diff --git a/source/java/org/alfresco/repo/transaction/RetryingTransactionHelper.java b/source/java/org/alfresco/repo/transaction/RetryingTransactionHelper.java
index 62dd5fdc35..89e16bad45 100644
--- a/source/java/org/alfresco/repo/transaction/RetryingTransactionHelper.java
+++ b/source/java/org/alfresco/repo/transaction/RetryingTransactionHelper.java
@@ -208,6 +208,12 @@ public class RetryingTransactionHelper
      */
     private List<Class<?>> extraExceptions;
 
+    /**
+     * A local variable holding the Rollback-only transaction flag which can be set by {@link #setRollbackOnly()}
+     * and is flushed by the 
+     */
+    private static ThreadLocal<Boolean> rollbackOnly = new ThreadLocal<Boolean>();
+    
     /**
      * Callback interface
      * @author Derek Hulley
@@ -458,7 +464,11 @@ public class RetryingTransactionHelper
                     // Only commit if we 'own' the transaction.
                     if (txn != null)
                     {
-                        if (txn.getStatus() == Status.STATUS_MARKED_ROLLBACK)
+                        // Check if force rollback is on
+                        boolean mustRollBack = isRollbackOnly();
+                        // This method owns the transaction; make sure we don't leak the state
+                        rollbackOnly.set(null);
+                        if (txn.getStatus() == Status.STATUS_MARKED_ROLLBACK || mustRollBack)
                         {
                             if (logger.isDebugEnabled())
                             {
@@ -511,6 +521,10 @@ public class RetryingTransactionHelper
                                 "   Exception follows:",
                                 e);
                     }
+
+                    // make sure we don't leak the state
+                    rollbackOnly.set(null);
+
                     // Rollback if we can.
                     if (txn != null)
                     {
@@ -670,6 +684,29 @@ public class RetryingTransactionHelper
         return retryCause;
     }
     
+    /**
+     * @return      Returns <tt>true</tt> if the current thread transaction was marked as RollbackOnly
+     */
+    public static boolean isRollbackOnly()
+    {
+        if (rollbackOnly.get() == null)
+        {
+            return false;
+        }
+        else
+        {
+            return rollbackOnly.get();
+        }
+    }
+    
+    /**
+     * Helper method to set the RollbackOnly state of the transaction in the current thread
+     */
+    public static void setRollbackOnly()
+    {
+        rollbackOnly.set(true);
+    }
+    
     /**
      * Utility method to get the active transaction.  The transaction status can be queried and
      * marked for rollback.
diff --git a/source/java/org/alfresco/repo/transaction/RetryingTransactionInterceptor.java b/source/java/org/alfresco/repo/transaction/RetryingTransactionInterceptor.java
index 964f465faf..9add2b8e05 100755
--- a/source/java/org/alfresco/repo/transaction/RetryingTransactionInterceptor.java
+++ b/source/java/org/alfresco/repo/transaction/RetryingTransactionInterceptor.java
@@ -1,5 +1,5 @@
 /*
- * Copyright (C) 2005-2011 Alfresco Software Limited.
+ * Copyright (C) 2005-2015 Alfresco Software Limited.
  *
  * This file is part of Alfresco
  *
@@ -80,11 +80,13 @@ public class RetryingTransactionInterceptor extends TransactionAspectSupport imp
                                     }
                                     catch (RuntimeException e)
                                     {
+                                        RetryingTransactionHelper.setRollbackOnly();
                                         completeTransactionAfterThrowing(txInfo, e);
                                         throw e;
                                     }
                                     catch (Throwable e)
                                     {
+                                        RetryingTransactionHelper.setRollbackOnly();
                                         // Wrap non-runtime exceptions so that they can be preserved
                                         completeTransactionAfterThrowing(txInfo, e);
                                         throw new WrapperException(e);
diff --git a/source/test-java/org/alfresco/repo/node/NodeServiceTest.java b/source/test-java/org/alfresco/repo/node/NodeServiceTest.java
index 0a91746a3c..e2e1f2bd27 100644
--- a/source/test-java/org/alfresco/repo/node/NodeServiceTest.java
+++ b/source/test-java/org/alfresco/repo/node/NodeServiceTest.java
@@ -1,5 +1,5 @@
 /*
- * Copyright (C) 2005-2012 Alfresco Software Limited.
+ * Copyright (C) 2005-2015 Alfresco Software Limited.
  *
  * This file is part of Alfresco
  *
@@ -703,6 +703,61 @@ public class NodeServiceTest
         assertEquals("Expected exact number of reference assocs", 1, childAssocRefs.size());
     }
 
+    /**
+     * Test for MNT-12501
+     */
+    @Test public void testRollbackTransaction()
+    {
+        final NodeRef workspaceRootNodeRef = nodeService.getRootNode(StoreRef.STORE_REF_WORKSPACE_SPACESSTORE);
+        final String name = GUID.generate();
+        final NodeRef[] nodes = new NodeRef[2];
+        // Now create 2 nodes with the same name and swallow the exception inside
+        RetryingTransactionCallback<Void> newNodeCallback = new RetryingTransactionCallback<Void>()
+        {
+            @Override
+            public Void execute() throws Throwable
+            {
+                Map<QName, Serializable> props = new HashMap<QName, Serializable>(3);
+                props.put(ContentModel.PROP_NAME, name);
+                try
+                {
+                    NodeRef node1 = nodeService.createNode(
+                            workspaceRootNodeRef,
+                            ContentModel.ASSOC_CONTAINS,
+                            QName.createQName(NAMESPACE, "duplicate"),
+                            ContentModel.TYPE_FOLDER,
+                            props).getChildRef();
+                    nodes[0] = node1;
+                    NodeRef node2 = nodeService.createNode(
+                            workspaceRootNodeRef,
+                            ContentModel.ASSOC_CONTAINS,
+                            QName.createQName(NAMESPACE, "duplicate"),
+                            ContentModel.TYPE_FOLDER,
+                            props).getChildRef();
+                    nodes[1] = node2;
+                }
+                catch (Exception e)
+                {
+                    // swallow the exception
+                }
+                return null;
+            }
+        };
+        try
+        {
+            txnService.getRetryingTransactionHelper().doInTransaction(newNodeCallback);
+            // The exception is swallowed inside the callback
+            //fail("Duplicate child node name not detected.");
+        }
+        catch (DuplicateChildNodeNameException e)
+        {
+            // The exception is swallowed inside the callback
+        }
+        assertNotNull("The first node was not created.", nodes[0]);
+        assertFalse("The node creation should be rolled back.", nodeService.exists(nodes[0]));
+        assertNull("The duplicate node should not be created.", nodes[1]);
+    }
+    
     private NodeRef setupTestGetChildren(final NodeRef workspaceRootNodeRef, final int numberOfReferences)
     {
         RetryingTransactionCallback<NodeRef> setupCallback = new RetryingTransactionCallback<NodeRef>()