diff --git a/pkg/cloudprovider/suite_aksmachineapi_offerings_test.go b/pkg/cloudprovider/suite_aksmachineapi_offerings_test.go
index 697e67610a..0a3980e689 100644
--- a/pkg/cloudprovider/suite_aksmachineapi_offerings_test.go
+++ b/pkg/cloudprovider/suite_aksmachineapi_offerings_test.go
@@ -401,13 +401,50 @@ var _ = Describe("CloudProvider", func() {
 				ExpectApplied(ctx, env.Client, nodePool, nodeClass)
 				pod := coretest.UnschedulablePod()
 				ExpectProvisionedAndWaitForPromises(ctx, env.Client, clusterNonZonal, cloudProviderNonZonal, coreProvisionerNonZonal, azureEnvNonZonal, pod)
-				ExpectScheduled(ctx, env.Client, pod)
+				node := ExpectScheduled(ctx, env.Client, pod)
+				Expect(node.Labels).To(HaveKeyWithValue(v1.LabelTopologyZone, zones.Regional))
+				Expect(node.Labels).To(HaveKeyWithValue(v1beta1.LabelPlacementScope, v1beta1.PlacementScopeRegional))
+
+				Expect(azureEnvNonZonal.AKSMachinesAPI.AKSMachineCreateOrUpdateBehavior.CalledWithInput.Len()).To(Equal(1))
+				aksMachine := azureEnvNonZonal.AKSMachinesAPI.AKSMachineCreateOrUpdateBehavior.CalledWithInput.Pop().AKSMachine
+				Expect(aksMachine.Zones).To(BeEmpty())
+			})
+
+			It("should support regional placement scope in non-zonal regions", func() {
+				coretest.ReplaceRequirements(nodePool, karpv1.NodeSelectorRequirementWithMinValues{
+					Key:      v1beta1.LabelPlacementScope,
+					Operator: v1.NodeSelectorOpIn,
+					Values:   []string{v1beta1.PlacementScopeRegional},
+				})
+				ExpectApplied(ctx, env.Client, nodePool, nodeClass)
+
+				pod := coretest.UnschedulablePod()
+				ExpectProvisionedAndWaitForPromises(ctx, env.Client, clusterNonZonal, cloudProviderNonZonal, coreProvisionerNonZonal, azureEnvNonZonal, pod)
+
+				node := ExpectScheduled(ctx, env.Client, pod)
+				Expect(node.Labels).To(HaveKeyWithValue(v1.LabelTopologyZone, zones.Regional))
+				Expect(node.Labels).To(HaveKeyWithValue(v1beta1.LabelPlacementScope, v1beta1.PlacementScopeRegional))
 
 				Expect(azureEnvNonZonal.AKSMachinesAPI.AKSMachineCreateOrUpdateBehavior.CalledWithInput.Len()).To(Equal(1))
 				aksMachine := azureEnvNonZonal.AKSMachinesAPI.AKSMachineCreateOrUpdateBehavior.CalledWithInput.Pop().AKSMachine
 				Expect(aksMachine.Zones).To(BeEmpty())
 			})
 
+			It("should not provision in non-zonal regions when placement scope requires zonal", func() {
+				coretest.ReplaceRequirements(nodePool, karpv1.NodeSelectorRequirementWithMinValues{
+					Key:      v1beta1.LabelPlacementScope,
+					Operator: v1.NodeSelectorOpIn,
+					Values:   []string{v1beta1.PlacementScopeZonal},
+				})
+				ExpectApplied(ctx, env.Client, nodePool, nodeClass)
+
+				pod := coretest.UnschedulablePod()
+				ExpectProvisionedAndWaitForPromises(ctx, env.Client, clusterNonZonal, cloudProviderNonZonal, coreProvisionerNonZonal, azureEnvNonZonal, pod)
+
+				ExpectNotScheduled(ctx, env.Client, pod)
+				Expect(azureEnvNonZonal.AKSMachinesAPI.AKSMachineCreateOrUpdateBehavior.CalledWithInput.Len()).To(Equal(0))
+			})
+
 			// Ported from VM test: "should support provisioning non-zonal instance types in zonal regions"
 			It("should support provisioning non-zonal instance types in zonal regions", func() {
 				coretest.ReplaceRequirements(nodePool, karpv1.NodeSelectorRequirementWithMinValues{
diff --git a/pkg/providers/allocationstrategy/allocation_strategy_test.go b/pkg/providers/allocationstrategy/allocation_strategy_test.go
index 4f34f8b20e..3f67b4750c 100644
--- a/pkg/providers/allocationstrategy/allocation_strategy_test.go
+++ b/pkg/providers/allocationstrategy/allocation_strategy_test.go
@@ -338,6 +338,27 @@ func TestFilterInstanceOfferings_ZonalOfferingsBeforeRegionalAtSamePriceAndCapac
 	g.Expect(filtered[0].Offerings[0].Requirements.Get(corev1.LabelTopologyZone).Any()).To(Equal("westus-1"))
 }
 
