diff --git a/sky/users/permission.py b/sky/users/permission.py
index ab412ce4640..310095cf0c1 100644
--- a/sky/users/permission.py
+++ b/sky/users/permission.py
@@ -43,7 +43,6 @@ def _lazy_initialize(self):
         with _policy_lock():
             global _enforcer_instance
             if _enforcer_instance is None:
-                _enforcer_instance = self
                 engine = global_user_state.initialize_and_get_db()
                 db_utils.add_all_tables_to_db_sqlalchemy(
                     sqlalchemy_adapter.Base.metadata, engine)
@@ -53,6 +52,10 @@ def _lazy_initialize(self):
                                           'model.conf')
                 enforcer = casbin.Enforcer(model_path, adapter)
                 self.enforcer = enforcer
+                # Only set the enforcer instance once the enforcer
+                # is successfully initialized, if we change it and then fail
+                # we will set it to None and all subsequent calls will fail.
+                _enforcer_instance = self
                 self._maybe_initialize_policies()
                 self._maybe_initialize_basic_auth_user()
             else:
diff --git a/tests/unit_tests/test_sky/users/test_permission.py b/tests/unit_tests/test_sky/users/test_permission.py
index e4d9fd19232..52e759a5e1a 100644
--- a/tests/unit_tests/test_sky/users/test_permission.py
+++ b/tests/unit_tests/test_sky/users/test_permission.py
@@ -742,3 +742,56 @@ def test_no_duplicate_policies_when_policies_already_exist(
 
         # The save_policy might not be called if no changes were made
         # We mainly want to ensure no duplicate additions occurred
+
+    @mock.patch('sky.users.permission._policy_lock')
+    @mock.patch(
+        'sky.users.permission.PermissionService._maybe_initialize_policies')
+    @mock.patch(
+        'sky.users.permission.PermissionService._maybe_initialize_basic_auth_user'
+    )
+    @mock.patch('sky.users.permission.casbin.Enforcer')
+    @mock.patch('sky.users.permission.sqlalchemy_adapter.Adapter')
+    @mock.patch('sky.users.permission.db_utils.add_all_tables_to_db_sqlalchemy')
+    @mock.patch('sky.global_user_state.initialize_and_get_db')
+    def test_lazy_initialize_db_failure_recovery(
+            self, mock_init_db, mock_add_tables, mock_adapter_class,
+            mock_enforcer_class, mock_init_basic_auth, mock_init_policies,
+            mock_policy_lock):
+        """Test that _lazy_initialize doesn't permanently set 
+        enforcer to None after DB failure on retry."""
+        # Configure context manager to allow exceptions to propagate
+        mock_context = mock.Mock()
+        mock_context.__enter__ = mock.Mock(return_value=None)
+        mock_context.__exit__ = mock.Mock(
+            return_value=False)  # Don't suppress exceptions
+        mock_policy_lock.return_value = mock_context
+
+        mock_engine = mock.Mock()
+        mock_init_db.return_value = mock_engine
+
+        mock_adapter = mock.Mock()
+        mock_adapter_class.return_value = mock_adapter
+
+        mock_enforcer = mock.Mock()
+        mock_enforcer_class.return_value = mock_enforcer
+
+        # First call: add_all_tables_to_db_sqlalchemy raises an error
+        # Second call: it succeeds
+        mock_add_tables.side_effect = [
+            Exception("Database connection failed"),
+            None  # Success on second call
+        ]
+
+        service = permission.PermissionService()
+
+        # First call - should raise an exception
+        with pytest.raises(Exception) as exc_info:
+            service._lazy_initialize()
+        assert "Database connection failed" in str(exc_info.value)
+
+        # Second call - should succeed
+        service._lazy_initialize()
+
+        # Verify that self.enforcer is not None after successful initialization
+        assert service.enforcer is not None
+        assert service.enforcer == mock_enforcer