diff --git a/credentials/alts/alts_test.go b/credentials/alts/alts_test.go
index 20062fe77539..d693541f15e3 100644
--- a/credentials/alts/alts_test.go
+++ b/credentials/alts/alts_test.go
@@ -397,7 +397,7 @@ func establishAltsConnection(t *testing.T, handshakerAddress, serverAddress stri
 		if err == nil {
 			break
 		}
-		if code := status.Code(err); code == codes.Unavailable {
+		if code := status.Code(err); code == codes.Unavailable || code == codes.DeadlineExceeded {
 			// The server is not ready yet. Try again.
 			continue
 		}
diff --git a/credentials/alts/internal/handshaker/handshaker.go b/credentials/alts/internal/handshaker/handshaker.go
index 64890797f30d..6c867dd85015 100644
--- a/credentials/alts/internal/handshaker/handshaker.go
+++ b/credentials/alts/internal/handshaker/handshaker.go
@@ -61,8 +61,6 @@ var (
 	// control number of concurrent created (but not closed) handshakes.
 	clientHandshakes = semaphore.NewWeighted(int64(envconfig.ALTSMaxConcurrentHandshakes))
 	serverHandshakes = semaphore.NewWeighted(int64(envconfig.ALTSMaxConcurrentHandshakes))
-	// errDropped occurs when maxPendingHandshakes is reached.
-	errDropped = errors.New("maximum number of concurrent ALTS handshakes is reached")
 	// errOutOfBound occurs when the handshake service returns a consumed
 	// bytes value larger than the buffer that was passed to it originally.
 	errOutOfBound = errors.New("handshaker service consumed bytes value is out-of-bound")
@@ -156,8 +154,8 @@ func NewServerHandshaker(ctx context.Context, conn *grpc.ClientConn, c net.Conn,
 // ClientHandshake starts and completes a client ALTS handshake for GCP. Once
 // done, ClientHandshake returns a secure connection.
 func (h *altsHandshaker) ClientHandshake(ctx context.Context) (net.Conn, credentials.AuthInfo, error) {
-	if !clientHandshakes.TryAcquire(1) {
-		return nil, nil, errDropped
+	if err := clientHandshakes.Acquire(ctx, 1); err != nil {
+		return nil, nil, err
 	}
 	defer clientHandshakes.Release(1)
 
@@ -209,8 +207,8 @@ func (h *altsHandshaker) ClientHandshake(ctx context.Context) (net.Conn, credent
 // ServerHandshake starts and completes a server ALTS handshake for GCP. Once
 // done, ServerHandshake returns a secure connection.
 func (h *altsHandshaker) ServerHandshake(ctx context.Context) (net.Conn, credentials.AuthInfo, error) {
-	if !serverHandshakes.TryAcquire(1) {
-		return nil, nil, errDropped
+	if err := serverHandshakes.Acquire(ctx, 1); err != nil {
+		return nil, nil, err
 	}
 	defer serverHandshakes.Release(1)
 
diff --git a/credentials/alts/internal/handshaker/handshaker_test.go b/credentials/alts/internal/handshaker/handshaker_test.go
index 956e0fbd1c20..9f877c48dcf3 100644
--- a/credentials/alts/internal/handshaker/handshaker_test.go
+++ b/credentials/alts/internal/handshaker/handshaker_test.go
@@ -193,10 +193,10 @@ func (s) TestClientHandshake(t *testing.T) {
 			}()
 		}
 
-		// Ensure all errors are expected.
+		// Ensure that there are no errors.
 		for i := 0; i < testCase.numberOfHandshakes; i++ {
-			if err := <-errc; err != nil && err != errDropped {
-				t.Errorf("ClientHandshake() = _, %v, want _, <nil> or %v", err, errDropped)
+			if err := <-errc; err != nil {
+				t.Errorf("ClientHandshake() = _, %v, want _, <nil>", err)
 			}
 		}
 
@@ -250,10 +250,10 @@ func (s) TestServerHandshake(t *testing.T) {
 			}()
 		}
 
-		// Ensure all errors are expected.
+		// Ensure that there are no errors.
 		for i := 0; i < testCase.numberOfHandshakes; i++ {
-			if err := <-errc; err != nil && err != errDropped {
-				t.Errorf("ServerHandshake() = _, %v, want _, <nil> or %v", err, errDropped)
+			if err := <-errc; err != nil {
+				t.Errorf("ServerHandshake() = _, %v, want _, <nil>", err)
 			}
 		}