diff --git a/internal/ingress/annotations/proxyintercepterrors/main.go b/internal/ingress/annotations/proxyintercepterrors/main.go
index 4f7584ed3..881f7c7ef 100644
--- a/internal/ingress/annotations/proxyintercepterrors/main.go
+++ b/internal/ingress/annotations/proxyintercepterrors/main.go
@@ -30,13 +30,13 @@ func NewParser(r resolver.Resolver) parser.IngressAnnotation {
 	return proxyInterceptErrors{r}
 }
 
-func (s proxyInterceptErrors) Parse(ing *networking.Ingress) (interface{}, error) {
-	defBackend := s.r.GetDefaultBackend()
-
+func (pie proxyInterceptErrors) Parse(ing *networking.Ingress) (interface{}, error) {
 	val, err := parser.GetBoolAnnotation("proxy-intercept-errors", ing)
+
 	// A missing annotation is not a problem, just use the default
 	if err == errors.ErrMissingAnnotations {
-		return defBackend.ProxyInterceptErrors, nil
+		return true, nil
+		// default is true and only matters when "custom-http-errors" is also set
 	}
 
 	return val, nil
diff --git a/internal/ingress/controller/controller.go b/internal/ingress/controller/controller.go
index 010eba162..da41a2160 100644
--- a/internal/ingress/controller/controller.go
+++ b/internal/ingress/controller/controller.go
@@ -1426,6 +1426,7 @@ func locationApplyAnnotations(loc *ingress.Location, anns *annotations.Ingress)
 	loc.BackendProtocol = anns.BackendProtocol
 	loc.FastCGI = anns.FastCGI
 	loc.CustomHTTPErrors = anns.CustomHTTPErrors
+	loc.ProxyInterceptErrors = anns.ProxyInterceptErrors
 	loc.ModSecurity = anns.ModSecurity
 	loc.Satisfy = anns.Satisfy
 	loc.Mirror = anns.Mirror
diff --git a/test/e2e/annotations/proxyintercepterrors.go b/test/e2e/annotations/proxyintercepterrors.go
new file mode 100644
index 000000000..b1f1aca94
--- /dev/null
+++ b/test/e2e/annotations/proxyintercepterrors.go
@@ -0,0 +1,82 @@
+/*
+Copyright 2018 The Kubernetes Authors.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+package annotations
+
+import (
+	"fmt"
+	"strings"
+
+	"github.com/onsi/ginkgo/v2"
+	"github.com/stretchr/testify/assert"
+	networking "k8s.io/api/networking/v1"
+
+	"k8s.io/ingress-nginx/test/e2e/framework"
+)
+
+var _ = framework.DescribeAnnotation("proxy-intercept-errors", func() {
+	f := framework.NewDefaultFramework("proxy-intercept-errors")
+
+	ginkgo.BeforeEach(func() {
+		f.NewEchoDeployment()
+	})
+
+	ginkgo.It("configures Nginx correctly", func() {
+		pieState := "true"
+		host := "pie.foo.com"
+
+		errorCodes := []string{"404"}
+
+		annotations := map[string]string{
+			"nginx.ingress.kubernetes.io/custom-http-errors":     strings.Join(errorCodes, ","),
+			"nginx.ingress.kubernetes.io/proxy-intercept-errors": pieState,
+		}
+
+		ing := framework.NewSingleIngress(host, "/", host, f.Namespace, framework.EchoService, 80, annotations)
+		f.EnsureIngress(ing)
+
+		var serverConfig string
+		f.WaitForNginxServer(host, func(sc string) bool {
+			serverConfig = sc
+			return strings.Contains(serverConfig, fmt.Sprintf("server_name %s", host))
+		})
+
+		ginkgo.By("turning on proxy_intercept_errors directive")
+		assert.Contains(ginkgo.GinkgoT(), serverConfig, "proxy_intercept_errors on;")
+
+		// --
+		pieState = "false"
+
+		ginkgo.By("updating configuration when only proxy-intercept-errors value changes")
+		err := framework.UpdateIngress(f.KubeClientSet, f.Namespace, host, func(ingress *networking.Ingress) error {
+			ingress.ObjectMeta.Annotations["nginx.ingress.kubernetes.io/proxy-intercept-errors"] = pieState
+			return nil
+		})
+		assert.Nil(ginkgo.GinkgoT(), err)
+
+		f.WaitForNginxServer(host, func(sc string) bool {
+			if serverConfig != sc {
+				serverConfig = sc
+				return true
+			}
+			return false
+		})
+
+		ginkgo.By("turning off proxy_intercept_errors directive")
+		assert.NotContains(ginkgo.GinkgoT(), serverConfig, "proxy_intercept_errors on;")
+
+	})
+})