diff --git a/spring-kafka/src/main/java/org/springframework/kafka/core/DefaultKafkaProducerFactory.java b/spring-kafka/src/main/java/org/springframework/kafka/core/DefaultKafkaProducerFactory.java
index b0000605..8b53b6ba 100644
--- a/spring-kafka/src/main/java/org/springframework/kafka/core/DefaultKafkaProducerFactory.java
+++ b/spring-kafka/src/main/java/org/springframework/kafka/core/DefaultKafkaProducerFactory.java
@@ -216,10 +216,21 @@ public class DefaultKafkaProducerFactory<K, V> implements ProducerFactory<K, V>,
 		return this.producer;
 	}
 
+	/**
+	 * Subclasses must return a raw producer which will be wrapped in a
+	 * {@link CloseSafeProducer}.
+	 * @return the producer.
+	 */
 	protected Producer<K, V> createKafkaProducer() {
 		return new KafkaProducer<K, V>(this.configs, this.keySerializer, this.valueSerializer);
 	}
 
+	/**
+	 * Subclasses must return a producer from the {@link #getCache()} or a
+	 * new raw producer wrapped in a {@link CloseSafeProducer}.
+	 * @return the producer - cannot be null.
+	 * @since 1.3
+	 */
 	protected Producer<K, V> createTransactionalProducer() {
 		Producer<K, V> producer = this.cache.poll();
 		if (producer == null) {
@@ -235,14 +246,28 @@ public class DefaultKafkaProducerFactory<K, V> implements ProducerFactory<K, V>,
 		}
 	}
 
-	private static class CloseSafeProducer<K, V> implements Producer<K, V> {
+	protected BlockingQueue<CloseSafeProducer<K, V>> getCache() {
+		return this.cache;
+	}
+
+	/**
+	 * A wrapper class for the delegate.
+	 *
+	 * @param <K> the key type.
+	 * @param <V> the value type.
+	 *
+	 */
+	protected static class CloseSafeProducer<K, V> implements Producer<K, V> {
 
 		private final Producer<K, V> delegate;
 
 		private final BlockingQueue<CloseSafeProducer<K, V>> cache;
 
+		private volatile boolean txFailed;
+
 		CloseSafeProducer(Producer<K, V> delegate) {
 			this(delegate, null);
+			Assert.isTrue(!(delegate instanceof CloseSafeProducer), "Cannot double-wrap a producer");
 		}
 
 		CloseSafeProducer(Producer<K, V> delegate, BlockingQueue<CloseSafeProducer<K, V>> cache) {
@@ -282,7 +307,21 @@ public class DefaultKafkaProducerFactory<K, V> implements ProducerFactory<K, V>,
 
 		@Override
 		public void beginTransaction() throws ProducerFencedException {
-			this.delegate.beginTransaction();
+			try {
+				this.delegate.beginTransaction();
+			}
+			catch (RuntimeException e) {
+				this.txFailed = true;
+				logger.error("Illegal transaction state; producer removed from cache; possible cause: "
+						+ "broker restarted during transaction", e);
+				try {
+					this.delegate.close();
+				}
+				catch (Exception ee) {
+					// empty
+				}
+				throw e;
+			}
 		}
 
 		@Override
@@ -303,7 +342,7 @@ public class DefaultKafkaProducerFactory<K, V> implements ProducerFactory<K, V>,
 
