diff --git a/src/dstack/_internal/server/background/tasks/process_running_jobs.py b/src/dstack/_internal/server/background/tasks/process_running_jobs.py
index 9de0fffcc..bcb35a089 100644
--- a/src/dstack/_internal/server/background/tasks/process_running_jobs.py
+++ b/src/dstack/_internal/server/background/tasks/process_running_jobs.py
@@ -370,8 +370,12 @@ async def _process_running_job(session: AsyncSession, job_model: JobModel):
                 # No job_model.termination_reason set means ssh connection failed
                 _set_disconnected_at_now(session, job_model)
                 if _should_terminate_job_due_to_disconnect(job_model):
-                    # TODO: Replace with JobTerminationReason.INSTANCE_UNREACHABLE for on-demand.
-                    job_model.termination_reason = JobTerminationReason.INTERRUPTED_BY_NO_CAPACITY
+                    if job_provisioning_data.instance_type.resources.spot:
+                        job_model.termination_reason = (
+                            JobTerminationReason.INTERRUPTED_BY_NO_CAPACITY
+                        )
+                    else:
+                        job_model.termination_reason = JobTerminationReason.INSTANCE_UNREACHABLE
                     job_model.termination_reason_message = "Instance is unreachable"
                     switch_job_status(session, job_model, JobStatus.TERMINATING)
                 else:
diff --git a/src/tests/_internal/server/background/tasks/test_process_running_jobs.py b/src/tests/_internal/server/background/tasks/test_process_running_jobs.py
index 601fbe1ee..9e318866c 100644
--- a/src/tests/_internal/server/background/tasks/test_process_running_jobs.py
+++ b/src/tests/_internal/server/background/tasks/test_process_running_jobs.py
@@ -532,7 +532,7 @@ async def test_pulling_shim_failed(self, test_db, session: AsyncSession):
             assert SSHTunnelMock.call_count == 3
         await session.refresh(job)
         assert job.status == JobStatus.TERMINATING
-        assert job.termination_reason == JobTerminationReason.INTERRUPTED_BY_NO_CAPACITY
+        assert job.termination_reason == JobTerminationReason.INSTANCE_UNREACHABLE
         assert job.remove_at is None
 
     @pytest.mark.asyncio