diff --git a/src/index.ts b/src/index.ts
index 422e26c92..0c6c7badb 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -485,7 +485,13 @@ export class AzureOpenAI extends OpenAI {
   }
 
   protected override async prepareOptions(opts: Core.FinalRequestOptions<unknown>): Promise<void> {
-    if (opts.headers?.['Authorization'] || opts.headers?.['api-key']) {
+    /**
+     * The user should provide a bearer token provider if they want
+     * to use Azure AD authentication. The user shouldn't set the
+     * Authorization header manually because the header is overwritten
+     * with the Azure AD token if a bearer token provider is provided.
+     */
+    if (opts.headers?.['api-key']) {
       return super.prepareOptions(opts);
     }
     const token = await this._getAzureADToken();
diff --git a/tests/lib/azure.test.ts b/tests/lib/azure.test.ts
index 6bb6e0d1e..064a0098c 100644
--- a/tests/lib/azure.test.ts
+++ b/tests/lib/azure.test.ts
@@ -254,6 +254,43 @@ describe('instantiate azure client', () => {
         /The `apiKey` and `azureADTokenProvider` arguments are mutually exclusive; only one can be passed at a time./,
       );
     });
+
+    test('AAD token is refreshed', async () => {
+      let fail = true;
+      const testFetch = async (url: RequestInfo, req: RequestInit | undefined): Promise<Response> => {
+        if (fail) {
+          fail = false;
+          return new Response(undefined, {
+            status: 429,
+            headers: {
+              'Retry-After': '0.1',
+            },
+          });
+        }
+        return new Response(
+          JSON.stringify({ auth: (req?.headers as Record<string, string>)['authorization'] }),
+          { headers: { 'content-type': 'application/json' } },
+        );
+      };
+      let counter = 0;
+      async function azureADTokenProvider() {
+        return `token-${counter++}`;
+      }
+      const client = new AzureOpenAI({
+        baseURL: 'http://localhost:5000/',
+        azureADTokenProvider,
+        apiVersion,
+        fetch: testFetch,
+      });
+      expect(
+        await client.chat.completions.create({
+          model,
+          messages: [{ role: 'system', content: 'Hello' }],
+        }),
+      ).toStrictEqual({
+        auth: 'Bearer token-1',
+      });
+    });
   });
 
   test('with endpoint', () => {