diff --git a/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java b/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java
index bee22966f9d6..82cc1a9abe6f 100644
--- a/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java
+++ b/xds/src/test/java/io/grpc/xds/XdsClientImplTest.java
@@ -1391,6 +1391,133 @@ public void receivedEndpointUpdateNotifiedToWatcherImmediately() {
     verifyNoMoreInteractions(requestObserver);
   }
 
+  /**
+   * Client receives EDS responses containing ClusterLoadAssignments for resources that were
+   * not requested (management server sends them proactively). Later client receives a CDS
+   * response with the requested Cluster referencing one of the previously received
+   * ClusterLoadAssignments. No EDS request needs to be sent for that
+   * ClusterLoadAssignment as it can be found in local cache (management server will not send
+   * EDS responses for that ClusterLoadAssignment again). A future EDS response update for
+   * that ClusterLoadAssignment should be notified to corresponding endpoint watchers.
+   *
+   * <p>Tests for caching EDS response data behavior.
+   */
+  @Test
+  public void receiveEdsResponsesForClusterLoadAssignmentToBeUsedLater() {
+    EndpointWatcher watcher1 = mock(EndpointWatcher.class);
+    xdsClient.watchEndpointData("cluster-foo.googleapis.com", watcher1);
+    StreamObserver<DiscoveryResponse> responseObserver = responseObservers.poll();
+    StreamObserver<DiscoveryRequest> requestObserver = requestObservers.poll();
+
+    // Client sends first EDS request.
+    verify(requestObserver)
+        .onNext(eq(buildDiscoveryRequest("", "cluster-foo.googleapis.com",
+            XdsClientImpl.ADS_TYPE_URL_EDS, "")));
+
+    // Management server sends back an EDS response containing ClusterLoadAssignments for
+    // some cluster not requested.
+    List<Any> clusterLoadAssignments = ImmutableList.of(
+        Any.pack(buildClusterLoadAssignment("cluster-foo.googleapis.com",
+            ImmutableList.of(
+                buildLocalityLbEndpoints("region1", "zone1", "subzone1",
+                    ImmutableList.of(
+                        buildLbEndpoint("192.168.0.1", 8080, HealthStatus.HEALTHY, 2)),
+                    1, 0)),
+            ImmutableList.<Policy.DropOverload>of())),
+        Any.pack(buildClusterLoadAssignment("cluster-bar.googleapis.com",
+            ImmutableList.of(
+                buildLocalityLbEndpoints("region2", "zone2", "subzone2",
+                    ImmutableList.of(
+                        buildLbEndpoint("192.168.234.52", 8888, HealthStatus.UNKNOWN, 5)),
+                    6, 1)),
+            ImmutableList.<ClusterLoadAssignment.Policy.DropOverload>of())));
+
+    DiscoveryResponse response =
+        buildDiscoveryResponse("0", clusterLoadAssignments,
+            XdsClientImpl.ADS_TYPE_URL_EDS, "0000");
+    responseObserver.onNext(response);
+
+    // Client sent an ACK EDS request.
+    verify(requestObserver)
+        .onNext(eq(buildDiscoveryRequest("0", "cluster-foo.googleapis.com",
+            XdsClientImpl.ADS_TYPE_URL_EDS, "0000")));
+
+    ArgumentCaptor<EndpointUpdate> endpointUpdateCaptor1 = ArgumentCaptor.forClass(null);
+    verify(watcher1).onEndpointChanged(endpointUpdateCaptor1.capture());
+    EndpointUpdate endpointUpdate1 = endpointUpdateCaptor1.getValue();
+    assertThat(endpointUpdate1.getClusterName()).isEqualTo("cluster-foo.googleapis.com");
+    assertThat(endpointUpdate1.getDropPolicies()).isEmpty();
+    assertThat(endpointUpdate1.getLocalityLbEndpointsMap())
+        .containsExactly(
+            new Locality("region1", "zone1", "subzone1"),
+            new LocalityLbEndpoints(
+                ImmutableList.of(
