diff --git a/distributed/scheduler.py b/distributed/scheduler.py
index df115c50466..ab4acc97876 100644
--- a/distributed/scheduler.py
+++ b/distributed/scheduler.py
@@ -2100,16 +2100,20 @@ def decide_worker_rootish_queuing_disabled(
 
         tg = ts.group
         lws = tg.last_worker
-        if not (
-            lws and tg.last_worker_tasks_left and self.workers.get(lws.address) is lws
+        if (
+            lws
+            and tg.last_worker_tasks_left
+            and lws.status == Status.running
+            and self.workers.get(lws.address) is lws
         ):
-            # Last-used worker is full or unknown; pick a new worker for the next few tasks
+            ws = lws
+        else:
+            # Last-used worker is full, unknown, retiring, or paused;
+            # pick a new worker for the next few tasks
             ws = min(pool, key=partial(self.worker_objective, ts))
             tg.last_worker_tasks_left = math.floor(
                 (len(tg) / self.total_nthreads) * ws.nthreads
             )
-        else:
-            ws = lws
 
         # Record `last_worker`, or clear it on the final task
         tg.last_worker = (
diff --git a/distributed/tests/test_scheduler.py b/distributed/tests/test_scheduler.py
index 3ed53391dd9..6e84db227d9 100644
--- a/distributed/tests/test_scheduler.py
+++ b/distributed/tests/test_scheduler.py
@@ -43,6 +43,7 @@
 from distributed.utils import TimeoutError
 from distributed.utils_test import (
     NO_AMM,
+    BlockedGatherDep,
     BrokenComm,
     async_wait_for,
     captured_logger,
@@ -253,6 +254,76 @@ def random(**kwargs):
     test_decide_worker_coschedule_order_neighbors_()
 
 
+@pytest.mark.skipif(
+    math.isfinite(dask.config.get("distributed.scheduler.worker-saturation")),
+    reason="Not relevant with queuing on; see https://github.com/dask/distributed/issues/7204",
+)
+@gen_cluster(
+    client=True,
+    nthreads=[("", 1)],
+    config={"distributed.scheduler.work-stealing": False},
+)
+async def test_decide_worker_rootish_while_last_worker_is_retiring(c, s, a):
+    """https://github.com/dask/distributed/issues/7063"""
+    # Put a task in memory on the worker to be retired and prevent the other from
+    # acquiring a replica. This will cause a to be stuck in closing_gracefully later on,
+    # until we set b.block_gather_dep.
+    m = (await c.scatter({"m": 1}, workers=[a.address]))["m"]
+
+    evx = [Event() for _ in range(3)]
+    evy = Event()
+
+    async with BlockedGatherDep(s.address, nthreads=1) as b:
+        xs = [
+            c.submit(lambda ev: ev.wait(), evx[0], key="x-0", workers=[a.address]),
+            c.submit(lambda ev: ev.wait(), evx[1], key="x-1", workers=[a.address]),
+            c.submit(lambda ev: ev.wait(), evx[2], key="x-2", workers=[b.address]),
+        ]
+        ys = [
+            c.submit(lambda x, ev: ev.wait(), xs[0], evy, key="y-0"),
+            c.submit(lambda x, ev: ev.wait(), xs[0], evy, key="y-1"),
+            c.submit(lambda x, ev: ev.wait(), xs[1], evy, key="y-2"),
+            c.submit(lambda x, ev: ev.wait(), xs[2], evy, key="y-3"),
+            c.submit(lambda x, ev: ev.wait(), xs[2], evy, key="y-4"),
+            c.submit(lambda x, ev: ev.wait(), xs[2], evy, key="y-5"),
+        ]
+
+        while a.state.executing_count != 1 or b.state.executing_count != 1:
+            await asyncio.sleep(0.01)
+
+        # - y-2 has no restrictions
+        # - TaskGroup(y) has more than 4 tasks (total_nthreads * 2)
+        # - TaskGroup(y) has less than 5 dependency groups
+        # - TaskGroup(y) has less than 5 dependency tasks
+        assert s.is_rootish(s.tasks["y-2"])
+
+        await evx[0].set()
+        await wait_for_state("y-0", "processing", s)
+        await wait_for_state("y-1", "processing", s)
+        assert s.tasks["y-2"].group.last_worker == s.workers[a.address]
+        assert s.tasks["y-2"].group.last_worker_tasks_left == 1
+
+        # Take a out of the running pool, but without removing it from the cluster
+        # completely
+        retire_task = asyncio.create_task(c.retire_workers([a.address]))
+        # Wait until AMM sends AcquireReplicasEvent to b to move away m
+        await b.in_gather_dep.wait()
+        assert s.workers[a.address].status == Status.closing_gracefully
+
+        # Transition y-2 to processing. Normally, it would be scheduled on a, but it's
+        # not a running worker, so we must choose b
+        await evx[1].set()
+        await wait_for_state("y-2", "processing", s)
+        await wait_for_state("y-2", "waiting", b)  # x-1 is in memory on a
+
+        # Cleanup
+        b.block_gather_dep.set()
+        await evx[2].set()
+        await evy.set()
+        await retire_task
+        await wait(xs + ys)
+
+
 @pytest.mark.slow
 @gen_cluster(
     nthreads=[("", 2)] * 4,