diff --git a/com.unity.netcode.gameobjects/CHANGELOG.md b/com.unity.netcode.gameobjects/CHANGELOG.md
index 8a7e4befa7..d89c4c79df 100644
--- a/com.unity.netcode.gameobjects/CHANGELOG.md
+++ b/com.unity.netcode.gameobjects/CHANGELOG.md
@@ -10,11 +10,14 @@ Additional documentation and release notes are available at [Multiplayer Documen
 
 ### Added
 
+
 ### Fixed
-- Fixed a failing UTP test that was failing when you install Unity Transport package 2.0.0 or newer.
+
+- Fixed issue where `NetworkObject.SpawnWithObservers` was not being honored for late joining clients. (#2623)
 
 ## Changed
 
+
 ## [1.5.1] - 2023-06-07
 
 ### Added
diff --git a/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs b/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs
index b59d99ed42..6d9275e7b6 100644
--- a/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs
+++ b/com.unity.netcode.gameobjects/Runtime/Connection/NetworkConnectionManager.cs
@@ -628,6 +628,8 @@ internal void HandleConnectionApproval(ulong ownerClientId, NetworkManager.Conne
                     };
                     if (!NetworkManager.NetworkConfig.EnableSceneManagement)
                     {
+                        // Update the observed spawned NetworkObjects for the newly connected player when scene management is disabled
+                        NetworkManager.SpawnManager.UpdateObservedNetworkObjects(ownerClientId);
                         if (NetworkManager.SpawnManager.SpawnedObjectsList.Count != 0)
                         {
                             message.SpawnedObjectsList = NetworkManager.SpawnManager.SpawnedObjectsList;
@@ -651,12 +653,12 @@ internal void HandleConnectionApproval(ulong ownerClientId, NetworkManager.Conne
                     SendMessage(ref message, NetworkDelivery.ReliableFragmentedSequenced, ownerClientId);
                     message.MessageVersions.Dispose();
 
-                    // If scene management is enabled, then let NetworkSceneManager handle the initial scene and NetworkObject synchronization
+                    // If scene management is disabled, then we are done and notify the local host-server the client is connected
                     if (!NetworkManager.NetworkConfig.EnableSceneManagement)
                     {
                         InvokeOnClientConnectedCallback(ownerClientId);
                     }
-                    else
+                    else // Otherwise, let NetworkSceneManager handle the initial scene and NetworkObject synchronization
                     {
                         NetworkManager.SceneManager.SynchronizeNetworkObjects(ownerClientId);
                     }
diff --git a/com.unity.netcode.gameobjects/Runtime/Spawning/NetworkSpawnManager.cs b/com.unity.netcode.gameobjects/Runtime/Spawning/NetworkSpawnManager.cs
index a82aa6b90d..8b966a213a 100644
--- a/com.unity.netcode.gameobjects/Runtime/Spawning/NetworkSpawnManager.cs
+++ b/com.unity.netcode.gameobjects/Runtime/Spawning/NetworkSpawnManager.cs
@@ -952,27 +952,35 @@ internal void OnDespawnObject(NetworkObject networkObject, bool destroyGameObjec
         }
 
