Workers at a morgue in Shanghai opened a body bag to find the man inside was still alive.
Video that has sparked outrage in China after being circulated online shows two members of staff in full protective suits carrying a yellow body bag out of a hearse.
The workers are then heard exclaiming in shock as the bag is opened to reveal the resident from the Xinchangzheng Nursing Home was not in fact dead.
"Alive! Did you see that? Alive!" one of the workers is heard saying.
"Do not cover him again!" says another.
The man was promptly returned to the nursing home following the discovery on Sunday.
The incident was recorded by an onlooker who can be heard saying: "The nursing home is such a mess.
"They sent a living person on a hearse and said they were dead. The undertaker staff said they were still moving ... It is irresponsible, really irresponsible."
The man's identity has not been released.
A Shanghai district government confirmed the incident and said five officials had been punished and the licence of a doctor revoked.
The government of Putuo district, where the nursing home is located, said in a statement that the person in the video had since been receiving treatment in hospital and had stable vital signs.
The incident triggered anger on Chinese social media, with people questioning the reliability of the social welfare system during the prolonged lockdown.
The city of 26 million people has faced harsh lockdown measures as part of China's strict zero-COVID policy, which banned people from leaving their homes and relying on the government to deliver food.
Other measures which were introduced include fences of up to two metres high which were erected around housing blocks.
Authorities in Shanghai are slowly beginning to ease lockdown restrictions that were imposed on the entire city at the beginning of April.
As many as 12.38 million Shanghai residents, nearly half the population of China's financial hub, are now in lower-risk areas, meaning they can leave their homes, the government said on Friday.
The city reported 32 new COVID deaths on Sunday, down from 38 a day earlier, the local government said on Monday.
A total of 6,606 new local asymptomatic coronavirus cases were recorded in Shanghai on Sunday, versus 7,084 the previous day, the authority said.