diff --git a/site/src/pages/WorkspacePage/WorkspaceActions/Buttons.tsx b/site/src/pages/WorkspacePage/WorkspaceActions/Buttons.tsx
index ecfde9e97aa9b..576e5fb84ead2 100644
--- a/site/src/pages/WorkspacePage/WorkspaceActions/Buttons.tsx
+++ b/site/src/pages/WorkspacePage/WorkspaceActions/Buttons.tsx
@@ -99,6 +99,21 @@ export const StartButton: FC<ActionButtonPropsWithWorkspace> = ({
   );
 };
 
+export const UpdateAndStartButton: FC<ActionButtonProps> = ({
+  handleAction,
+}) => {
+  return (
+    <Tooltip title="This template requires automatic updates on workspace startup. Contact your administrator if you want to preserve the template version.">
+      <TopbarButton
+        startIcon={<PlayCircleOutlineIcon />}
+        onClick={() => handleAction()}
+      >
+        Update and start&hellip;
+      </TopbarButton>
+    </Tooltip>
+  );
+};
+
 export const StopButton: FC<ActionButtonProps> = ({
   handleAction,
   loading,
@@ -148,16 +163,13 @@ export const RestartButton: FC<ActionButtonPropsWithWorkspace> = ({
   );
 };
 
-export const UpdateAndStartButton: FC<ActionButtonProps> = ({
+export const UpdateAndRestartButton: FC<ActionButtonProps> = ({
   handleAction,
 }) => {
   return (
     <Tooltip title="This template requires automatic updates on workspace startup. Contact your administrator if you want to preserve the template version.">
-      <TopbarButton
-        startIcon={<PlayCircleOutlineIcon />}
-        onClick={() => handleAction()}
-      >
-        Update and start&hellip;
+      <TopbarButton startIcon={<ReplayIcon />} onClick={() => handleAction()}>
+        Update and restart&hellip;
       </TopbarButton>
     </Tooltip>
   );
diff --git a/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.stories.tsx b/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.stories.tsx
index 3e663dafba1a9..e4188b7b88041 100644
--- a/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.stories.tsx
+++ b/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.stories.tsx
@@ -34,93 +34,128 @@ export const Running: Story = {
   },
 };
 
-export const Stopping: Story = {
+export const RunningUpdateAvailable: Story = {
+  name: "Running (Update available)",
   args: {
-    workspace: Mocks.MockStoppingWorkspace,
+    workspace: {
+      ...Mocks.MockWorkspace,
+      outdated: true,
+    },
   },
 };
 
-export const Stopped: Story = {
+export const RunningRequireActiveVersion: Story = {
+  name: "Running (No required update)",
   args: {
-    workspace: Mocks.MockStoppedWorkspace,
+    workspace: {
+      ...Mocks.MockWorkspace,
+      template_require_active_version: true,
+    },
   },
 };
 
-export const Canceling: Story = {
+export const RunningUpdateRequired: Story = {
+  name: "Running (Update Required)",
   args: {
-    workspace: Mocks.MockCancelingWorkspace,
+    workspace: {
+      ...Mocks.MockWorkspace,
+      template_require_active_version: true,
+      outdated: true,
+    },
   },
 };
 
-export const Canceled: Story = {
+export const Stopping: Story = {
   args: {
-    workspace: Mocks.MockCanceledWorkspace,
+    workspace: Mocks.MockStoppingWorkspace,
   },
 };
 
-export const Deleting: Story = {
+export const Stopped: Story = {
   args: {
-    workspace: Mocks.MockDeletingWorkspace,
+    workspace: Mocks.MockStoppedWorkspace,
   },
 };
 
-export const Deleted: Story = {
+export const StoppedUpdateAvailable: Story = {
+  name: "Stopped (Update available)",
   args: {
-    workspace: Mocks.MockDeletedWorkspace,
+    workspace: {
+      ...Mocks.MockStoppedWorkspace,
+      outdated: true,
+    },
   },
 };
 
-export const Outdated: Story = {
+export const StoppedRequireActiveVersion: Story = {
+  name: "Stopped (No required update)",
+  args: {
+    workspace: {
+      ...Mocks.MockStoppedWorkspace,
+      template_require_active_version: true,
+    },
+  },
+};
+
+export const StoppedUpdateRequired: Story = {
+  name: "Stopped (Update Required)",
+  args: {
+    workspace: {
+      ...Mocks.MockStoppedWorkspace,
+      template_require_active_version: true,
+      outdated: true,
+    },
+  },
+};
+
+export const Updating: Story = {
   args: {
     workspace: Mocks.MockOutdatedWorkspace,
+    isUpdating: true,
   },
 };
 
-export const Failed: Story = {
+export const Restarting: Story = {
   args: {
-    workspace: Mocks.MockFailedWorkspace,
+    workspace: Mocks.MockStoppingWorkspace,
+    isRestarting: true,
   },
 };
 
