diff --git a/samcli/lib/utils/managed_cloudformation_stack.py b/samcli/lib/utils/managed_cloudformation_stack.py
index 83cee2e0a5..2835f1b665 100644
--- a/samcli/lib/utils/managed_cloudformation_stack.py
+++ b/samcli/lib/utils/managed_cloudformation_stack.py
@@ -253,7 +253,7 @@ def _create_stack(
         Tags=[{"Key": "ManagedStackSource", "Value": "AwsSamCli"}],
         ChangeSetType="CREATE",
         ChangeSetName=change_set_name,  # this must be unique for the stack, but we only create so that's fine
-        Capabilities=["CAPABILITY_IAM"],
+        Capabilities=["CAPABILITY_IAM", "CAPABILITY_AUTO_EXPAND"],
         Parameters=parameters,
     )
     stack_id = change_set_resp["StackId"]
diff --git a/tests/unit/lib/utils/test_managed_cloudformation_stack.py b/tests/unit/lib/utils/test_managed_cloudformation_stack.py
index 277a21f078..e7dff209b8 100644
--- a/tests/unit/lib/utils/test_managed_cloudformation_stack.py
+++ b/tests/unit/lib/utils/test_managed_cloudformation_stack.py
@@ -99,7 +99,7 @@ def test_new_stack(self, boto_mock):
             "Tags": [{"Key": "ManagedStackSource", "Value": "AwsSamCli"}],
             "ChangeSetType": "CREATE",
             "ChangeSetName": "InitialCreation",
-            "Capabilities": ["CAPABILITY_IAM"],
+            "Capabilities": ["CAPABILITY_IAM", "CAPABILITY_AUTO_EXPAND"],
             "Parameters": [],
         }
         ccs_resp = {"Id": "id", "StackId": "aws-sam-cli-managed-default"}
@@ -210,7 +210,7 @@ def test_change_set_creation_fails(self, patched_boto, patched_session):
             "Tags": [{"Key": "ManagedStackSource", "Value": "AwsSamCli"}],
             "ChangeSetType": "CREATE",
             "ChangeSetName": "InitialCreation",
-            "Capabilities": ["CAPABILITY_IAM"],
+            "Capabilities": ["CAPABILITY_IAM", "CAPABILITY_AUTO_EXPAND"],
             "Parameters": [],
         }
         stubber.add_client_error("create_change_set", service_error_code="ClientError", expected_params=ccs_params)
@@ -233,7 +233,7 @@ def test_change_set_execution_fails(self, patched_boto):
             "Tags": [{"Key": "ManagedStackSource", "Value": "AwsSamCli"}],
             "ChangeSetType": "CREATE",
             "ChangeSetName": "InitialCreation",
-            "Capabilities": ["CAPABILITY_IAM"],
+            "Capabilities": ["CAPABILITY_IAM", "CAPABILITY_AUTO_EXPAND"],
             "Parameters": [],
         }
         ccs_resp = {"Id": "id", "StackId": "aws-sam-cli-managed-default"}