 14) {
+          // ignore the error we are expecting
+          assert.strictEqual(err.code, 4);
+          assert.strictEqual(retrySpy.callCount, 2);
+          assert.strictEqual(
+            err.message,
+            'Exceeded maximum number of retries before any response was received'
+          );
+          done();
+        }
+      } catch (error: unknown) {
+        done(error);
       }
     });
   });