diff --git a/kotlinx-coroutines-core/common/src/flow/operators/Share.kt b/kotlinx-coroutines-core/common/src/flow/operators/Share.kt
index 4dd89ee4bf..6351d4a89b 100644
--- a/kotlinx-coroutines-core/common/src/flow/operators/Share.kt
+++ b/kotlinx-coroutines-core/common/src/flow/operators/Share.kt
@@ -330,13 +330,20 @@ private fun <T> CoroutineScope.launchSharingDeferred(
     result: CompletableDeferred<StateFlow<T>>
 ) {
     launch(context) {
-        var state: MutableStateFlow<T>? = null
-        upstream.collect { value ->
-            state?.let { it.value = value } ?: run {
-                state = MutableStateFlow(value).also {
-                    result.complete(it.asStateFlow())
+        try {
+            var state: MutableStateFlow<T>? = null
+            upstream.collect { value ->
+                state?.let { it.value = value } ?: run {
+                    state = MutableStateFlow(value).also {
+                        result.complete(it.asStateFlow())
+                    }
                 }
             }
+        } catch (e: Throwable) {
+            // Notify the waiter that the flow has failed
+            result.completeExceptionally(e)
+            // But still cancel the scope where state was (not) produced
+            throw e
         }
     }
 }
diff --git a/kotlinx-coroutines-core/common/test/flow/sharing/StateInTest.kt b/kotlinx-coroutines-core/common/test/flow/sharing/StateInTest.kt
index 2a613afaf7..c90626deb8 100644
--- a/kotlinx-coroutines-core/common/test/flow/sharing/StateInTest.kt
+++ b/kotlinx-coroutines-core/common/test/flow/sharing/StateInTest.kt
@@ -30,21 +30,21 @@ class StateInTest : TestBase() {
 
     @Test
     fun testUpstreamCompletedNoInitialValue() =
-        testUpstreamCompletedOrFailedReset(failed = false, iv = false)
+        testUpstreamCompletedOrFailedReset(failed = false, withInitialValue = false)
 
     @Test
     fun testUpstreamFailedNoInitialValue() =
-        testUpstreamCompletedOrFailedReset(failed = true, iv = false)
+        testUpstreamCompletedOrFailedReset(failed = true, withInitialValue = false)
 
     @Test
     fun testUpstreamCompletedWithInitialValue() =
-        testUpstreamCompletedOrFailedReset(failed = false, iv = true)
+        testUpstreamCompletedOrFailedReset(failed = false, withInitialValue = true)
 
     @Test
     fun testUpstreamFailedWithInitialValue() =
-        testUpstreamCompletedOrFailedReset(failed = true, iv = true)
+        testUpstreamCompletedOrFailedReset(failed = true, withInitialValue = true)
 
-    private fun testUpstreamCompletedOrFailedReset(failed: Boolean, iv: Boolean) = runTest {
+    private fun testUpstreamCompletedOrFailedReset(failed: Boolean, withInitialValue: Boolean) = runTest {
         val emitted = Job()
         val terminate = Job()
         val sharingJob = CompletableDeferred<Unit>()
@@ -56,7 +56,7 @@ class StateInTest : TestBase() {
         }
         val scope = this + sharingJob
         val shared: StateFlow<String?>
-        if (iv) {
+        if (withInitialValue) {
             shared = upstream.stateIn(scope, SharingStarted.Eagerly, null)
             assertEquals(null, shared.value)
         } else {
@@ -75,4 +75,15 @@ class StateInTest : TestBase() {
             assertNull(sharingJob.getCompletionExceptionOrNull())
         }
     }
-}
\ No newline at end of file
+
+    @Test
+    fun testUpstreamFailedIMmediatelyWithInitialValue() = runTest {
+        val ceh = CoroutineExceptionHandler { _, _ -> expect(2) }
+        val flow = flow<Int> {
+            expect(1)
+            throw TestException()
+        }
+        assertFailsWith<TestException> { flow.stateIn(CoroutineScope(ceh)) }
+        finish(3)
+    }
+}