diff --git a/pageserver/src/tenant/mgr.rs b/pageserver/src/tenant/mgr.rs
index b0f4d2ae78..4eace11aeb 100644
--- a/pageserver/src/tenant/mgr.rs
+++ b/pageserver/src/tenant/mgr.rs
@@ -296,14 +296,17 @@ pub async fn create_tenant(
         let created_tenant =
             schedule_local_tenant_processing(conf, &tenant_directory, remote_storage, ctx)?;
 
+        // As we already removed the directory, the tenant should directly go into the broken state.
+        let destroy = || created_tenant.set_broken("failed to create".into());
+
         fail::fail_point!("tenant-create-fail", |_| {
-            created_tenant.set_stopping(); // add this to all possible error paths
+            destroy(); // add this to all fail paths
             anyhow::bail!("tenant-create-fail");
         });
 
         let crated_tenant_id = created_tenant.tenant_id();
         if tenant_id != crated_tenant_id {
-            created_tenant.set_stopping();
+            destroy(); // add this to all fail paths
             anyhow::bail!("loaded created tenant has unexpected tenant id (expect {tenant_id} != actual {crated_tenant_id})");    
         }
 
diff --git a/test_runner/fixtures/pageserver/http.py b/test_runner/fixtures/pageserver/http.py
index 1ff057fae2..7150b8179b 100644
--- a/test_runner/fixtures/pageserver/http.py
+++ b/test_runner/fixtures/pageserver/http.py
@@ -159,6 +159,8 @@ class PageserverHttpClient(requests.Session):
         self.verbose_error(res)
         if res.status_code == 409:
             raise Exception(f"could not create tenant: already exists for id {new_tenant_id}")
+        if not res.ok:
+            raise Exception(f"could not create tenant: {res.text}")
         new_tenant_id = res.json()
         assert isinstance(new_tenant_id, str)
         return TenantId(new_tenant_id)
diff --git a/test_runner/regress/test_tenants.py b/test_runner/regress/test_tenants.py
index bb33bf8c04..e10f40a688 100644
--- a/test_runner/regress/test_tenants.py
+++ b/test_runner/regress/test_tenants.py
@@ -413,18 +413,24 @@ def test_pageserver_create_tenants_fail(
     env = neon_env_builder.init_start()
 
     env.pageserver.allowed_errors.append(
-        ".*marking .* as locally complete, while it doesnt exist in remote index.*"
+        ".*tenant-create-fail.*"
     )
     env.pageserver.allowed_errors.append(
-        ".*could not load tenant.*Failed to list timelines directory.*"
+        ".*Tenant is already in Broken state.*"
+    )
+    env.pageserver.allowed_errors.append(
+        ".*could not load tenant.*"
     )
 
-    pageserver_http = env.pageserver.http_client()
-    pageserver_http.configure_failpoints(("tenant-create-fail", "return"))
 
     client = env.pageserver.http_client()
+    client.configure_failpoints(("tenant-create-fail", "return"))
+    tenant_id = "deadbeefdeadbeefdeadbeefdeadbeef"
+    try:
+        client.tenant_create(tenant_id)
+    except Exception as e:
+        exception_string = str(e)
+        assert "tenant-create-fail" in exception_string, "should reach failpoint"
 
-    dir = client.tenant_create()
-
-    path = Path(env.repo_dir) / "tenants" / str(dir)
+    path = Path(env.repo_dir) / "tenants" / tenant_id
     assert not path.exists()