diff --git a/pandas/tests/groupby/test_categorical.py b/pandas/tests/groupby/test_categorical.py
index 60c82bf1fb71c..4de61f719dfbb 100644
--- a/pandas/tests/groupby/test_categorical.py
+++ b/pandas/tests/groupby/test_categorical.py
@@ -1509,3 +1509,53 @@ def test_aggregate_categorical_with_isnan():
         index=index,
     )
     tm.assert_frame_equal(result, expected)
+
+
+def test_categorical_transform():
+    # GH 29037
+    df = pd.DataFrame(
+        {
+            "package_id": [1, 1, 1, 2, 2, 3],
+            "status": [
+                "Waiting",
+                "OnTheWay",
+                "Delivered",
+                "Waiting",
+                "OnTheWay",
+                "Waiting",
+            ],
+        }
+    )
+
+    delivery_status_type = pd.CategoricalDtype(
+        categories=["Waiting", "OnTheWay", "Delivered"], ordered=True
+    )
+    df["status"] = df["status"].astype(delivery_status_type)
+    df["last_status"] = df.groupby("package_id")["status"].transform(max)
+    result = df.copy()
+
+    expected = pd.DataFrame(
+        {
+            "package_id": [1, 1, 1, 2, 2, 3],
+            "status": [
+                "Waiting",
+                "OnTheWay",
+                "Delivered",
+                "Waiting",
+                "OnTheWay",
+                "Waiting",
+            ],
+            "last_status": [
+                "Delivered",
+                "Delivered",
+                "Delivered",
+                "OnTheWay",
+                "OnTheWay",
+                "Waiting",
+            ],
+        }
+    )
+
+    expected["status"] = expected["status"].astype(delivery_status_type)
+
+    tm.assert_frame_equal(result, expected)