diff --git a/homeassistant/components/threshold/__init__.py b/homeassistant/components/threshold/__init__.py
index 2ca1410a890..fb9e7145951 100644
--- a/homeassistant/components/threshold/__init__.py
+++ b/homeassistant/components/threshold/__init__.py
@@ -3,6 +3,7 @@
 from homeassistant.config_entries import ConfigEntry
 from homeassistant.const import Platform
 from homeassistant.core import HomeAssistant
+from homeassistant.helpers import device_registry as dr
 
 
 async def async_setup_entry(hass: HomeAssistant, entry: ConfigEntry) -> bool:
@@ -18,6 +19,17 @@ async def async_setup_entry(hass: HomeAssistant, entry: ConfigEntry) -> bool:
 
 async def config_entry_update_listener(hass: HomeAssistant, entry: ConfigEntry) -> None:
     """Update listener, called when the config entry options are changed."""
+
+    # Remove device link for entry, the source device may have changed.
+    # The link will be recreated after load.
+    device_registry = dr.async_get(hass)
+    devices = device_registry.devices.get_devices_for_config_entry_id(entry.entry_id)
+
+    for device in devices:
+        device_registry.async_update_device(
+            device.id, remove_config_entry_id=entry.entry_id
+        )
+
     await hass.config_entries.async_reload(entry.entry_id)
 
 
diff --git a/homeassistant/components/threshold/config_flow.py b/homeassistant/components/threshold/config_flow.py
index a8e330cab38..08a4a18fca7 100644
--- a/homeassistant/components/threshold/config_flow.py
+++ b/homeassistant/components/threshold/config_flow.py
@@ -48,15 +48,15 @@ OPTIONS_SCHEMA = vol.Schema(
                 mode=selector.NumberSelectorMode.BOX, step="any"
             ),
         ),
+        vol.Required(CONF_ENTITY_ID): selector.EntitySelector(
+            selector.EntitySelectorConfig(domain=SENSOR_DOMAIN)
+        ),
     }
 )
 
 CONFIG_SCHEMA = vol.Schema(
     {
         vol.Required(CONF_NAME): selector.TextSelector(),
-        vol.Required(CONF_ENTITY_ID): selector.EntitySelector(
-            selector.EntitySelectorConfig(domain=SENSOR_DOMAIN)
-        ),
     }
 ).extend(OPTIONS_SCHEMA.schema)
 
diff --git a/tests/components/threshold/test_config_flow.py b/tests/components/threshold/test_config_flow.py
index 88c970d5c2c..ddf870b7a0a 100644
--- a/tests/components/threshold/test_config_flow.py
+++ b/tests/components/threshold/test_config_flow.py
@@ -129,6 +129,7 @@ async def test_options(hass: HomeAssistant) -> None:
     result = await hass.config_entries.options.async_configure(
         result["flow_id"],
         user_input={
+            "entity_id": input_sensor,
             "hysteresis": 0.0,
             "upper": 20.0,
         },
diff --git a/tests/components/threshold/test_init.py b/tests/components/threshold/test_init.py
index 02726d5a121..d1fda706911 100644
--- a/tests/components/threshold/test_init.py
+++ b/tests/components/threshold/test_init.py
@@ -4,7 +4,7 @@ import pytest
 
 from homeassistant.components.threshold.const import DOMAIN
 from homeassistant.core import HomeAssistant
-from homeassistant.helpers import entity_registry as er
+from homeassistant.helpers import device_registry as dr, entity_registry as er
 
 from tests.common import MockConfigEntry
 
@@ -44,6 +44,7 @@ async def test_setup_and_remove_config_entry(
 
     # Check the platform is setup correctly
     state = hass.states.get(threshold_entity_id)
+    assert state
     assert state.state == "on"
     assert state.attributes["entity_id"] == input_sensor
     assert state.attributes["hysteresis"] == 0.0
@@ -60,3 +61,64 @@ async def test_setup_and_remove_config_entry(
     # Check the state and entity registry entry are removed
     assert hass.states.get(threshold_entity_id) is None
     assert entity_registry.async_get(threshold_entity_id) is None
+
+
+@pytest.mark.parametrize("platform", ["sensor"])
+async def test_entry_changed(hass: HomeAssistant, platform) -> None:
+    """Test reconfiguring."""
+
+    device_registry = dr.async_get(hass)
+    entity_registry = er.async_get(hass)
+
+    def _create_mock_entity(domain: str, name: str) -> er.RegistryEntry:
+        config_entry = MockConfigEntry(
+            data={},
+            domain="test",
+            title=f"{name}",
+        )
+        config_entry.add_to_hass(hass)
+        device_entry = device_registry.async_get_or_create(
+            identifiers={("test", name)}, config_entry_id=config_entry.entry_id
+        )
+        return entity_registry.async_get_or_create(
+            domain, "test", name, suggested_object_id=name, device_id=device_entry.id
+        )
+
+    def _get_device_config_entries(entry: er.RegistryEntry) -> set[str]:
+        assert entry.device_id
+        device = device_registry.async_get(entry.device_id)
+        assert device
+        return device.config_entries
+
+    # Set up entities, with backing devices and config entries
+    run1_entry = _create_mock_entity("sensor", "initial")
+    run2_entry = _create_mock_entity("sensor", "changed")
+
+    # Setup the config entry
+    config_entry = MockConfigEntry(
+        data={},
+        domain=DOMAIN,
+        options={
+            "entity_id": "sensor.initial",
+            "hysteresis": 0.0,
+            "lower": -2.0,
+            "name": "My threshold",
+            "upper": None,
+        },
+        title="My integration",
+    )
+    config_entry.add_to_hass(hass)
+    assert await hass.config_entries.async_setup(config_entry.entry_id)
+    await hass.async_block_till_done()
+
+    assert config_entry.entry_id in _get_device_config_entries(run1_entry)
+    assert config_entry.entry_id not in _get_device_config_entries(run2_entry)
+
+    hass.config_entries.async_update_entry(
+        config_entry, options={**config_entry.options, "entity_id": "sensor.changed"}
+    )
+    await hass.async_block_till_done()
+
+    # Check that the config entry association has updated
+    assert config_entry.entry_id not in _get_device_config_entries(run1_entry)
+    assert config_entry.entry_id in _get_device_config_entries(run2_entry)