diff --git a/.changeset/cyan-ducks-wonder.md b/.changeset/cyan-ducks-wonder.md
new file mode 100644
index 000000000..123897616
--- /dev/null
+++ b/.changeset/cyan-ducks-wonder.md
@@ -0,0 +1,5 @@
+---
+"@workflow/core": patch
+---
+
+Allow step retrying if it fails without proper cleanup
diff --git a/packages/core/src/runtime.ts b/packages/core/src/runtime.ts
index 3a7c66fff..b05d366d7 100644
--- a/packages/core/src/runtime.ts
+++ b/packages/core/src/runtime.ts
@@ -640,12 +640,13 @@ export const stepEntrypoint =
           let result: unknown;
           const attempt = step.attempt + 1;
           try {
-            if (step.status !== 'pending') {
-              // We should only be running the step if it's pending
-              // (initial state, or state set on re-try), so the step has been
-              // invoked erroneously.
+            if (!['pending', 'running'].includes(step.status)) {
+              // We should only be running the step if it's either
+              // a) pending - initial state, or state set on re-try
+              // b) running - if a step fails mid-execution, like a function timeout
+              // otherwise, the step has been invoked erroneously
               console.error(
-                `[Workflows] "${workflowRunId}" - Step invoked erroneously, expected status "pending", got "${step.status}" instead, skipping execution`
+                `[Workflows] "${workflowRunId}" - Step invoked erroneously, expected status "pending" or "running", got "${step.status}" instead, skipping execution`
               );
               span?.setAttributes({
                 ...Attribute.StepSkipped(true),
@@ -698,11 +699,23 @@ export const stepEntrypoint =
               () => stepFn(...args)
             );
 
+            // NOTE: None of the code from this point is guaranteed to run
+            // Since the step might fail or cause a function timeout and the process might be SIGKILL'd
+            // The workflow runtime must be resilient to the below code not executing on a failed step
             result = dehydrateStepReturnValue(result, ops, workflowRunId);
 
             waitUntil(Promise.all(ops));
 
-            // Update the event log with the step result
+            // Mark the step as completed first. This order is important. If a concurrent
+            // execution marked the step as complete, this request should throw, and
+            // this prevent the step_completed event in the event log
+            // TODO: this should really be atomic and handled by the world
+            await world.steps.update(workflowRunId, stepId, {
+              status: 'completed',
+              output: result as Serializable,
+            });
+
+            // Then, append the event log with the step result
             await world.events.create(workflowRunId, {
               eventType: 'step_completed',
               correlationId: stepId,
@@ -711,11 +724,6 @@ export const stepEntrypoint =
               },
             });
 
-            await world.steps.update(workflowRunId, stepId, {
-              status: 'completed',
-              output: result as Serializable,
-            });
-
             span?.setAttributes({
               ...Attribute.StepStatus('completed'),
               ...Attribute.StepResultType(typeof result),