diff --git a/arch/xtensa/core/xtensa-asm2.c b/arch/xtensa/core/xtensa-asm2.c
index 3e31dcaa939f59b..a38493d106d922b 100644
--- a/arch/xtensa/core/xtensa-asm2.c
+++ b/arch/xtensa/core/xtensa-asm2.c
@@ -255,6 +255,16 @@ void *xtensa_excint1_c(int *interrupted_stack)
 			reason = bsa[BSA_A2_OFF/4];
 			/* Skip ILL to RETW */
 			bsa[BSA_PC_OFF/4] += 3;
+			/* This would ensure nested count is reset to one when an exception
+			 * is triggered from ISR context. When nested count <=1 the handler would
+			 * switch the thread context, otherwise would return the interrupted stack.
+			 * This would cause xtensa_arch_except to return when it is not expected to.
+			 * Resetting the cpu nested count prevents xtensa_arch_except from returning
+			 * in ISR context.
+			 */
+			if ((arch_curr_cpu()->nested > 1) && (reason == K_ERR_STACK_CHK_FAIL)) {
+				arch_curr_cpu()->nested = 1U;
+			}
 			pc = (void *)bsa[BSA_PC_OFF/4];
 		}
 
diff --git a/include/zephyr/arch/xtensa/arch.h b/include/zephyr/arch/xtensa/arch.h
index 5b5a90c029f5fe6..18b2a76f61ebeeb 100644
--- a/include/zephyr/arch/xtensa/arch.h
+++ b/include/zephyr/arch/xtensa/arch.h
@@ -48,6 +48,7 @@ extern void xtensa_arch_except(int reason_p);
 
 #define ARCH_EXCEPT(reason_p) do { \
 	xtensa_arch_except(reason_p); \
+	CODE_UNREACHABLE; \
 } while (false)
 
 /* internal routine documented in C file, needed by IRQ_CONNECT() macro */