diff --git a/CHANGELOG.md b/CHANGELOG.md
index c5aeb79e..baba7c6c 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -7,6 +7,13 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 
 ## Unreleased
 
+### Changed
+
+- Post factories that are passed a term slug to `with_terms()` will create the
+	term if it doesn't exist by default. This can be disabled by calling the
+	`create_terms()` method on the factory or replacing the with terms method call
+	with `with_terms_only_existing()`.
+
 ### Fixed
 
 - Ensure that the `delete()` method of the HTTP Client doesn't set a body by default.
diff --git a/src/mantle/database/factory/class-post-factory.php b/src/mantle/database/factory/class-post-factory.php
index 072b89c8..0c700f2c 100644
--- a/src/mantle/database/factory/class-post-factory.php
+++ b/src/mantle/database/factory/class-post-factory.php
@@ -36,6 +36,11 @@ class Post_Factory extends Factory {
 	 */
 	protected string $model = Post::class;
 
+	/**
+	 * Flag to create terms by default.
+	 */
+	protected bool $create_terms = true;
+
 	/**
 	 * Constructor.
 	 *
@@ -46,9 +51,21 @@ public function __construct( Generator $faker, public string $post_type = 'post'
 		parent::__construct( $faker );
 	}
 
+	/**
+	 * Change the default creation of terms with the post factory.
+	 *
+	 * @param bool $value Value to set.
+	 */
+	public function create_terms( bool $value = true ): void {
+		$this->create_terms = $value;
+	}
+
 	/**
 	 * Create a new factory instance to create posts with a set of terms.
 	 *
+	 * Any slugs passed that are not found will be created. If you want to
+	 * only use existing terms, use `with_terms_only_existing()`.
+	 *
 	 * @param array<int|string, \WP_Term|int|string|array<string, mixed>>|\WP_Term|int|string ...$terms Terms to assign to the post.
 	 */
 	public function with_terms( ...$terms ): static {
@@ -60,7 +77,26 @@ public function with_terms( ...$terms ): static {
 		$terms = collect( $terms )->all();
 
 		return $this->with_middleware(
-			fn ( array $args, Closure $next ) => $next( $args )->set_terms( $terms ),
+			fn ( array $args, Closure $next ) => $next( $args )->set_terms( $terms, append: true, create: $this->create_terms ),
+		);
+	}
+
+	/**
+	 * Create a new factory instance to create posts with a set of terms without creating
+	 * any unknown terms.
+	 *
+	 * @param array<int|string, \WP_Term|int|string|array<string, mixed>>|\WP_Term|int|string ...$terms Terms to assign to the post.
+	 */
+	public function with_terms_only_existing( ...$terms ): static {
+		// Handle an array in the first argument.
+		if ( 1 === count( $terms ) && isset( $terms[0] ) && is_array( $terms[0] ) ) {
+			$terms = $terms[0];
+		}
+
+		$terms = collect( $terms )->all();
+
+		return $this->with_middleware(
+			fn ( array $args, Closure $next ) => $next( $args )->set_terms( $terms, append: true, create: false ),
 		);
 	}
 
diff --git a/src/mantle/database/model/term/trait-model-term.php b/src/mantle/database/model/term/trait-model-term.php
index e86a294c..d4ca11d0 100644
--- a/src/mantle/database/model/term/trait-model-term.php
+++ b/src/mantle/database/model/term/trait-model-term.php
@@ -12,6 +12,7 @@
 use Mantle\Database\Model\Term;
 use Mantle\Support\Arr;
 use Mantle\Support\Collection;
+use Mantle\Support\Str;
 use WP_Term;
 
 use function Mantle\Support\Helpers\collect;
@@ -120,18 +121,19 @@ public function get_terms( string $taxonomy ): array {
 	 * @param mixed  $terms Accepts an array of or a single instance of terms.
 	 * @param string $taxonomy Taxonomy name, optional.
 	 * @param bool   $append Append to the object's terms, defaults to false.
+	 * @param bool   $create Create the term if it does not exist, defaults to false.
 	 * @return static
 	 *
 	 * @throws Model_Exception Thrown if the $taxonomy cannot be inferred from $terms.
 	 * @throws Model_Exception Thrown if error saving the post's terms.
 	 */
-	public function set_terms( $terms, ?string $taxonomy = null, bool $append = false ) {
+	public function set_terms( $terms, ?string $taxonomy = null, bool $append = false, bool $create = false ) {
 		$terms = collect( Arr::wrap( $terms ) );
 
 		// If taxonomy is not specified, chunk the terms into taxonomy groups.
 		if ( ! $taxonomy ) {
 			$terms = $terms->reduce(
-				function ( array $carry, $term, $index ): array {
+				function ( array $carry, $term, $index ) use ( $create ): array {
 					if ( $term instanceof WP_Term ) {
 						$carry[ $term->taxonomy ][] = $term;
 
@@ -177,10 +179,21 @@ function ( array $carry, $term, $index ): array {
 								continue;
 							}
 
-							$item = get_term_object_by( 'slug', $item, $taxonomy );
+							$term = get_term_object_by( 'slug', $item, $taxonomy );
 
-							if ( $item ) {
-								$carry[ $taxonomy ][] = $item;
+							// Optionally create the term if it does not exist.
+							if ( ! $term && $create ) {
+								$term = wp_insert_term( Str::headline( $item ), $taxonomy, [ 'slug' => $item ] );
+
+								if ( is_wp_error( $term ) ) {
+									throw new Model_Exception( "Error creating term: [{$term->get_error_message()}]" );
+								}
+
+								$term = get_term( $term['term_id'], $taxonomy );
+							}
+
+							if ( $term instanceof WP_Term ) {
+								$carry[ $taxonomy ][] = $term;
 							}
 						}
 
diff --git a/tests/Database/Factory/UnitTestingFactoryTest.php b/tests/Database/Factory/UnitTestingFactoryTest.php
index d09d9a9b..efc67c79 100644
--- a/tests/Database/Factory/UnitTestingFactoryTest.php
+++ b/tests/Database/Factory/UnitTestingFactoryTest.php
@@ -280,8 +280,8 @@ public function test_posts_with_multiple_terms_spread_array_argument() {
 		);
 	}
 
-	#[Group( 'with_terms' )]
 	#[DataProvider( 'slug_id_dataprovider' )]
+	#[Group( 'with_terms' )]
 	public function test_posts_with_multiple_terms_single_array( string $field ) {
 		$tags = collect( static::factory()->tag->create_many( 5 ) )
 			->map( fn ( $term_id ) => get_term( $term_id ) )
@@ -300,7 +300,14 @@ public function test_posts_with_multiple_terms_single_array( string $field ) {
 
 	#[Group( 'with_terms' )]
 	public function test_posts_with_terms_create_unknown_term() {
-		$this->markTestIncomplete( 'This test is incomplete.' );
+		$post = static::factory()->post->with_terms( [
+			'post_tag' => [ 'unknown-term' ],
+		] )->create_and_get();
+
+		$post_tags = get_the_terms( $post, 'post_tag' );
+
+		$this->assertCount( 1, $post_tags );
+		$this->assertEquals( 'unknown-term', $post_tags[0]->slug );
 	}
 
 	public function test_terms_with_posts() {