diff --git a/zerver/lib/events.py b/zerver/lib/events.py
index 7ee60af21b..9a5ba58a0a 100644
--- a/zerver/lib/events.py
+++ b/zerver/lib/events.py
@@ -727,7 +727,7 @@ def apply_event(state: Dict[str, Any],
         elif event['op'] == 'peer_remove':
             stream_ids = set(event["stream_ids"])
             user_ids = set(event["user_ids"])
-            for sub_dict in [state["subscriptions"]]:
+            for sub_dict in [state["subscriptions"], state['unsubscribed']]:
                 for sub in sub_dict:
                     if sub["stream_id"] in stream_ids:
                         subscribers = set(sub["subscribers"]) - user_ids
diff --git a/zerver/tests/test_events.py b/zerver/tests/test_events.py
index 7901605992..ea48b9fcbe 100644
--- a/zerver/tests/test_events.py
+++ b/zerver/tests/test_events.py
@@ -1844,7 +1844,8 @@ class SubscribeActionTest(BaseAction):
 
         stream = get_stream("test_stream", self.user_profile.realm)
 
-        # Now remove the first user, to test the normal unsubscribe flow
+        # Now remove the first user, to test the normal unsubscribe flow and
+        # 'peer_remove' event for subscribed streams.
         action = lambda: bulk_remove_subscriptions(
             [self.example_user('othello')],
             [stream],
@@ -1872,6 +1873,19 @@ class SubscribeActionTest(BaseAction):
             'test_stream',
         )
 
+        self.subscribe(self.example_user("iago"), "test_stream")
+
+        # Remove the user to test 'peer_remove' event flow for unsubscribed stream.
+        action = lambda: bulk_remove_subscriptions(
+            [self.example_user('iago')],
+            [stream],
+            get_client("website"))
+        events = self.verify_action(
+            action,
+            include_subscribers=include_subscribers,
+            state_change_expected=include_subscribers)
+        check_subscription_peer_remove('events[0]', events[0])
+
         # Now resubscribe a user, to make sure that works on a vacated stream
         action = lambda: self.subscribe(self.example_user("hamlet"), "test_stream")
         events = self.verify_action(