         /// <summary>
-        /// Updates all spawned <see cref="NetworkObject.Observers"/> for the specified client
+        /// Updates all spawned <see cref="NetworkObject.Observers"/> for the specified newly connected client 
         /// Note: if the clientId is the server then it is observable to all spawned <see cref="NetworkObject"/>'s
         /// </summary>
+        /// <remarks>
+        /// This method is to only to be used for newly connected clients in order to update the observers list for
+        /// each NetworkObject instance.
+        /// </remarks>
         internal void UpdateObservedNetworkObjects(ulong clientId)
         {
             foreach (var sobj in SpawnedObjectsList)
             {
+                // If the NetworkObject has no visibility check then prepare to add this client as an observer
                 if (sobj.CheckObjectVisibility == null)
                 {
-                    if (!sobj.Observers.Contains(clientId))
+                    // If the client is not part of the observers and spawn with observers is enabled on this instance or the clientId is the server
+                    if (!sobj.Observers.Contains(clientId) && (sobj.SpawnWithObservers || clientId == NetworkManager.ServerClientId))
                     {
                         sobj.Observers.Add(clientId);
                     }
                 }
                 else
                 {
+                    // CheckObject visibility overrides SpawnWithObservers under this condition
                     if (sobj.CheckObjectVisibility(clientId))
                     {
                         sobj.Observers.Add(clientId);
                     }
-                    else if (sobj.Observers.Contains(clientId))
+                    else // Otherwise, if the observers contains the clientId (shouldn't happen) then remove it since CheckObjectVisibility returned false
+                    if (sobj.Observers.Contains(clientId))
                     {
                         sobj.Observers.Remove(clientId);
                     }
diff --git a/com.unity.netcode.gameobjects/Tests/Runtime/NetworkObject/NetworkObjectOnSpawnTests.cs b/com.unity.netcode.gameobjects/Tests/Runtime/NetworkObject/NetworkObjectOnSpawnTests.cs
index 87ec8066e8..ee01794d98 100644
--- a/com.unity.netcode.gameobjects/Tests/Runtime/NetworkObject/NetworkObjectOnSpawnTests.cs
+++ b/com.unity.netcode.gameobjects/Tests/Runtime/NetworkObject/NetworkObjectOnSpawnTests.cs
@@ -61,8 +61,26 @@ private bool CheckClientsSideObserverTestObj()
             return true;
         }
 
+        /// <summary>
+        /// Assures the <see cref="ObserverSpawnTests"/> late joining client has all
+        /// NetworkPrefabs required to connect.
+        /// </summary>
+        protected override void OnNewClientCreated(NetworkManager networkManager)
+        {
+            foreach (var networkPrefab in m_ServerNetworkManager.NetworkConfig.Prefabs.Prefabs)
+            {
+                if (!networkManager.NetworkConfig.Prefabs.Contains(networkPrefab.Prefab))
+                {
+                    networkManager.NetworkConfig.Prefabs.Add(networkPrefab);
+                }
+            }
+            base.OnNewClientCreated(networkManager);
+        }
 
-
+        /// <summary>
+        /// This test validates <see cref="NetworkObject.SpawnWithObservers"/> property
+        /// </summary>
+        /// <param name="observerTestTypes">whether to spawn with or without observers</param>
         [UnityTest]
         public IEnumerator ObserverSpawnTests([Values] ObserverTestTypes observerTestTypes)
         {
@@ -92,6 +110,23 @@ public IEnumerator ObserverSpawnTests([Values] ObserverTestTypes observerTestTyp
                 m_ObserverTestType = ObserverTestTypes.WithObservers;
                 yield return WaitForConditionOrTimeOut(CheckClientsSideObserverTestObj);
                 AssertOnTimeout($"{k_WithObserversError} {k_ObserverTestObjName} object!");
+
+                // Validate that a late joining client does not see the NetworkObject when it spawns
+                yield return CreateAndStartNewClient();
+
+                m_ObserverTestType = ObserverTestTypes.WithoutObservers;
+                // Just give a little time to make sure nothing spawned
+                yield return s_DefaultWaitForTick;
+                yield return WaitForConditionOrTimeOut(CheckClientsSideObserverTestObj);
+                AssertOnTimeout($"{(withoutObservers ? k_WithoutObserversError : k_WithObserversError)} {k_ObserverTestObjName} object!");
+
+                // Now validate that we can make the NetworkObject visible to the newly joined client
+                m_ObserverTestNetworkObject.NetworkShow(m_ClientNetworkManagers[NumberOfClients].LocalClientId);
+
+                // Validate the NetworkObject is visible to all connected clients (including the recently joined client)
+                m_ObserverTestType = ObserverTestTypes.WithObservers;
+                yield return WaitForConditionOrTimeOut(CheckClientsSideObserverTestObj);
+                AssertOnTimeout($"{k_WithObserversError} {k_ObserverTestObjName} object!");
             }
         }
         /// <summary>