diff --git a/sonic-xcvrd/tests/test_xcvrd.py b/sonic-xcvrd/tests/test_xcvrd.py
index d259862c5..e2f252941 100644
--- a/sonic-xcvrd/tests/test_xcvrd.py
+++ b/sonic-xcvrd/tests/test_xcvrd.py
@@ -387,6 +387,23 @@ def test_is_cmis_api(self, mock_class, expected_return_value):
         mock_xcvr_api.__class__ = mock_class
         assert is_cmis_api(mock_xcvr_api) == expected_return_value
 
+    @patch('swsscommon.swsscommon.SonicV2Connector')
+    def test_notify_system_ready(self, mock_dbconn):
+        mock_db = MagicMock()
+        mock_db.connect = MagicMock()
+        mock_db.delete = MagicMock()
+        mock_db.hmset = MagicMock()
+        mock_dbconn.return_value = mock_db
+
+        # Case 1: Report ready status
+        notify_system_ready()
+        mock_db.hmset.assert_called_once()
+
+        # Case 2: Should not report status again
+        mock_db.hmset.reset_mock()
+        notify_system_ready()
+        mock_db.hmset.assert_not_called()
+
     def test_get_state_db_port_table_val_by_key(self):
         xcvr_table_helper = XcvrTableHelper(DEFAULT_NAMESPACE)
         port_mapping = PortMapping()
diff --git a/sonic-xcvrd/xcvrd/xcvrd.py b/sonic-xcvrd/xcvrd/xcvrd.py
index fbb31269f..34af43b33 100644
--- a/sonic-xcvrd/xcvrd/xcvrd.py
+++ b/sonic-xcvrd/xcvrd/xcvrd.py
@@ -244,6 +244,37 @@ def strip_unit_and_beautify(value, unit):
         return str(value)
 
 
+def notify_system_ready(fail_status=False, fail_reason='-'):
+    key = 'FEATURE|pmon'
+    statusvalue = {}
+
+    try:
+        state_db = swsscommon.SonicV2Connector()
+        state_db.connect(state_db.STATE_DB)
+    except Exception:
+        helper_logger.log_error('Failed to connect STATE_DB to report '
+                                f'{SYSLOG_IDENTIFIER} ready status')
+        return
+
+    if fail_status:
+        statusvalue['up_status'] = 'false'
+        statusvalue['fail_reason'] = fail_reason
+    else:
+        statusvalue['up_status'] = 'true'
+
+    if getattr(notify_system_ready, 'reported', False):
+        helper_logger.log_debug(
+            f'{SYSLOG_IDENTIFIER} ready status already reported. Tried to '
+            f'report status: {statusvalue}')
+        return
+
+    state_db.delete(state_db.STATE_DB, key)
+    state_db.hmset(state_db.STATE_DB, key, statusvalue)
+    helper_logger.log_info(f'Report {SYSLOG_IDENTIFIER} ready status: '
+                           f'{statusvalue}')
+    notify_system_ready.reported = True
+
+
 def _wrapper_get_presence(physical_port):
     if platform_chassis is not None:
         try:
@@ -2594,6 +2625,7 @@ def run(self):
         for thread in self.threads:
             self.log_notice("Started thread {}".format(thread.getName()))
 
+        notify_system_ready()
         self.stop_event.wait()
 
         self.log_info("Stop daemon main loop")
@@ -2609,6 +2641,8 @@ def run(self):
                     generate_sigkill = True
 
         if generate_sigkill is True:
+            # Notify system not ready
+            notify_system_ready(False, "Exception occured in xcvrd daemon")
             self.log_error("Exiting main loop as child thread raised exception!")
             os.kill(os.getpid(), signal.SIGKILL)
 
@@ -2637,6 +2671,8 @@ def run(self):
         self.log_info("Shutting down...")
 
         if self.sfp_error_event.is_set():
+            # Notify system not ready
+            notify_system_ready(False, "SFP system error")
             sys.exit(SFP_SYSTEM_ERROR)