diff --git a/nova/compute/manager.py b/nova/compute/manager.py
index 81c7ee51b0ae..a7b2f483cd34 100644
--- a/nova/compute/manager.py
+++ b/nova/compute/manager.py
@@ -3335,7 +3335,12 @@ class ComputeManager(manager.Manager):
         allocs = self.reportclient.get_allocations_for_consumer(
                     context, instance.uuid)
 
-        with self._error_out_instance_on_exception(context, instance):
+        # If the resource claim or group policy validation fails before we
+        # do anything to the guest or its networking/volumes we want to keep
+        # the current status rather than put the instance into ERROR status.
+        instance_state = instance.vm_state
+        with self._error_out_instance_on_exception(
+                context, instance, instance_state=instance_state):
             try:
                 self._do_rebuild_instance_with_claim(
                     context, instance, orig_image_ref,
@@ -3369,8 +3374,13 @@ class ComputeManager(manager.Manager):
                 self.rt.delete_allocation_for_evacuated_instance(
                     context, instance, scheduled_node, node_type='destination')
                 self._notify_instance_rebuild_error(context, instance, e, bdms)
-                raise exception.BuildAbortException(
-                    instance_uuid=instance.uuid, reason=e.format_message())
+                # Wrap this in InstanceFaultRollback so that the
+                # _error_out_instance_on_exception context manager keeps the
+                # vm_state unchanged.
+                raise exception.InstanceFaultRollback(
+                    inner_exception=exception.BuildAbortException(
+                        instance_uuid=instance.uuid,
+                        reason=e.format_message()))
             except (exception.InstanceNotFound,
                     exception.UnexpectedDeletingTaskStateError) as e:
                 LOG.debug('Instance was deleted while rebuilding',
diff --git a/nova/tests/functional/test_servers.py b/nova/tests/functional/test_servers.py
index c6a9fdb59ece..54f7df2bd995 100644
--- a/nova/tests/functional/test_servers.py
+++ b/nova/tests/functional/test_servers.py
@@ -2503,8 +2503,10 @@ class ServerMovingTests(integrated_helpers.ProviderUsageBaseTestCase):
             # evacuate the server
             self.api.post_server_action(server['id'], {'evacuate': {}})
             # the migration will fail on the dest node and the instance will
-            # go into error state
-            server = self._wait_for_state_change(self.api, server, 'ERROR')
+            # stay ACTIVE and task_state will be set to None.
+            server = self._wait_for_server_parameter(
+                self.api, server, {'status': 'ACTIVE',
+                                   'OS-EXT-STS:task_state': None})
 
         # Run the periodics to show those don't modify allocations.
         self._run_periodics()
@@ -7204,7 +7206,8 @@ class ServerMoveWithPortResourceRequestTest(
             server = self._wait_for_server_parameter(
                 self.api, server,
                 {'OS-EXT-SRV-ATTR:host': 'host1',
-                 'status': 'ERROR'})
+                 'status': 'ACTIVE',
+                 'OS-EXT-STS:task_state': None})
 
         self._wait_for_migration_status(server, ['failed'])
 
diff --git a/nova/tests/unit/compute/test_compute_mgr.py b/nova/tests/unit/compute/test_compute_mgr.py
index 348169e7bd43..18b2f736090d 100644
--- a/nova/tests/unit/compute/test_compute_mgr.py
+++ b/nova/tests/unit/compute/test_compute_mgr.py
@@ -5007,6 +5007,28 @@ class ComputeManagerUnitTestCase(test.NoDBTestCase,
         delete_alloc.assert_called_once_with(self.context, instance, 'foo',
                                              node_type='destination')
 
+    @mock.patch('nova.objects.Instance.save')
+    @mock.patch('nova.compute.utils.add_instance_fault_from_exc')
+    @mock.patch('nova.compute.resource_tracker.ResourceTracker.'
+                'delete_allocation_for_evacuated_instance')
+    def test_rebuild_compute_resources_unavailable(self, mock_delete_alloc,
+                                                   mock_add_fault,
+                                                   mock_save):
+        """Tests that when the rebuild_claim fails with
+        ComputeResourcesUnavailable the vm_state on the instance remains
+        unchanged.
+        """
+        instance = fake_instance.fake_instance_obj(self.context)
+        instance.vm_state = vm_states.ACTIVE
+        ex = exception.ComputeResourcesUnavailable(reason='out of foo')
+        self.assertRaises(exception.BuildAbortException,
+                          self._test_rebuild_ex, instance, ex)
+        # Make sure the instance vm_state did not change.
+        self.assertEqual(vm_states.ACTIVE, instance.vm_state)
+        mock_delete_alloc.assert_called_once()
+        mock_save.assert_called()
+        mock_add_fault.assert_called_once()
+
     @mock.patch('nova.context.RequestContext.elevated')
     @mock.patch('nova.objects.instance.Instance.drop_migration_context')
     @mock.patch('nova.objects.instance.Instance.apply_migration_context')
@@ -5071,6 +5093,7 @@ class ComputeManagerUnitTestCase(test.NoDBTestCase,
         instance = fake_instance.fake_instance_obj(self.context)
         instance.info_cache = None
         instance.system_metadata = {}
+        instance.vm_state = vm_states.ACTIVE
         elevated_context = mock.Mock()
         mock_context_elevated.return_value = elevated_context
         request_spec = objects.RequestSpec()
@@ -5094,6 +5117,8 @@ class ComputeManagerUnitTestCase(test.NoDBTestCase,
         mock_notify.assert_called_once_with(
             elevated_context, instance, 'fake-mini', bdms=None, exception=exc,
             phase='error', tb=mock.ANY)
+        # Make sure the instance vm_state did not change.
+        self.assertEqual(vm_states.ACTIVE, instance.vm_state)
 
     def test_rebuild_node_not_updated_if_not_recreate(self):
         node = uuidutils.generate_uuid()  # ironic node uuid