diff --git a/cmd/finish.go b/cmd/finish.go
index c2822ab..14d67a3 100644
--- a/cmd/finish.go
+++ b/cmd/finish.go
@@ -747,6 +747,14 @@ func handleDeleteBranchStep(cfg *config.Config, state *mergestate.MergeState, re
 		return &errors.GitError{Operation: fmt.Sprintf("checkout parent branch '%s'", state.ParentBranch), Err: err}
 	}
 
+	// Clear the merge state before branch deletion. By this point all merges,
+	// tags, and child updates are complete — the state is only needed for conflict
+	// recovery which is no longer possible. Clearing early ensures a failed branch
+	// deletion (e.g. remote permission error) doesn't leave stale merge state.
+	if err := mergestate.ClearMergeState(); err != nil {
+		return &errors.GitError{Operation: "clear merge state", Err: err}
+	}
+
 	// Apply keep logic: if keep is set, it overrides individual settings
 	keepRemote := resolvedOptions.KeepRemote
 	keepLocal := resolvedOptions.KeepLocal
@@ -770,11 +778,6 @@ func handleDeleteBranchStep(cfg *config.Config, state *mergestate.MergeState, re
 		}
 	}
 
-	// Clear the merge state
-	if err := mergestate.ClearMergeState(); err != nil {
-		return &errors.GitError{Operation: "clear merge state", Err: err}
-	}
-
 	fmt.Printf("Successfully finished branch '%s' and updated %d child base branches\n", state.FullBranchName, len(state.UpdatedBranches))
 
 	// Run post-hook after successful completion
diff --git a/test/cmd/finish_retention_test.go b/test/cmd/finish_retention_test.go
index 6edeb74..fb86fc2 100644
--- a/test/cmd/finish_retention_test.go
+++ b/test/cmd/finish_retention_test.go
@@ -419,3 +419,84 @@ func TestFinishDeleteBranchUsesConfiguredRemote(t *testing.T) {
 		t.Error("Expected remote branch to be deleted from upstream")
 	}
 }
+
+// TestFinishClearsMergeStateWhenBranchDeletionFails tests that merge state is cleared even when
+// remote branch deletion fails during finish.
+// Steps:
+// 1. Sets up a test repository with a remote and initializes git-flow
+// 2. Creates a feature branch with changes and pushes to remote
+// 3. Configures the remote repository to reject branch deletions so deletion will fail
+// 4. Finishes the feature branch (merge succeeds, remote deletion fails)
+// 5. Verifies the merge state file does not exist (cleared despite deletion error)
+// 6. Verifies the merge completed successfully (changes are on develop)
+func TestFinishClearsMergeStateWhenBranchDeletionFails(t *testing.T) {
+	dir := testutil.SetupTestRepo(t)
+	defer testutil.CleanupTestRepo(t, dir)
+
+	output, err := testutil.RunGitFlow(t, dir, "init", "--defaults")
+	if err != nil {
+		t.Fatalf("Failed to initialize git-flow: %v\nOutput: %s", err, output)
+	}
+
+	// Add a remote repository
+	remoteDir, err := testutil.AddRemote(t, dir, "origin", true)
+	if err != nil {
+		t.Fatalf("Failed to add remote: %v", err)
+	}
+	defer testutil.CleanupTestRepo(t, remoteDir)
+
+	// Create a feature branch with changes
+	output, err = testutil.RunGitFlow(t, dir, "feature", "start", "delete-fail-test")
+	if err != nil {
+		t.Fatalf("Failed to start feature branch: %v\nOutput: %s", err, output)
+	}
+
+	testutil.WriteFile(t, dir, "feature-file.txt", "feature content")
+	_, err = testutil.RunGit(t, dir, "add", "feature-file.txt")
+	if err != nil {
+		t.Fatalf("Failed to add file: %v", err)
+	}
+	_, err = testutil.RunGit(t, dir, "commit", "-m", "Add feature file")
+	if err != nil {
+		t.Fatalf("Failed to commit: %v", err)
+	}
+
+	// Push feature branch to remote
+	_, err = testutil.RunGit(t, dir, "push", "origin", "feature/delete-fail-test")
+	if err != nil {
+		t.Fatalf("Failed to push feature branch: %v", err)
+	}
+
+	// Configure the remote bare repo to reject branch deletions
+	_, err = testutil.RunGit(t, remoteDir, "config", "receive.denyDeletes", "true")
+	if err != nil {
+		t.Fatalf("Failed to configure receive.denyDeletes: %v", err)
+	}
+
+	// Finish the feature branch — merge should succeed but remote deletion should fail
+	output, err = testutil.RunGitFlow(t, dir, "feature", "finish", "delete-fail-test")
+	_ = output // finish may or may not return an error depending on how deletion failure is handled
+
+	// Verify remote branch still exists (confirms deletion was actually rejected)
+	remoteRefs, err := testutil.RunGit(t, dir, "ls-remote", "--heads", "origin", "feature/delete-fail-test")
+	if err != nil {
+		t.Fatalf("Failed to list remote refs: %v", err)
+	}
+	if remoteRefs == "" {
+		t.Fatal("Expected remote branch feature/delete-fail-test to still exist, but it was deleted")
+	}
+
+	// KEY ASSERTION: merge state must be cleared even though deletion failed
+	if testutil.GitFlowMergeStateExists(t, dir) {
+		t.Error("Expected merge state to be cleared after finish, but merge.json still exists")
+	}
+
+	// Verify the merge itself completed — feature changes should be on develop
+	_, err = testutil.RunGit(t, dir, "checkout", "develop")
+	if err != nil {
+		t.Fatalf("Failed to checkout develop: %v", err)
+	}
+	if !testutil.FileExists(t, dir, "feature-file.txt") {
+		t.Error("Expected feature-file.txt to exist on develop after merge")
+	}
+}
diff --git a/test/testutil/testutil.go b/test/testutil/testutil.go
index 1dd73fb..ecb4c10 100644
--- a/test/testutil/testutil.go
+++ b/test/testutil/testutil.go
@@ -86,3 +86,22 @@ func FileExists(t *testing.T, dir string, path string) bool {
 	_, err := os.Stat(fullPath)
 	return err == nil
 }
+
+// GitFlowMergeStateExists checks if the git-flow merge state file exists
+func GitFlowMergeStateExists(t *testing.T, dir string) bool {
+	t.Helper()
+	gitDir, err := getGitDirForRepo(dir)
+	if err != nil {
+		t.Fatalf("Failed to determine git directory for repo %s: %v", dir, err)
+	}
+	stateFile := filepath.Join(gitDir, "gitflow", "state", "merge.json")
+	_, err = os.Stat(stateFile)
+	if err == nil {
+		return true
+	}
+	if os.IsNotExist(err) {
+		return false
+	}
+	t.Fatalf("Failed to stat git-flow merge state file %s: %v", stateFile, err)
+	return false
+}