diff --git a/src/dvc_data/hashfile/transfer.py b/src/dvc_data/hashfile/transfer.py
index 80f2facc..01c99e34 100644
--- a/src/dvc_data/hashfile/transfer.py
+++ b/src/dvc_data/hashfile/transfer.py
@@ -90,7 +90,8 @@ def _do_transfer(  # noqa: C901
 
         logger.debug("transfer dir: %s with %d files", dir_hash, len(bound_file_ids))
 
-        dir_fails = _add(src, dest, bound_file_ids, **kwargs)
+        dir_fails = entry_ids & failed_ids
+        dir_fails.update(_add(src, dest, bound_file_ids, **kwargs))
         if dir_fails:
             logger.debug(
                 "failed to upload full contents of '%s', aborting .dir file upload",
diff --git a/tests/hashfile/test_transfer.py b/tests/hashfile/test_transfer.py
new file mode 100644
index 00000000..d5b48375
--- /dev/null
+++ b/tests/hashfile/test_transfer.py
@@ -0,0 +1,61 @@
+import pytest
+from dvc_objects.fs.local import LocalFileSystem
+
+from dvc_data.hashfile.db import HashFileDB, add_update_tree
+from dvc_data.hashfile.db.local import LocalHashFileDB
+from dvc_data.hashfile.hash_info import HashInfo
+from dvc_data.hashfile.transfer import TransferResult, transfer
+from dvc_data.hashfile.tree import Tree
+
+
+@pytest.mark.parametrize("odb_cls", [HashFileDB, LocalHashFileDB])
+@pytest.mark.parametrize("fail_shared", [True, False])
+def test_transfer_shared_file(tmp_path, odb_cls, fail_shared):
+    fs = LocalFileSystem(jobs=1)
+    src = odb_cls(fs, str(tmp_path / "src"))
+    dest = odb_cls(fs, str(tmp_path / "dest"))
+    shared = HashInfo("md5", "acbd18db4cc2f85cedef654fccc4a4d8")
+    other = HashInfo("md5", "37b51d194a7513e45b56f6524f2d51f2")
+    src.add_bytes(shared.value, b"foo")
+    src.add_bytes(other.value, b"bar")
+
+    trees = []
+    for name, hash_info in [("first", shared), ("second", shared), ("other", other)]:
+        tree = Tree.from_list([{"md5": hash_info.value, "relpath": name}])
+        tree.digest()
+        trees.append(add_update_tree(src, tree))
+    shared_dirs = {tree.hash_info for tree in trees[:2]}
+    independent_dir = trees[2].hash_info
+    objects = shared_dirs | {shared, other, independent_dir}
+
+    def validate_status(status):
+        assert status.new == objects
+        if fail_shared:
+            # Model a source file disappearing after the initial status check.
+            src.delete(shared.value)
+
+    result = transfer(
+        src,
+        dest,
+        objects,
+        jobs=1,
+        validate_status=validate_status,
+    )
+
+    assert dest.exists(independent_dir.value)
+    assert dest.fs.cat(dest.oid_to_path(other.value)) == b"bar"
+    if fail_shared:
+        assert not dest.exists(shared.value)
+        assert all(not dest.exists(hi.value) for hi in shared_dirs)
+        assert result == TransferResult(
+            {other, independent_dir}, {shared, *shared_dirs}
+        )
+
+        # A later retry must be able to restore both incomplete directories.
+        src.add_bytes(shared.value, b"foo")
+        result = transfer(src, dest, objects, jobs=1)
+        assert result == TransferResult({shared, *shared_dirs}, set())
+    else:
+        assert result == TransferResult(objects, set())
+    assert all(dest.exists(hi.value) for hi in objects)
+    assert dest.fs.cat(dest.oid_to_path(shared.value)) == b"foo"