diff --git a/lib/transaction.js b/lib/transaction.js
index 22868452d..a6e153a07 100644
--- a/lib/transaction.js
+++ b/lib/transaction.js
@@ -21,20 +21,25 @@ function mixinTransaction(MySQL, mysql) {
     debug('Begin a transaction with isolation level: %s', isolationLevel);
     this.client.getConnection(function(err, connection) {
       if (err) return cb(err);
+      // On failure the caller never gets the connection, so release it here.
+      function fail(err) {
+        connection.release();
+        cb(err);
+      }
       if (isolationLevel) {
         connection.query(
           'SET SESSION TRANSACTION ISOLATION LEVEL ' + isolationLevel,
           function(err) {
-            if (err) return cb(err);
+            if (err) return fail(err);
             connection.beginTransaction(function(err) {
-              if (err) return cb(err);
+              if (err) return fail(err);
               return cb(null, connection);
             });
           },
         );
       } else {
         connection.beginTransaction(function(err) {
-          if (err) return cb(err);
+          if (err) return fail(err);
           return cb(null, connection);
         });
       }
diff --git a/test/transaction.start-failure.test.js b/test/transaction.start-failure.test.js
new file mode 100644
index 000000000..21d0fa4ac
--- /dev/null
+++ b/test/transaction.start-failure.test.js
@@ -0,0 +1,88 @@
+// Copyright IBM Corp. 2026. All Rights Reserved.
+// Node module: loopback-connector-mysql
+// This file is licensed under the MIT License.
+// License text available at https://opensource.org/licenses/MIT
+
+'use strict';
+require('./init.js');
+const should = require('should');
+const sinon = require('sinon');
+
+describe('transaction start failure', function() {
+  let db;
+
+  // A fresh pool per test, so a leak in one test cannot fail the next one.
+  beforeEach(function(done) {
+    db = global.getDataSource({connectionLimit: 1});
+    db.once('connected', function() {
+      done();
+    });
+  });
+
+  afterEach(function() {
+    sinon.restore();
+    // Not awaited: before the fix a leaked connection keeps pool.end() open.
+    db.disconnect(function() {});
+  });
+
+  it('returns the connection when SET TRANSACTION ISOLATION LEVEL fails',
+    function(done) {
+      this.timeout(10000);
+      // More failed starts than the pool has connections: without the release,
+      // the last one and the query after it wait for ever.
+      let pending = 3;
+      for (let i = 0; i < 3; i++) {
+        db.connector.beginTransaction('NOT A LEVEL', function(err, connection) {
+          should.exist(err);
+          should.not.exist(connection);
+          if (--pending === 0) {
+            db.connector.execute('SELECT 1 AS ok', [], function(err, rows) {
+              if (err) return done(err);
+              rows[0].ok.should.equal(1);
+              done();
+            });
+          }
+        });
+      }
+    });
+
+  function failBegin(isolationLevel, done) {
+    const pool = db.connector.client;
+    const getConnection = pool.getConnection.bind(pool);
+    // BEGIN cannot be made to fail on a healthy server, so the next pooled
+    // connection's beginTransaction is replaced for this one call.
+    const stub = sinon.stub(pool, 'getConnection').callsFake(function(cb) {
+      stub.restore();
+      getConnection(function(err, connection) {
+        if (err) return cb(err);
+        sinon.stub(connection, 'beginTransaction').callsFake(function(next) {
+          next(new Error('BEGIN refused'));
+        });
+        cb(null, connection);
+      });
+    });
+    db.connector.beginTransaction(isolationLevel, function(err, connection) {
+      should.exist(err);
+      err.message.should.equal('BEGIN refused');
+      should.not.exist(connection);
+      // One connection in the pool: this query only runs if the failed start
+      // gave it back.
+      db.connector.execute('SELECT 1 AS ok', [], function(err, rows) {
+        if (err) return done(err);
+        rows[0].ok.should.equal(1);
+        done();
+      });
+    });
+  }
+
+  it('returns the connection when BEGIN fails after SET', function(done) {
+    this.timeout(10000);
+    failBegin('READ COMMITTED', done);
+  });
+
+  it('returns the connection when BEGIN fails without an isolation level',
+    function(done) {
+      this.timeout(10000);
+      failBegin(undefined, done);
+    });
+});