diff --git a/platform/platform-tests/testSrc/com/intellij/util/concurrency/ThreadContextPropagationTest.kt b/platform/platform-tests/testSrc/com/intellij/util/concurrency/ThreadContextPropagationTest.kt
index 8440fce56524..746715aecb86 100644
--- a/platform/platform-tests/testSrc/com/intellij/util/concurrency/ThreadContextPropagationTest.kt
+++ b/platform/platform-tests/testSrc/com/intellij/util/concurrency/ThreadContextPropagationTest.kt
@@ -371,4 +371,50 @@ class ThreadContextPropagationTest {
     delay(100)
     Assertions.assertTrue(tracker.get())
   }
+
+
+  class MyFaultyIjElement1(val e: Throwable) : IntelliJContextElement, AbstractCoroutineContextElement(MyFaultyIjElement1) {
+    companion object Key : CoroutineContext.Key<MyFaultyIjElement1>
+
+    override fun produceChildElement(parentContext: CoroutineContext, isStructured: Boolean): IntelliJContextElement? = throw e
+  }
+
+  @Test
+  fun `faulty produceChildElement`() = timeoutRunBlocking {
+    val tracker = AtomicBoolean(false)
+    val ise = IllegalStateException("Boom")
+    withContext(MyCancellableIjElement(tracker) + MyFaultyIjElement1(ise)) {
+      val exception = Assertions.assertThrows(IllegalStateException::class.java) {
+        application.executeOnPooledThread { Assertions.fail() }
+      }
+      Assertions.assertEquals(ise, exception)
+      Assertions.assertTrue(tracker.get())
+    }
+  }
+
+  class MyFaultyIjElement2(val e: Throwable) : IntelliJContextElement, AbstractCoroutineContextElement(MyFaultyIjElement2) {
+    companion object Key : CoroutineContext.Key<MyFaultyIjElement2>
+
+    override fun produceChildElement(parentContext: CoroutineContext, isStructured: Boolean): IntelliJContextElement? = this
+    override fun beforeChildStarted(context: CoroutineContext) = throw e
+  }
+
+  @Test
+  fun `faulty beforeChildStarted`() = timeoutRunBlocking {
+    val tracker = AtomicBoolean(false)
+    val ise = Exception("Boom")
+    val rootJob = Job()
+    try {
+      withContext(MyIjElement(tracker) + MyFaultyIjElement2(ise) + rootJob) {
+        val exception = Assertions.assertThrows(RuntimeException::class.java) {
+          application.invokeAndWait { Assertions.fail() }
+        }
+        Assertions.assertEquals(ise, exception.cause)
+        Assertions.assertTrue(tracker.get())
+      }
+    }
+    catch (e: Throwable) {
+      Assertions.assertEquals(ise.message, e.message)
+    }
+  }
 }
diff --git a/platform/util/src/com/intellij/util/concurrency/propagation.kt b/platform/util/src/com/intellij/util/concurrency/propagation.kt
index 6215b9fbcd17..0f86663d134b 100644
--- a/platform/util/src/com/intellij/util/concurrency/propagation.kt
+++ b/platform/util/src/com/intellij/util/concurrency/propagation.kt
@@ -19,6 +19,7 @@ import com.intellij.openapi.util.Ref
 import com.intellij.util.SmartList
 import com.intellij.util.SystemProperties
 import com.intellij.util.concurrency.SchedulingWrapper.MyScheduledFutureTask
+import com.intellij.util.containers.forEachGuaranteed
 import kotlinx.coroutines.*
 import org.jetbrains.annotations.ApiStatus
 import org.jetbrains.annotations.ApiStatus.Internal
@@ -115,15 +116,24 @@ data class ChildContext internal constructor(
 
   @DelicateCoroutinesApi
   fun applyContextActions(installThreadContext: Boolean = true): AccessToken {
+    val alreadyAppliedElements = mutableListOf<IntelliJContextElement>()
+    try {
+      for (elem in ijElements) {
+        elem.beforeChildStarted(context)
+        alreadyAppliedElements.add(elem)
+      }
+    }
+    catch (e: Throwable) {
+      cleanupList(e, alreadyAppliedElements.reversed()) {
+        it.afterChildCompleted(context)
+      }
+    }
     val installToken = if (installThreadContext) {
       installThreadContext(context, replace = false)
     }
     else {
       AccessToken.EMPTY_ACCESS_TOKEN
     }
-    for (elem in ijElements) {
-      elem.beforeChildStarted(context)
-    }
     return object : AccessToken() {
       override fun finish() {
         installToken.finish()
@@ -190,10 +200,27 @@ private fun doCreateChildContext(debugName: @NonNls String, unconditionalCancell
 
 private fun gatherAppliedChildContext(parentContext: CoroutineContext, isStructured: Boolean): Pair<CoroutineContext, List<IntelliJContextElement>> {
   val ijElements = SmartList<IntelliJContextElement>()
-  val newContext = parentContext.fold<CoroutineContext>(EmptyCoroutineContext) { old, elem ->
-    old + produceChildContextElement(parentContext, elem, isStructured, ijElements)
+  try {
+    val newContext = parentContext.fold<CoroutineContext>(EmptyCoroutineContext) { old, elem ->
+      old + produceChildContextElement(parentContext, elem, isStructured, ijElements)
+    }
+    return Pair(newContext, ijElements)
   }
-  return Pair(newContext, ijElements)
+  catch (e: Throwable) {
+    cleanupList(e, ijElements.reversed()) {
+      it.childCanceled(parentContext)
+    }
+  }
+}
+
+private fun <T> cleanupList(original: Throwable, list: List<T>, action: (T) -> Unit): Nothing {
+  try {
+    list.forEachGuaranteed(action)
+  }
+  catch (e: Throwable) {
+    original.addSuppressed(e)
+  }
+  throw original
 }
 
 private fun produceChildContextElement(parentContext: CoroutineContext, element: CoroutineContext.Element, isStructured: Boolean, ijElements: MutableList<IntelliJContextElement>): CoroutineContext {
@@ -239,7 +266,7 @@ internal fun captureRunnableThreadContext(command: Runnable): Runnable {
 internal fun <V> captureCallableThreadContext(callable: Callable<V>): Callable<V> {
   val childContext = createChildContext(callable.toString())
   var callable = captureClientIdInCallable(callable)
-  callable = ContextCallable(true, childContext, callable)
+  callable = ContextCallable(true, childContext, callable, AtomicBoolean(false))
   return callable
 }