diff --git a/src/dstack/_internal/core/backends/azure/compute.py b/src/dstack/_internal/core/backends/azure/compute.py
index 66ebb0a718..0a8036fdcc 100644
--- a/src/dstack/_internal/core/backends/azure/compute.py
+++ b/src/dstack/_internal/core/backends/azure/compute.py
@@ -186,7 +186,6 @@ def create_instance(
             managed_identity_resource_group=managed_identity_resource_group,
             image_reference=_get_image_ref(
                 compute_client=self._compute_client,
-                location=location,
                 variant=VMImageVariant.from_instance_type(instance_offer.instance),
             ),
             vm_size=instance_offer.instance.name,
@@ -527,9 +526,12 @@ def _vm_type_available(vm_resource: ResourceSku) -> bool:
     return False
 
 
+# Public name Azure assigned to the gallery that scripts/publish_azure_image.sh publishes to
+_COMMUNITY_GALLERY_NAME = "dstack-ebac134d-04b9-4c2b-8b6c-ad3e73904aa7"  # Gen2
+
+
 def _get_image_ref(
     compute_client: compute_mgmt.ComputeManagementClient,
-    location: str,
     variant: VMImageVariant,
 ) -> ImageReference:
     if settings.DSTACK_VM_BASE_IMAGE_PREFIX:
@@ -539,12 +541,12 @@ def _get_image_ref(
             image_name=variant.get_image_name(),
         )
         return ImageReference(id=image.id)
-    image = compute_client.community_gallery_images.get(
-        location=location,
-        public_gallery_name="dstack-ebac134d-04b9-4c2b-8b6c-ad3e73904aa7",  # Gen2
-        gallery_image_name=variant.get_image_name(),
+    # Not looked up: the lookup fails with azure-mgmt-compute>=38.2.0 (#4333)
+    return ImageReference(
+        community_gallery_image_id=(
+            f"/CommunityGalleries/{_COMMUNITY_GALLERY_NAME}/Images/{variant.get_image_name()}"
+        )
     )
-    return ImageReference(community_gallery_image_id=image.unique_id)
 
 
 def _get_gateway_image_ref() -> ImageReference:
@@ -677,6 +679,12 @@ def _begin_create_instance(
             message = e.error.message if e.error.message is not None else ""
             raise NoCapacityError(message)
         raise e
+    except ResourceNotFoundError as e:
+        # The image is not replicated to the location or does not exist
+        if e.error is not None and e.error.code == "GalleryImageNotFound":
+            image_id = image_reference.community_gallery_image_id or image_reference.id
+            raise ComputeError(f"VM image {image_id} is not available in {location}")
+        raise e
     return poller
 
 
diff --git a/src/tests/_internal/core/backends/azure/test_compute.py b/src/tests/_internal/core/backends/azure/test_compute.py
index a0ce0afaef..039984ef26 100644
--- a/src/tests/_internal/core/backends/azure/test_compute.py
+++ b/src/tests/_internal/core/backends/azure/test_compute.py
@@ -1,7 +1,16 @@
+from unittest.mock import Mock
+
 import pytest
+from azure.core.exceptions import ODataV4Format, ResourceNotFoundError
+from azure.mgmt.compute.models import ImageReference
 
 from dstack._internal import settings
-from dstack._internal.core.backends.azure.compute import VMImageVariant
+from dstack._internal.core.backends.azure.compute import (
+    VMImageVariant,
+    _begin_create_instance,
+    _get_image_ref,
+)
+from dstack._internal.core.errors import ComputeError
 from dstack._internal.core.models.instances import Gpu, InstanceType, Resources
 
 
@@ -71,3 +80,70 @@ def test_from_instance_type(
     )
     def test_get_image_name(self, variant: VMImageVariant, expected_name: str):
         assert variant.get_image_name() == expected_name
+
+
+class TestGetImageRef:
+    def test_community_gallery_image(self, monkeypatch: pytest.MonkeyPatch):
+        monkeypatch.setattr(settings, "DSTACK_VM_BASE_IMAGE_PREFIX", "")
+        compute_client = Mock()
+        image_ref = _get_image_ref(compute_client=compute_client, variant=VMImageVariant.GRID)
+        assert image_ref.community_gallery_image_id == (
+            "/CommunityGalleries/dstack-ebac134d-04b9-4c2b-8b6c-ad3e73904aa7/Images/"
+            f"dstack-grid-{settings.DSTACK_VM_BASE_IMAGE_VERSION}"
+        )
+        assert compute_client.mock_calls == []
+
+
+class TestBeginCreateInstance:
+    def test_raises_compute_error_if_image_not_available(self):
+        compute_client = Mock()
+        compute_client.virtual_machines.begin_create_or_update.side_effect = _not_found_error(
+            "GalleryImageNotFound"
+        )
+        image_id = "/CommunityGalleries/g/Images/dstack-0.14"
+        with pytest.raises(ComputeError, match=f"{image_id} is not available in westeurope"):
+            _begin_create_instance(
+                **_create_instance_kwargs(
+                    compute_client, ImageReference(community_gallery_image_id=image_id)
+                )
+            )
+
+    def test_reraises_other_not_found_errors(self):
+        compute_client = Mock()
+        error = _not_found_error("ResourceGroupNotFound")
+        compute_client.virtual_machines.begin_create_or_update.side_effect = error
+        with pytest.raises(ResourceNotFoundError) as exc_info:
+            _begin_create_instance(
+                **_create_instance_kwargs(
+                    compute_client, ImageReference(community_gallery_image_id="/img")
+                )
+            )
+        assert exc_info.value is error
+
+
+def _not_found_error(code: str) -> ResourceNotFoundError:
+    error = ResourceNotFoundError(code)
+    error.error = ODataV4Format({"code": code, "message": code})
+    return error
+
+
+def _create_instance_kwargs(compute_client: Mock, image_reference: ImageReference) -> dict:
+    return dict(
+        compute_client=compute_client,
+        subscription_id="subscription",
+        location="westeurope",
+        resource_group="resource-group",
+        network_security_group="security-group",
+        network="network",
+        subnet="subnet",
+        managed_identity_name=None,
+        managed_identity_resource_group=None,
+        image_reference=image_reference,
+        vm_size="Standard_NV6ads_A10_v5",
+        instance_name="instance",
+        user_data="",
+        ssh_pub_keys=["ssh-ed25519 AAAA"],
+        spot=True,
+        disk_size=100,
+        computer_name="runnervm",
+    )