diff --git a/src/network/networkd-link.c b/src/network/networkd-link.c
index 96739b0d0a..65fd8b43e3 100644
--- a/src/network/networkd-link.c
+++ b/src/network/networkd-link.c
@@ -2205,8 +2205,8 @@ static int link_update_master(Link *link, sd_netlink_message *message) {
 
         r = sd_netlink_message_read_u32(message, IFLA_MASTER, (uint32_t*) &master_ifindex);
         if (r == -ENODATA)
-                return 0;
-        if (r < 0)
+                master_ifindex = 0; /* no master interface */
+        else if (r < 0)
                 return log_link_debug_errno(link, r, "rtnl: failed to read master ifindex: %m");
 
         if (master_ifindex == link->ifindex)
@@ -2223,6 +2223,9 @@ static int link_update_master(Link *link, sd_netlink_message *message) {
 
                 link_drop_from_master(link);
                 link->master_ifindex = master_ifindex;
+
+                /* Updating master ifindex may cause operational state change, e.g. carrier <-> enslaved */
+                link_dirty(link);
         }
 
         r = link_append_to_master(link);
diff --git a/test/test-network/systemd-networkd-tests.py b/test/test-network/systemd-networkd-tests.py
index 894d43c0c1..3f8c6b1b65 100755
--- a/test/test-network/systemd-networkd-tests.py
+++ b/test/test-network/systemd-networkd-tests.py
@@ -5104,11 +5104,11 @@ class NetworkdNetworkTests(unittest.TestCase, Utilities):
 
         output = check_output('ip -4 addr show dev dummy98')
         print(output)
-        self.assertRegex(output, 'inet 10\.234\.77\.111/32.*dummy98')
+        self.assertIn('inet 10.234.77.111/32', output)
 
         output = check_output('ip -6 addr show dev dummy98')
         print(output)
-        self.assertRegex(output, 'inet6 2222:3333::4444/64 scope global')
+        self.assertIn('inet6 2222:3333::4444/64 scope global', output)
 
     def check_nexthop(self, manage_foreign_nexthops, first):
         self.wait_online('veth99:routable', 'veth-peer:routable', 'dummy98:routable')
@@ -5775,6 +5775,21 @@ class NetworkdBondTests(unittest.TestCase, Utilities):
         print(output)
         self.assertRegex(output, 'master bond199')
 
+        # Test case for #37629
+        for _ in range(3):
+            # When a slave leaved from its master bonding interface, the kernel brings down the slave.
+            check_output('ip link set dummy98 nomaster')
+            self.wait_online('dummy98:off')
+
+            # Bring up the interface to check if networkd recognizes the interface has no master now.
+            check_output('ip link set dummy98 up')
+            self.wait_online('dummy98:carrier')
+
+            # We need to first bring down the interface to make it join a bonding interface.
+            check_output('ip link set dummy98 down')
+            check_output('ip link set dummy98 master bond199')
+            self.wait_online('dummy98:enslaved')
+
     def test_bond_active_slave(self):
         copy_network_unit('23-active-slave.network', '23-bond199.network', '25-bond-active-backup-slave.netdev', '12-dummy.netdev')
         start_networkd()