-export const FailedWithDebug: Story = {
+export const Canceling: Story = {
   args: {
-    workspace: Mocks.MockFailedWorkspace,
-    canDebug: true,
+    workspace: Mocks.MockCancelingWorkspace,
   },
 };
 
-export const Updating: Story = {
+export const Deleting: Story = {
   args: {
-    isUpdating: true,
-    workspace: Mocks.MockOutdatedWorkspace,
+    workspace: Mocks.MockDeletingWorkspace,
   },
 };
 
-export const RequireActiveVersionStarted: Story = {
+export const Deleted: Story = {
   args: {
-    workspace: Mocks.MockOutdatedRunningWorkspaceRequireActiveVersion,
-    canChangeVersions: false,
+    workspace: Mocks.MockDeletedWorkspace,
   },
 };
 
-export const RequireActiveVersionStopped: Story = {
+export const Outdated: Story = {
   args: {
-    workspace: Mocks.MockOutdatedStoppedWorkspaceRequireActiveVersion,
-    canChangeVersions: false,
+    workspace: Mocks.MockOutdatedWorkspace,
   },
 };
 
-export const AlwaysUpdateStarted: Story = {
+export const Failed: Story = {
   args: {
-    workspace: Mocks.MockOutdatedRunningWorkspaceAlwaysUpdate,
-    canChangeVersions: true,
+    workspace: Mocks.MockFailedWorkspace,
   },
 };
 
-export const AlwaysUpdateStopped: Story = {
+export const FailedWithDebug: Story = {
   args: {
-    workspace: Mocks.MockOutdatedStoppedWorkspaceAlwaysUpdate,
-    canChangeVersions: true,
+    workspace: Mocks.MockFailedWorkspace,
+    canDebug: true,
   },
 };
 
@@ -133,6 +168,7 @@ export const CancelShownForOwner: Story = {
     isOwner: true,
   },
 };
+
 export const CancelShownForUser: Story = {
   args: {
     workspace: Mocks.MockStartingWorkspace,
diff --git a/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.tsx b/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.tsx
index 86a53d592243e..e58f8190e900f 100644
--- a/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.tsx
+++ b/site/src/pages/WorkspacePage/WorkspaceActions/WorkspaceActions.tsx
@@ -26,6 +26,7 @@ import {
   ActivateButton,
   FavoriteButton,
   UpdateAndStartButton,
+  UpdateAndRestartButton,
 } from "./Buttons";
 import { type ActionType, abilitiesByWorkspaceStatus } from "./constants";
 import { DebugButton } from "./DebugButton";
@@ -89,12 +90,12 @@ export const WorkspaceActions: FC<WorkspaceActionsProps> = ({
 
   const mustUpdate = mustUpdateWorkspace(workspace, canChangeVersions);
   const tooltipText = getTooltipText(workspace, mustUpdate, canChangeVersions);
-  const canBeUpdated = workspace.outdated && canAcceptJobs;
 
   // A mapping of button type to the corresponding React component
   const buttonMapping: Record<ActionType, ReactNode> = {
     update: <UpdateButton handleAction={handleUpdate} />,
     updateAndStart: <UpdateAndStartButton handleAction={handleUpdate} />,
+    updateAndRestart: <UpdateAndRestartButton handleAction={handleUpdate} />,
     updating: <UpdateButton loading handleAction={handleUpdate} />,
     start: (
       <StartButton
@@ -152,13 +153,6 @@ export const WorkspaceActions: FC<WorkspaceActionsProps> = ({
         enableBuildParameters={workspace.latest_build.transition === "start"}
       />
     ),
-    toggleFavorite: (
-      <FavoriteButton
-        workspaceID={workspace.id}
-        isFavorite={workspace.favorite}
-        onToggle={handleToggleFavorite}
-      />
-    ),
   };
 
   return (
@@ -166,30 +160,22 @@ export const WorkspaceActions: FC<WorkspaceActionsProps> = ({
       css={{ display: "flex", alignItems: "center", gap: 8 }}
       data-testid="workspace-actions"
     >
-      {canBeUpdated && (
-        <>
-          {isUpdating
-            ? buttonMapping.updating
-            : workspace.template_require_active_version
-              ? buttonMapping.updateAndStart
-              : buttonMapping.update}
-        </>
-      )}
-
-      {!canBeUpdated &&
-        !isUpdating &&
-        workspace.template_require_active_version &&
-        buttonMapping.start}
-
-      {isRestarting
-        ? buttonMapping.restarting
-        : actions.map((action) => (
-            <Fragment key={action}>{buttonMapping[action]}</Fragment>
-          ))}
+      {/* Restarting must be handled separately, because it otherwise would appear as stopping */}
+      {isUpdating
+        ? buttonMapping.updating
+        : isRestarting
+          ? buttonMapping.restarting
+          : actions.map((action) => (
+              <Fragment key={action}>{buttonMapping[action]}</Fragment>
+            ))}
 