+                    new LbEndpoint("192.168.0.1", 8080,
+                        2, true)), 1, 0));
+
+    // Start watching endpoints in cluster that server had already sent to us.
+    EndpointWatcher watcher2 = mock(EndpointWatcher.class);
+    xdsClient.watchEndpointData("cluster-bar.googleapis.com", watcher2);
+
+    // Cached result is notified to watcher immediately.
+    ArgumentCaptor<EndpointUpdate> endpointUpdateCaptor2 = ArgumentCaptor.forClass(null);
+    verify(watcher2).onEndpointChanged(endpointUpdateCaptor2.capture());
+    EndpointUpdate endpointUpdate2 = endpointUpdateCaptor2.getValue();
+    assertThat(endpointUpdate2.getClusterName()).isEqualTo("cluster-bar.googleapis.com");
+    assertThat(endpointUpdate2.getDropPolicies()).isEmpty();
+    assertThat(endpointUpdate2.getLocalityLbEndpointsMap())
+        .containsExactly(
+            new Locality("region2", "zone2", "subzone2"),
+            new LocalityLbEndpoints(
+                ImmutableList.of(
+                    new LbEndpoint("192.168.234.52", 8888,
+                        5, true)), 6, 1));
+
+    // Client sent an EDS request to subscribe to resources newly being watched.
+    verify(requestObserver)
+        .onNext(
+            argThat(
+                new DiscoveryRequestMatcher("0",
+                    ImmutableList.of("cluster-foo.googleapis.com", "cluster-bar.googleapis.com"),
+                    XdsClientImpl.ADS_TYPE_URL_EDS, "0000")));
+
+    // Management server sends back an EDS response updating endpoints in a previously known
+    // cluster.
+    clusterLoadAssignments = ImmutableList.of(
+        Any.pack(buildClusterLoadAssignment("cluster-bar.googleapis.com",
+            ImmutableList.of(
+                buildLocalityLbEndpoints("region3", "zone3", "subzone3",
+                    ImmutableList.of(
+                        buildLbEndpoint("192.168.41.54", 443, HealthStatus.UNKNOWN, 4)),
+                    2, 0)),
+            ImmutableList.<ClusterLoadAssignment.Policy.DropOverload>of())));
+
+    response = buildDiscoveryResponse("1", clusterLoadAssignments,
+        XdsClientImpl.ADS_TYPE_URL_EDS, "0001");
+    responseObserver.onNext(response);
+
+    // Client sent an ACK EDS request.
+    verify(requestObserver)
+        .onNext(
+            argThat(
+                new DiscoveryRequestMatcher("1",
+                    ImmutableList.of("cluster-foo.googleapis.com", "cluster-bar.googleapis.com"),
+                    XdsClientImpl.ADS_TYPE_URL_EDS, "0001")));
+
+    // Updated result is notified to the corresponding watcher.
+    verify(watcher2, times(2)).onEndpointChanged(endpointUpdateCaptor2.capture());
+    endpointUpdate2 = endpointUpdateCaptor2.getValue();
+    assertThat(endpointUpdate2.getClusterName()).isEqualTo("cluster-bar.googleapis.com");
+    assertThat(endpointUpdate2.getDropPolicies()).isEmpty();
+    assertThat(endpointUpdate2.getLocalityLbEndpointsMap())
+        .containsExactly(
+            new Locality("region3", "zone3", "subzone3"),
+            new LocalityLbEndpoints(
+                ImmutableList.of(
+                    new LbEndpoint("192.168.41.54", 443,
+                        4, true)), 2, 0));
+  }
+
   @Test
   public void addRemoveEndpointWatchersFreely() {
     EndpointWatcher watcher1 = mock(EndpointWatcher.class);
@@ -1567,8 +1694,6 @@ public void addRemoveEndpointWatchersFreely() {
             XdsClientImpl.ADS_TYPE_URL_EDS, "0002")));
   }
 
-  // TODO(chengyuanzhang): tests for caching EDS responses proactively sent by management server.
-
   // TODO(chengyuanzhang): tests for LDS/RDS/CDS/EDS sharing the same RPC stream.
 
   // TODO(chengyuanzhang): incorporate interactions with cluster watchers and end endpoint watchers