diff --git a/include/pybind11/detail/init.h b/include/pybind11/detail/init.h
index a28680e2..c0ad7d05 100644
--- a/include/pybind11/detail/init.h
+++ b/include/pybind11/detail/init.h
@@ -39,6 +39,9 @@ PYBIND11_NAMESPACE_BEGIN(initimpl)
 
 inline void no_nullptr(void *ptr) {
     if (!ptr) {
+        if (PyErr_Occurred()) {
+            throw error_already_set();
+        }
         throw type_error("pybind11::init(): factory function returned nullptr");
     }
 }
diff --git a/tests/test_factory_constructors.cpp b/tests/test_factory_constructors.cpp
index aefe52a8..9fa0bd52 100644
--- a/tests/test_factory_constructors.cpp
+++ b/tests/test_factory_constructors.cpp
@@ -419,6 +419,16 @@ TEST_SUBMODULE(factory_constructors, m) {
             "__init__", [](NoisyAlloc &a, int i, const std::string &) { new (&a) NoisyAlloc(i); });
     });
 
+    struct FactoryErrorAlreadySet {};
+    py::class_<FactoryErrorAlreadySet>(m, "FactoryErrorAlreadySet")
+        .def(py::init([](bool set_error) -> FactoryErrorAlreadySet * {
+            if (!set_error) {
+                return new FactoryErrorAlreadySet();
+            }
+            py::set_error(PyExc_ValueError, "factory sets error and returns nullptr");
+            return nullptr;
+        }));
+
     // static_assert testing (the following def's should all fail with appropriate compilation
     // errors):
 #if 0
diff --git a/tests/test_factory_constructors.py b/tests/test_factory_constructors.py
index ca084d64..f59d6cf2 100644
--- a/tests/test_factory_constructors.py
+++ b/tests/test_factory_constructors.py
@@ -515,3 +515,10 @@ def __init__(self, bad):
             str(excinfo.value)
             == "__init__(self, ...) called with invalid or missing `self` argument"
         )
+
+
+def test_factory_error_already_set():
+    obj = m.FactoryErrorAlreadySet(False)
+    assert isinstance(obj, m.FactoryErrorAlreadySet)
+    with pytest.raises(ValueError, match="factory sets error and returns nullptr"):
+        m.FactoryErrorAlreadySet(True)