diff --git a/.changes/unreleased/Fixed-20240729-210429.yaml b/.changes/unreleased/Fixed-20240729-210429.yaml
new file mode 100644
index 00000000..177c75df
--- /dev/null
+++ b/.changes/unreleased/Fixed-20240729-210429.yaml
@@ -0,0 +1,3 @@
+kind: Fixed
+body: 'branch create: Don''t lose data if the branch cannot be created for any reason.'
+time: 2024-07-29T21:04:29.049874-07:00
diff --git a/branch_create.go b/branch_create.go
index cdcf4a15..cc3a05b3 100644
--- a/branch_create.go
+++ b/branch_create.go
@@ -145,12 +145,39 @@ func (cmd *branchCreateCmd) Run(ctx context.Context, log *log.Logger, opts *glob
 	if err := repo.DetachHead(ctx, baseName); err != nil {
 		return fmt.Errorf("detach head: %w", err)
 	}
-	// From this point on, if there's an error,
-	// restore the original branch.
+
+	// From this point on, to prevent data loss,
+	// we'll revert to original branch while keeping the changes
+	// if we failed to successfully create the new branch.
+	//
+	// The condition for this is not whether an error is returned,
+	// and whether the new branch was successfully created.
+	var (
+		branchCreated bool     // whether the new branch was created
+		commitHash    git.Hash // hash of the commit (if created)
+	)
 	defer func() {
-		if err != nil {
-			err = errors.Join(err, repo.Checkout(ctx, cmd.Target))
+		if branchCreated {
+			return
+		}
+
+		log.Warn("Unable to create branch. Rolling back.",
+			"branch", cmd.Target)
+
+		// Move HEAD to the state just before the commit
+		// while leaving the index and working tree as-is.
+		resetErr := repo.Reset(ctx, commitHash.String()+"^", git.ResetOptions{
+			Mode:  git.ResetSoft,
+			Quiet: true,
+		})
+		if resetErr != nil {
+			log.Warn("Could not reset to parent commit.",
+				"commit", commitHash,
+				"error", resetErr)
 		}
+
+		err = errors.Join(err,
+			repo.Checkout(ctx, cmd.Target))
 	}()
 
 	if err := repo.Commit(ctx, git.CommitRequest{
@@ -161,6 +188,11 @@ func (cmd *branchCreateCmd) Run(ctx context.Context, log *log.Logger, opts *glob
 		return fmt.Errorf("commit: %w", err)
 	}
 
+	commitHash, err = repo.Head(ctx)
+	if err != nil {
+		return fmt.Errorf("get commit hash: %w", err)
+	}
+
 	if cmd.Name == "" {
 		// Branch name was not specified.
 		// Generate one from the commit message.
@@ -190,6 +222,7 @@ func (cmd *branchCreateCmd) Run(ctx context.Context, log *log.Logger, opts *glob
 		return fmt.Errorf("create branch: %w", err)
 	}
 
+	branchCreated = true
 	if err := repo.Checkout(ctx, cmd.Name); err != nil {
 		return fmt.Errorf("checkout branch: %w", err)
 	}
diff --git a/testdata/script/issue307_branch_create_cannot_create.txt b/testdata/script/issue307_branch_create_cannot_create.txt
new file mode 100644
index 00000000..5955fcdb
--- /dev/null
+++ b/testdata/script/issue307_branch_create_cannot_create.txt
@@ -0,0 +1,34 @@
+# 'branch create' does not lose files if a branch cannot be created.
+# https://github.com/abhinav/git-spice/issues/307
+
+as 'Test <test@example.com>'
+at '2024-03-30T14:59:32Z'
+
+cd repo
+git init
+git commit --allow-empty -m 'Initial commit'
+gs repo init
+
+git checkout -b feature
+git add feature1.txt
+git commit -m 'Add feature1'
+
+git checkout main
+git add feature2.txt
+
+# will be unable to create the branch because
+# 'feature' is a file so a directory cannot be created there.
+! gs branch create feature/2 -m 'Add feature2'
+
+# should not lose the file.
+exists feature2.txt
+
+git status --porcelain
+cmp stdout $WORK/golden/status.txt
+
+-- repo/feature1.txt --
+feature 1
+-- repo/feature2.txt --
+feature 2
+-- golden/status.txt --
+A  feature2.txt