diff --git a/apm-lambda-extension/extension/apm_server_transport.go b/apm-lambda-extension/extension/apm_server_transport.go
index 326eb2b5..9e33e2cc 100644
--- a/apm-lambda-extension/extension/apm_server_transport.go
+++ b/apm-lambda-extension/extension/apm_server_transport.go
@@ -185,6 +185,12 @@ func (transport *ApmServerTransport) PostToApmServer(ctx context.Context, agentD
 		return fmt.Errorf("failed to read the response body after posting to the APM server")
 	}
 
+	if resp.StatusCode == http.StatusUnauthorized {
+		Log.Warnf("Authentication with the APM server failed: response status code: %d", resp.StatusCode)
+		Log.Debugf("APM server response body: %v", string(body))
+		return nil
+	}
+
 	transport.SetApmServerTransportState(ctx, Healthy)
 	Log.Debug("Transport status set to healthy")
 	Log.Debugf("APM server response body: %v", string(body))
diff --git a/apm-lambda-extension/extension/apm_server_transport_test.go b/apm-lambda-extension/extension/apm_server_transport_test.go
index eab30a57..09a1f8ce 100644
--- a/apm-lambda-extension/extension/apm_server_transport_test.go
+++ b/apm-lambda-extension/extension/apm_server_transport_test.go
@@ -60,6 +60,7 @@ func TestPostToApmServerDataCompressed(t *testing.T) {
 		bytes, _ := ioutil.ReadAll(r.Body)
 		assert.Equal(t, string(data), string(bytes))
 		assert.Equal(t, "gzip", r.Header.Get("Content-Encoding"))
+		w.WriteHeader(http.StatusAccepted)
 		if _, err := w.Write([]byte(`{"foo": "bar"}`)); err != nil {
 			t.Fail()
 			return
@@ -105,6 +106,7 @@ func TestPostToApmServerDataNotCompressed(t *testing.T) {
 		compressedBytes, _ := ioutil.ReadAll(pr)
 		assert.Equal(t, string(compressedBytes), string(requestBytes))
 		assert.Equal(t, "gzip", r.Header.Get("Content-Encoding"))
+		w.WriteHeader(http.StatusAccepted)
 		if _, err := w.Write([]byte(`{"foo": "bar"}`)); err != nil {
 			t.Fail()
 			return
@@ -334,6 +336,7 @@ func TestAPMServerRecovery(t *testing.T) {
 		bytes, _ := ioutil.ReadAll(r.Body)
 		assert.Equal(t, string(data), string(bytes))
 		assert.Equal(t, "gzip", r.Header.Get("Content-Encoding"))
+		w.WriteHeader(http.StatusAccepted)
 		if _, err := w.Write([]byte(`{"foo": "bar"}`)); err != nil {
 			return
 		}
@@ -359,6 +362,52 @@ func TestAPMServerRecovery(t *testing.T) {
 	assert.Equal(t, transport.reconnectionCount, -1)
 }
 
+func TestAPMServerAuthFails(t *testing.T) {
+	// Compress the data
+	pr, pw := io.Pipe()
+	gw, _ := gzip.NewWriterLevel(pw, gzip.BestSpeed)
+	go func() {
+		if _, err := gw.Write([]byte("")); err != nil {
+			t.Fail()
+			return
+		}
+		if err := gw.Close(); err != nil {
+			t.Fail()
+			return
+		}
+		if err := pw.Close(); err != nil {
+			t.Fail()
+			return
+		}
+	}()
+
+	// Create AgentData struct with compressed data
+	data, _ := io.ReadAll(pr)
+	agentData := AgentData{Data: data, ContentEncoding: "gzip"}
+
+	// Create apm server and handler
+	apmServer := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		w.WriteHeader(http.StatusUnauthorized)
+	}))
+	defer apmServer.Close()
+
+	config := extensionConfig{
+		apmServerUrl: apmServer.URL + "/",
+	}
+
+	transport := InitApmServerTransport(&config)
+	transport.SetApmServerTransportState(context.Background(), Healthy)
+	transport.SetApmServerTransportState(context.Background(), Failing)
+	for {
+		if transport.status != Failing {
+			break
+		}
+	}
+	assert.Equal(t, transport.status, Pending)
+	assert.NoError(t, transport.PostToApmServer(context.Background(), agentData))
+	assert.NotEqual(t, transport.status, Healthy)
+}
+
 func TestContinuedAPMServerFailure(t *testing.T) {
 	// Compress the data
 	pr, pw := io.Pipe()