diff --git a/changes/ticket40434 b/changes/ticket40434
new file mode 100644
index 0000000000..988bb416be
--- /dev/null
+++ b/changes/ticket40434
@@ -0,0 +1,6 @@
+  o Minor bugfix (onion service):
+    - Do not flag an HSDir as non-running in case the descriptor upload or
+      fetch fails. An onion service closes pending directory connections
+      before uploading a new descriptor which can thus lead to wrongly
+      flagging many relays and thus affecting circuit building path selection.
+      Fixes bug 40434; bugfix on 0.2.0.13-alpha.
diff --git a/src/feature/dirclient/dirclient.c b/src/feature/dirclient/dirclient.c
index a5dd856729..f2e1e5b5ff 100644
--- a/src/feature/dirclient/dirclient.c
+++ b/src/feature/dirclient/dirclient.c
@@ -738,7 +738,22 @@ connection_dir_client_request_failed(dir_connection_t *conn)
     return; /* this was a test fetch. don't retry. */
   }
   if (!entry_list_is_constrained(get_options()))
-    router_set_status(conn->identity_digest, 0); /* don't try this one again */
+    /* We must not set a directory to non-running for HS purposes else we end
+     * up flagging nodes from the hashring has unusable. It doesn't have direct
+     * effect on the HS subsystem because the nodes are selected regardless of
+     * their status but still, we shouldn't flag them as non running.
+     *
+     * One example where this can go bad is if a tor instance gets added a lot
+     * of ephemeral services and with a network with problem then many nodes in
+     * the consenus ends up unusable.
+     *
+     * Furthermore, a service does close any pending directory connections
+     * before uploading a descriptor and thus we can end up here in a natural
+     * way since closing a pending directory connection leads to this code
+     * path. */
+    if (!DIR_PURPOSE_IS_HS(TO_CONN(conn)->purpose)) {
+      router_set_status(conn->identity_digest, 0);
+    }
   if (conn->base_.purpose == DIR_PURPOSE_FETCH_SERVERDESC ||
              conn->base_.purpose == DIR_PURPOSE_FETCH_EXTRAINFO) {
     log_info(LD_DIR, "Giving up on serverdesc/extrainfo fetch from "
diff --git a/src/feature/dircommon/directory.h b/src/feature/dircommon/directory.h
index 0aa2ff53ef..2cd9c176c8 100644
--- a/src/feature/dircommon/directory.h
+++ b/src/feature/dircommon/directory.h
@@ -87,6 +87,12 @@ const dir_connection_t *CONST_TO_DIR_CONN(const connection_t *c);
    (p)==DIR_PURPOSE_UPLOAD_RENDDESC_V2 ||       \
    (p)==DIR_PURPOSE_UPLOAD_HSDESC)
 
+/** True iff p is a purpose corresponding to onion service that is either
+ * uploading or fetching actions. */
+#define DIR_PURPOSE_IS_HS(p)          \
+  ((p) == DIR_PURPOSE_FETCH_HSDESC || \
+   (p) == DIR_PURPOSE_UPLOAD_HSDESC)
+
 enum compress_method_t;
 int parse_http_response(const char *headers, int *code, time_t *date,
                         enum compress_method_t *compression, char **response);