diff --git a/py/emitnative.c b/py/emitnative.c
index 6a5bcd7ee0..73899b9e90 100644
--- a/py/emitnative.c
+++ b/py/emitnative.c
@@ -914,7 +914,7 @@ STATIC void emit_native_label_assign(emit_t *emit, mp_uint_t l) {
 
     if (is_finally) {
         // Label is at start of finally handler: pop exception stack
-        emit_native_leave_exc_stack(emit, true);
+        emit_native_leave_exc_stack(emit, false);
     }
 }
 
diff --git a/tests/basics/try_finally1.py b/tests/basics/try_finally1.py
index 1e821deb62..67ebe0b590 100644
--- a/tests/basics/try_finally1.py
+++ b/tests/basics/try_finally1.py
@@ -82,3 +82,15 @@ finally:
         print("except2")
     print("finally1")
 print()
+
+# case where exception is raised after a finally has finished (tests that the finally doesn't run again)
+def func():
+    try:
+        print("try")
+    finally:
+        print("finally")
+    foo
+try:
+    func()
+except:
+    print("except")