diff --git a/.pipelines/nightly.yaml b/.pipelines/nightly.yaml
index 9ab26a9ab..b8dd7af36 100644
--- a/.pipelines/nightly.yaml
+++ b/.pipelines/nightly.yaml
@@ -41,3 +41,4 @@ jobs:
       - "csi-secrets-store-soak-linux-aks"
       - "csi-secrets-store-soak-win-aks"
   - template: templates/arc/e2e-test-kind.yaml
+  - template: templates/arc/e2e-test-aks.yaml
diff --git a/.pipelines/templates/aks-setup.yaml b/.pipelines/templates/aks-setup.yaml
index 1281fac28..9b648ae0a 100644
--- a/.pipelines/templates/aks-setup.yaml
+++ b/.pipelines/templates/aks-setup.yaml
@@ -11,8 +11,11 @@ parameters:
 
 steps:
   - script: |
-      echo "##vso[task.setvariable variable=AZURE_CLUSTER_NAME]sscd-e2e-$(openssl rand -hex 6)"
-      echo ${AZURE_CLUSTER_NAME}
+      if [[ -z "${AZURE_CLUSTER_NAME}" ]]; then
+        clusterName=sscd-arc-e2e-$(openssl rand -hex 6)
+        echo "##vso[task.setvariable variable=AZURE_CLUSTER_NAME]$clusterName"
+        echo "AKS cluster name is set to - $clusterName"
+      fi
     displayName: "Set cluster name"
     condition: and(succeeded(), eq(variables['CLUSTER_TYPE'], 'aks'))
     
diff --git a/.pipelines/templates/arc/e2e-test-aks.yaml b/.pipelines/templates/arc/e2e-test-aks.yaml
new file mode 100644
index 000000000..9a7b396a1
--- /dev/null
+++ b/.pipelines/templates/arc/e2e-test-aks.yaml
@@ -0,0 +1,36 @@
+jobs:
+  - job: e2e_arc_aks
+    variables:
+    - name: CLUSTER_TYPE
+      value: aks
+    - name: OS_TYPE
+      value: linux
+    - group: csi-secrets-store-e2e
+    steps:
+    - template: ../az-login.yaml
+    - template: setup.yaml
+    - script: |
+        echo "##vso[task.setvariable variable=AZURE_LOCATION]${AZURE_CANARY_LOCATION}"
+        echo "AKS localtion set to: ${AZURE_CANARY_LOCATION}"
+
+        make install-helm
+      displayName: "override AKS location and install dependencies"
+      condition: succeeded()
+    - template: ../aks-setup.yaml
+    - template: ../assign-user-identity.yaml
+      parameters:
+        identitySubscriptionID: $(SUBSCRIPTION_ID)
+    - template: ../role-assignment.yaml
+    - template: cluster-connect.yaml
+    - template: extension-create.yaml
+      parameters:
+        azureClusterName: $(AZURE_CLUSTER_NAME)
+        releaseTrain: preview
+        configurationSettings: "'secrets-store-csi-driver.enableSecretRotation=true' \
+        'secrets-store-csi-driver.rotationPollInterval=30s' \
+        'secrets-store-csi-driver.syncSecret.enabled=true'"
+    - template: ../e2e-test.yaml
+      parameters:
+        testName: "arc extension e2e test on AKS"
+        isArcTest: true
+    - template: ../teardown.yaml