+func TestFilterInstanceOfferings_ZonalPlacementScopeRejectsRegionalOfferings(t *testing.T) {
+	g := NewWithT(t)
+	provider := allocationstrategy.NewProvider()
+	requirements := scheduling.NewRequirements(
+		scheduling.NewRequirement(v1beta1.LabelPlacementScope, corev1.NodeSelectorOpIn, v1beta1.PlacementScopeZonal),
+	)
+
+	instanceTypes := []*corecloudprovider.InstanceType{
+		{
+			Name: "Standard_Regional",
+			Offerings: corecloudprovider.Offerings{
+				newOfferingWithZone(0.1, karpv1.CapacityTypeOnDemand, zones.Regional),
+				newOfferingWithZone(0.1, karpv1.CapacityTypeSpot, zones.Regional),
+			},
+		},
+	}
+
+	filtered := provider.FilterInstanceOfferings(context.Background(), allocationstrategy.NewInstanceOfferings(instanceTypes), requirements)
+	g.Expect(filtered).To(BeEmpty())
+}
+
 func TestFilterInstanceOfferings_SpotRegionalOfferingBeforeOnDemandZonalAtSamePrice(t *testing.T) {
 	g := NewWithT(t)
 	provider := allocationstrategy.NewProvider()
diff --git a/pkg/providers/instancetype/suite_test.go b/pkg/providers/instancetype/suite_test.go
index 4b5591fb5d..a7d5edcc9b 100644
--- a/pkg/providers/instancetype/suite_test.go
+++ b/pkg/providers/instancetype/suite_test.go
@@ -1860,12 +1860,47 @@ var _ = Describe("InstanceType Provider", func() {
 				ExpectApplied(ctx, env.Client, nodePool, nodeClass)
 				pod := coretest.UnschedulablePod()
 				ExpectProvisionedAndWaitForPromises(ctx, env.Client, clusterNonZonal, cloudProviderNonZonal, coreProvisionerNonZonal, azureEnvNonZonal, pod)
-				ExpectScheduled(ctx, env.Client, pod)
+				node := ExpectScheduled(ctx, env.Client, pod)
+				Expect(node.Labels).To(HaveKeyWithValue(v1.LabelTopologyZone, zones.Regional))
+				Expect(node.Labels).To(HaveKeyWithValue(v1beta1.LabelPlacementScope, v1beta1.PlacementScopeRegional))
+
+				Expect(azureEnvNonZonal.VirtualMachinesAPI.VirtualMachineCreateOrUpdateBehavior.CalledWithInput.Len()).To(Equal(1))
+				vm := azureEnvNonZonal.VirtualMachinesAPI.VirtualMachineCreateOrUpdateBehavior.CalledWithInput.Pop().VM
+				Expect(vm.Zones).To(BeEmpty())
+			})
+			It("should support regional placement scope in non-zonal regions", func() {
+				coretest.ReplaceRequirements(nodePool, karpv1.NodeSelectorRequirementWithMinValues{
+					Key:      v1beta1.LabelPlacementScope,
+					Operator: v1.NodeSelectorOpIn,
+					Values:   []string{v1beta1.PlacementScopeRegional},
+				})
+				ExpectApplied(ctx, env.Client, nodePool, nodeClass)
+
+				pod := coretest.UnschedulablePod()
+				ExpectProvisionedAndWaitForPromises(ctx, env.Client, clusterNonZonal, cloudProviderNonZonal, coreProvisionerNonZonal, azureEnvNonZonal, pod)
+
+				node := ExpectScheduled(ctx, env.Client, pod)
+				Expect(node.Labels).To(HaveKeyWithValue(v1.LabelTopologyZone, zones.Regional))
+				Expect(node.Labels).To(HaveKeyWithValue(v1beta1.LabelPlacementScope, v1beta1.PlacementScopeRegional))
 
 				Expect(azureEnvNonZonal.VirtualMachinesAPI.VirtualMachineCreateOrUpdateBehavior.CalledWithInput.Len()).To(Equal(1))
 				vm := azureEnvNonZonal.VirtualMachinesAPI.VirtualMachineCreateOrUpdateBehavior.CalledWithInput.Pop().VM
 				Expect(vm.Zones).To(BeEmpty())
 			})
+			It("should not provision in non-zonal regions when placement scope requires zonal", func() {
+				coretest.ReplaceRequirements(nodePool, karpv1.NodeSelectorRequirementWithMinValues{
+					Key:      v1beta1.LabelPlacementScope,
+					Operator: v1.NodeSelectorOpIn,
+					Values:   []string{v1beta1.PlacementScopeZonal},
+				})
+				ExpectApplied(ctx, env.Client, nodePool, nodeClass)
+
+				pod := coretest.UnschedulablePod()
+				ExpectProvisionedAndWaitForPromises(ctx, env.Client, clusterNonZonal, cloudProviderNonZonal, coreProvisionerNonZonal, azureEnvNonZonal, pod)
+
+				ExpectNotScheduled(ctx, env.Client, pod)
+				Expect(azureEnvNonZonal.VirtualMachinesAPI.VirtualMachineCreateOrUpdateBehavior.CalledWithInput.Len()).To(Equal(0))
+			})
 			It("should provision non-zonal instance types in zonal regions with zone label 0", func() {
 				coretest.ReplaceRequirements(nodePool, karpv1.NodeSelectorRequirementWithMinValues{
 					Key:      v1.LabelInstanceTypeStable,