diff --git a/changelogs/fragments/1038-ec2-insufficient-capacity.yml b/changelogs/fragments/1038-ec2-insufficient-capacity.yml
new file mode 100644
index 00000000000..0058fe5cbb4
--- /dev/null
+++ b/changelogs/fragments/1038-ec2-insufficient-capacity.yml
@@ -0,0 +1,3 @@
+---
+minor_changes:
+  - ec2_instance - expanded the use of the automatic retries to ``InsuffienctInstanceCapacity`` (https://github.com/ansible-collections/amazon.aws/issues/1038).
diff --git a/plugins/modules/ec2_instance.py b/plugins/modules/ec2_instance.py
index 745d43d8959..1af800f2086 100644
--- a/plugins/modules/ec2_instance.py
+++ b/plugins/modules/ec2_instance.py
@@ -2072,6 +2072,7 @@ def main():
     retry_decorator = AWSRetry.jittered_backoff(
         catch_extra_error_codes=[
             'IncorrectState',
+            'InsuffienctInstanceCapacity',
         ]
     )
     client = module.client('ec2', retry_decorator=retry_decorator)