diff --git a/app/server/appsmith-server/src/main/java/com/appsmith/server/services/ce/ApplicationTemplateServiceCEImpl.java b/app/server/appsmith-server/src/main/java/com/appsmith/server/services/ce/ApplicationTemplateServiceCEImpl.java
index 176dcb6f90..f070ea002d 100644
--- a/app/server/appsmith-server/src/main/java/com/appsmith/server/services/ce/ApplicationTemplateServiceCEImpl.java
+++ b/app/server/appsmith-server/src/main/java/com/appsmith/server/services/ce/ApplicationTemplateServiceCEImpl.java
@@ -349,7 +349,9 @@ public class ApplicationTemplateServiceCEImpl implements ApplicationTemplateServ
                 .accept(MediaType.APPLICATION_JSON)
                 .body(BodyInserters.fromValue(payload))
                 .retrieve()
-                .bodyToMono(ApplicationTemplate.class);
+                .bodyToMono(ApplicationTemplate.class)
+                .onErrorResume(error -> Mono.error(new AppsmithException(
+                        AppsmithError.CLOUD_SERVICES_ERROR, "while publishing template" + error.getMessage())));
     }
 
     private Mono<Application> updateApplicationFlags(String applicationId, String branchId) {
diff --git a/app/server/appsmith-server/src/test/java/com/appsmith/server/services/ce/ApplicationTemplateServicePublishTemplateTest.java b/app/server/appsmith-server/src/test/java/com/appsmith/server/services/ce/ApplicationTemplateServicePublishTemplateTest.java
new file mode 100644
index 0000000000..0aee9ad0f1
--- /dev/null
+++ b/app/server/appsmith-server/src/test/java/com/appsmith/server/services/ce/ApplicationTemplateServicePublishTemplateTest.java
@@ -0,0 +1,124 @@
+package com.appsmith.server.services.ce;
+
+import com.appsmith.server.configurations.CloudServicesConfig;
+import com.appsmith.server.domains.Application;
+import com.appsmith.server.domains.GitApplicationMetadata;
+import com.appsmith.server.domains.Workspace;
+import com.appsmith.server.dtos.CommunityTemplateDTO;
+import com.appsmith.server.exceptions.AppsmithException;
+import com.appsmith.server.services.ApplicationPageService;
+import com.appsmith.server.services.ApplicationTemplateService;
+import com.appsmith.server.services.WorkspaceService;
+import lombok.extern.slf4j.Slf4j;
+import mockwebserver3.Dispatcher;
+import mockwebserver3.MockResponse;
+import mockwebserver3.MockWebServer;
+import mockwebserver3.RecordedRequest;
+import org.junit.jupiter.api.AfterAll;
+import org.junit.jupiter.api.BeforeAll;
+import org.junit.jupiter.api.Test;
+import org.junit.jupiter.api.extension.ExtendWith;
+import org.springframework.beans.factory.annotation.Autowired;
+import org.springframework.boot.test.context.SpringBootTest;
+import org.springframework.security.test.context.support.WithUserDetails;
+import org.springframework.test.context.junit.jupiter.SpringExtension;
+import reactor.test.StepVerifier;
+
+import java.io.IOException;
+import java.time.Instant;
+import java.util.List;
+
+@Slf4j
+@ExtendWith(SpringExtension.class)
+@SpringBootTest
+public class ApplicationTemplateServicePublishTemplateTest {
+    private static MockWebServer mockCloudServices;
+
+    @Autowired
+    ApplicationTemplateService applicationTemplateService;
+
+    @Autowired
+    WorkspaceService workspaceService;
+
+    @Autowired
+    ApplicationPageService applicationPageService;
+
+    @Autowired
+    CloudServicesConfig cloudServicesConfig;
+
+    static final Dispatcher dispatcher = new Dispatcher() {
+        @Override
+        public MockResponse dispatch(RecordedRequest request) throws InterruptedException {
+
+            switch (request.getPath()) {
+                case "/api/v1/app-templates/upload-community-template":
+                    return new MockResponse().setResponseCode(500).setBody("Error while uploading template");
+
+                default:
+                    return new MockResponse()
+                            .setHeader("x-header-name", "header-value")
+                            .setResponseCode(200)
+                            .setBody("response");
+            }
+        }
+    };
+
+    @BeforeAll
+    public static void setUp() throws IOException {
+        mockCloudServices = new MockWebServer();
+        mockCloudServices.setDispatcher(dispatcher);
+        mockCloudServices.start();
+    }
+
+    @AfterAll
+    public static void tearDown() throws IOException {
+        mockCloudServices.shutdown();
+    }
+
+    private Application setUpTestApplicationForWorkspace(String workspaceId) {
+        Application testApplication = new Application();
+        testApplication.setName("Export-Application-Test-Application");
+        testApplication.setWorkspaceId(workspaceId);
+        testApplication.setUpdatedAt(Instant.now());
+        testApplication.setLastDeployedAt(Instant.now());
+        testApplication.setModifiedBy("some-user");
+        testApplication.setGitApplicationMetadata(new GitApplicationMetadata());
+
+        cloudServicesConfig.setBaseUrl(String.format("http://localhost:%s", mockCloudServices.getPort()));
+
+        return applicationPageService
+                .createApplication(testApplication, workspaceId)
+                .block();
+    }
+
+    @Test
+    @WithUserDetails(value = "api_user")
+    public void test_application_published_as_community_template() {
+        // Create Workspace
+        Workspace workspace = new Workspace();
+        workspace.setName("Import-Export-Test-Workspace");
+        Workspace savedWorkspace = workspaceService.create(workspace).block();
+
+        Application testApp = setUpTestApplicationForWorkspace(savedWorkspace.getId());
+        CommunityTemplateDTO communityTemplateDTO = new CommunityTemplateDTO();
+        communityTemplateDTO.setApplicationId(testApp.getId());
+        communityTemplateDTO.setWorkspaceId(testApp.getWorkspaceId());
+        communityTemplateDTO.setTitle("Some title");
+        communityTemplateDTO.setHeadline("Some headline");
+        communityTemplateDTO.setDescription("Some description");
+        communityTemplateDTO.setUseCases(List.of("uc1", "uc2"));
+        communityTemplateDTO.setAuthorEmail("test@user.com");
+
+        // make sure we've received the response returned by the mockCloudServices
+        StepVerifier.create(applicationTemplateService.publishAsCommunityTemplate(communityTemplateDTO))
+                .expectErrorMatches(throwable -> throwable instanceof AppsmithException
+                        && throwable
+                                .getMessage()
+                                .contains("Received error from cloud services while publishing template"))
+                .verify();
+
+        // Test cleanup
+        applicationPageService.deleteApplication(testApp.getId()).block();
+        workspaceService.archiveById(savedWorkspace.getId()).block();
+    }
+}