diff --git a/mvcc/backend/backend.go b/mvcc/backend/backend.go
index 1d5586e9096..9d379d74e07 100644
--- a/mvcc/backend/backend.go
+++ b/mvcc/backend/backend.go
@@ -27,8 +27,9 @@ import (
 
 	"github.com/coreos/pkg/capnslog"
 	humanize "github.com/dustin/go-humanize"
-	bolt "go.etcd.io/bbolt"
 	"go.uber.org/zap"
+
+	bolt "go.etcd.io/bbolt"
 )
 
 var (
@@ -449,10 +450,6 @@ func (b *backend) defrag() error {
 	b.readTx.Lock()
 	defer b.readTx.Unlock()
 
-	b.batchTx.unsafeCommit(true)
-
-	b.batchTx.tx = nil
-
 	// Create a temporary file to ensure we start with a clean slate.
 	// Snapshotter.cleanupSnapdir cleans up any of these that are found during startup.
 	dir := filepath.Dir(b.db.Path())
@@ -460,11 +457,14 @@ func (b *backend) defrag() error {
 	if err != nil {
 		return err
 	}
+
 	options := bolt.Options{}
 	if boltOpenOptions != nil {
 		options = *boltOpenOptions
 	}
 	options.OpenFile = func(path string, i int, mode os.FileMode) (file *os.File, err error) {
+		// gofail: var defragOpenFileError string
+		// return nil, fmt.Errorf(defragOpenFileError)
 		return temp, nil
 	}
 	tdbp := temp.Name()
@@ -485,6 +485,11 @@ func (b *backend) defrag() error {
 			zap.String("current-db-size-in-use", humanize.Bytes(uint64(sizeInUse1))),
 		)
 	}
+
+	// Commit/stop and then reset current transactions (including the readTx)
+	b.batchTx.unsafeCommit(true)
+	b.batchTx.tx = nil
+
 	// gofail: var defragBeforeCopy struct{}
 	err = defragdb(b.db, tmpdb, defragLimit)
 	if err != nil {
@@ -496,6 +501,11 @@ func (b *backend) defrag() error {
 				plog.Fatalf("failed to remove db.tmp after defragmentation completed: %v", rmErr)
 			}
 		}
+
+		// restore the bbolt transactions if defragmentation fails
+		b.batchTx.tx = b.unsafeBegin(true)
+		b.readTx.tx = b.unsafeBegin(false)
+
 		return err
 	}
 
@@ -564,6 +574,9 @@ func (b *backend) defrag() error {
 }
 
 func defragdb(odb, tmpdb *bolt.DB, limit int) error {
+	// gofail: var defragdbFail string
+	// return fmt.Errorf(defragdbFail)
+
 	// open a tx on tmpdb for writes
 	tmptx, err := tmpdb.Begin(true)
 	if err != nil {
diff --git a/tests/e2e/defrag_no_space_test.go b/tests/e2e/defrag_no_space_test.go
new file mode 100644
index 00000000000..0cb75414957
--- /dev/null
+++ b/tests/e2e/defrag_no_space_test.go
@@ -0,0 +1,70 @@
+// Copyright 2024 The etcd Authors
+//
+// Licensed under the Apache License, Version 2.0 (the "License");
+// you may not use this file except in compliance with the License.
+// You may obtain a copy of the License at
+//
+//	http://www.apache.org/licenses/LICENSE-2.0
+//
+// Unless required by applicable law or agreed to in writing, software
+// distributed under the License is distributed on an "AS IS" BASIS,
+// WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+// See the License for the specific language governing permissions and
+// limitations under the License.
+
+package e2e
+
+import (
+	"context"
+	"fmt"
+	"testing"
+	"time"
+
+	"github.com/stretchr/testify/require"
+)
+
+func TestDefragNoSpace(t *testing.T) {
+	tests := []struct {
+		name      string
+		failpoint string
+		err       string
+	}{
+		{
+			name:      "no space (#18810) - can't open/create new bbolt db",
+			failpoint: "defragOpenFileError",
+			err:       "no space",
+		},
+		{
+			name:      "defragdb failure",
+			failpoint: "defragdbFail",
+			err:       "some random error",
+		},
+	}
+
+	for _, tc := range tests {
+		t.Run(tc.name, func(t *testing.T) {
+			clus, err := newEtcdProcessCluster(t,
+				&etcdProcessClusterConfig{
+					clusterSize:   1,
+					debug:         true,
+					goFailEnabled: true,
+				},
+			)
+			require.NoError(t, err)
+			t.Cleanup(func() { clus.Stop() })
+
+			member := clus.procs[0]
+			etcdctl := member.Etcdctl(clientNonTLS, false, false)
+
+			require.NoError(t, member.Failpoints().SetupHTTP(context.Background(), tc.failpoint, fmt.Sprintf(`return("%s")`, tc.err)))
+			require.ErrorContains(t, etcdctl.Defragment(time.Minute), tc.err)
+
+			// Make sure etcd continues to run even after the failed defrag attempt
+			require.NoError(t, etcdctl.Put("foo", "bar"))
+			value, err := etcdctl.Get("foo")
+			require.NoError(t, err)
+			require.Len(t, value.Kvs, 1)
+			require.Equal(t, "bar", string(value.Kvs[0].Value))
+		})
+	}
+}
diff --git a/tests/e2e/etcdctl.go b/tests/e2e/etcdctl.go
index cc5c7a31b6d..1b2df7b12d4 100644
--- a/tests/e2e/etcdctl.go
+++ b/tests/e2e/etcdctl.go
@@ -18,6 +18,7 @@ import (
 	"encoding/json"
 	"fmt"
 	"strings"
+	"time"
 
 	"go.etcd.io/etcd/clientv3"
 )
@@ -141,6 +142,15 @@ func (ctl *Etcdctl) Compact(rev int64) (*clientv3.CompactResponse, error) {
 	return nil, spawnWithExpect(args, fmt.Sprintf("compacted revision %v", rev))
 }
 
+func (ctl *Etcdctl) Defragment(timeout time.Duration) error {
+	args := append(ctl.cmdArgs(), "defrag")
+	if timeout != 0 {
+		args = append(args, fmt.Sprintf("--command-timeout=%s", timeout))
+	}
+
+	return spawnWithExpect(args, "Finished defragmenting etcd member")
+}
+
 func (ctl *Etcdctl) Status() ([]*clientv3.StatusResponse, error) {
 	var epStatus []*struct {
 		Endpoint string