       {showCancel && <CancelButton handleAction={handleCancel} />}
 
-      {buttonMapping.toggleFavorite}
+      <FavoriteButton
+        workspaceID={workspace.id}
+        isFavorite={workspace.favorite}
+        onToggle={handleToggleFavorite}
+      />
 
       <MoreMenu>
         <MoreMenuTrigger>
diff --git a/site/src/pages/WorkspacePage/WorkspaceActions/constants.ts b/site/src/pages/WorkspacePage/WorkspaceActions/constants.ts
index c2a85da8cb121..f6d9f8f1cfa20 100644
--- a/site/src/pages/WorkspacePage/WorkspaceActions/constants.ts
+++ b/site/src/pages/WorkspacePage/WorkspaceActions/constants.ts
@@ -6,16 +6,19 @@ import type { Workspace } from "api/typesGenerated";
 export const actionTypes = [
   "start",
   "starting",
+  // Replaces start when an update is required.
+  "updateAndStart",
   "stop",
   "stopping",
   "restart",
   "restarting",
+  // Replaces restart when an update is required.
+  "updateAndRestart",
   "deleting",
   "update",
   "updating",
   "activate",
   "activating",
-  "toggleFavorite",
 
   // There's no need for a retrying state because retrying starts a transition
   // into one of the starting, stopping, or deleting states (based on the
@@ -23,10 +26,6 @@ export const actionTypes = [
   "retry",
   "debug",
 
-  // When a template requires updates, we aim to display a distinct update
-  // button that clearly indicates a mandatory update.
-  "updateAndStart",
-
   // These are buttons that should be used with disabled UI elements
   "canceling",
   "deleted",
@@ -54,13 +53,6 @@ export const abilitiesByWorkspaceStatus = (
   }
 
   const status = workspace.latest_build.status;
-  if (status === "failed" && canDebug) {
-    return {
-      actions: ["retry", "debug"],
-      canCancel: false,
-      canAcceptJobs: true,
-    };
-  }
 
   switch (status) {
     case "starting": {
@@ -73,10 +65,12 @@ export const abilitiesByWorkspaceStatus = (
     case "running": {
       const actions: ActionType[] = ["stop"];
 
-      // If the template requires the latest version, we prevent the user from
-      // restarting the workspace without updating it first. In the Buttons
-      // component, we display an UpdateAndStart component to facilitate this.
-      if (!workspace.template_require_active_version) {
+      if (workspace.template_require_active_version && workspace.outdated) {
+        actions.push("updateAndRestart");
+      } else {
+        if (workspace.outdated) {
+          actions.unshift("update");
+        }
         actions.push("restart");
       }
 
@@ -96,10 +90,12 @@ export const abilitiesByWorkspaceStatus = (
     case "stopped": {
       const actions: ActionType[] = [];
 
-      // If the template requires the latest version, we prevent the user from
-      // starting the workspace without updating it first. In the Buttons
-      // component, we display an UpdateAndStart component to facilitate this.
-      if (!workspace.template_require_active_version) {
+      if (workspace.template_require_active_version && workspace.outdated) {
+        actions.push("updateAndStart");
+      } else {
+        if (workspace.outdated) {
+          actions.unshift("update");
+        }
         actions.push("start");
       }
 
@@ -117,14 +113,31 @@ export const abilitiesByWorkspaceStatus = (
       };
     }
     case "failed": {
+      const actions: ActionType[] = ["retry"];
+
+      if (canDebug) {
+        actions.push("debug");
+      }
+
+      if (workspace.outdated) {
+        actions.unshift("update");
+      }
+
       return {
-        actions: ["retry"],
+        actions,
         canCancel: false,
         canAcceptJobs: true,
       };
     }
 
     // Disabled states
+    case "pending": {
+      return {
+        actions: ["pending"],
+        canCancel: false,
+        canAcceptJobs: false,
+      };
+    }
     case "canceling": {
       return {
         actions: ["canceling"],
@@ -146,15 +159,8 @@ export const abilitiesByWorkspaceStatus = (
         canAcceptJobs: false,
       };
     }
-    case "pending": {
-      return {
-        actions: ["pending"],
-        canCancel: false,
-        canAcceptJobs: false,
-      };
-    }
-    default: {
+
+    default:
       throw new Error(`Unknown workspace status: ${status}`);
-    }
   }
 };
diff --git a/site/src/testHelpers/entities.ts b/site/src/testHelpers/entities.ts
index bd7627f070fdf..055093570c7ab 100644
--- a/site/src/testHelpers/entities.ts
+++ b/site/src/testHelpers/entities.ts
@@ -1175,10 +1175,6 @@ export const MockOutdatedRunningWorkspaceRequireActiveVersion: TypesGen.Workspac
     id: "test-outdated-workspace-require-active-version",
     outdated: true,
     template_require_active_version: true,
-    latest_build: {
-      ...MockWorkspaceBuild,
-      status: "running",
-    },
   };
 
 export const MockOutdatedRunningWorkspaceAlwaysUpdate: TypesGen.Workspace = {