 		@Override
 		public void close() {
-			if (this.cache != null) {
+			if (this.cache != null && !this.txFailed) {
 				synchronized (this) {
 					if (!this.cache.contains(this)) {
 						this.cache.offer(this);
diff --git a/spring-kafka/src/main/java/org/springframework/kafka/core/KafkaTemplate.java b/spring-kafka/src/main/java/org/springframework/kafka/core/KafkaTemplate.java
index e07e3407..d981b83e 100644
--- a/spring-kafka/src/main/java/org/springframework/kafka/core/KafkaTemplate.java
+++ b/spring-kafka/src/main/java/org/springframework/kafka/core/KafkaTemplate.java
@@ -258,8 +258,8 @@ public class KafkaTemplate<K, V> implements KafkaOperations<K, V> {
 		Producer<K, V> producer = this.producers.get();
 		Assert.state(producer == null, "Nested calls to 'executeInTransaction' are not allowed");
 		producer = this.producerFactory.createProducer();
-		this.producers.set(producer);
 		producer.beginTransaction();
+		this.producers.set(producer);
 		T result = null;
 		try {
 			result = callback.doInOperations(this);
diff --git a/spring-kafka/src/test/java/org/springframework/kafka/core/DefaultKafkaProducerFactoryTests.java b/spring-kafka/src/test/java/org/springframework/kafka/core/DefaultKafkaProducerFactoryTests.java
new file mode 100644
index 00000000..653c7f8a
--- /dev/null
+++ b/spring-kafka/src/test/java/org/springframework/kafka/core/DefaultKafkaProducerFactoryTests.java
@@ -0,0 +1,101 @@
+/*
+ * Copyright 2018 the original author or authors.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *      http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package org.springframework.kafka.core;
+
+import static org.assertj.core.api.Assertions.assertThat;
+import static org.mockito.ArgumentMatchers.any;
+import static org.mockito.BDDMockito.willAnswer;
+import static org.mockito.Mockito.inOrder;
+import static org.mockito.Mockito.mock;
+
+import java.util.HashMap;
+import java.util.concurrent.BlockingQueue;
+import java.util.concurrent.atomic.AtomicInteger;
+
+import org.apache.kafka.clients.producer.Producer;
+import org.apache.kafka.common.KafkaException;
+import org.junit.jupiter.api.Test;
+import org.mockito.InOrder;
+
+import org.springframework.kafka.test.utils.KafkaTestUtils;
+import org.springframework.kafka.transaction.KafkaTransactionManager;
+import org.springframework.transaction.CannotCreateTransactionException;
+import org.springframework.transaction.support.TransactionTemplate;
+
+/**
+ * @author Gary Russell
+ * @since 1.3.5
+ *
+ */
+public class DefaultKafkaProducerFactoryTests {
+
+	@SuppressWarnings({ "rawtypes", "unchecked" })
+	@Test
+	public void testProducerClosedAfterBadTransition() throws Exception {
+		final Producer producer = mock(Producer.class);
+		DefaultKafkaProducerFactory pf = new DefaultKafkaProducerFactory(new HashMap<>()) {
+
+			@Override
+			protected Producer createTransactionalProducer() {
+				producer.initTransactions();
+				BlockingQueue<Producer> cache = getCache();
+				Producer cached = cache.poll();
+				return cached == null ? new CloseSafeProducer(producer, cache) : cached;
+			}
+
+		};
+		pf.setTransactionIdPrefix("foo");
+
+		final AtomicInteger flag = new AtomicInteger();
+		willAnswer(i -> {
+			if (flag.incrementAndGet() == 2) {
+				throw new KafkaException("Invalid transition ...");
+			}
+			return null;
+		}).given(producer).beginTransaction();
+
+		final KafkaTemplate kafkaTemplate = new KafkaTemplate(pf);
+		KafkaTransactionManager tm = new KafkaTransactionManager(pf);
+		TransactionTemplate transactionTemplate = new TransactionTemplate(tm);
+		transactionTemplate.execute(s -> {
+			kafkaTemplate.send("foo", "bar");
+			return null;
+		});
+		BlockingQueue cache = KafkaTestUtils.getPropertyValue(pf, "cache", BlockingQueue.class);
+		assertThat(cache).hasSize(1);
+		try {
+			transactionTemplate.execute(s -> {
+				return null;
+			});
+		}
+		catch (CannotCreateTransactionException e) {
+			assertThat(e.getCause().getMessage()).contains("Invalid transition");
+		}
+		assertThat(cache).hasSize(0);
+
+		InOrder inOrder = inOrder(producer);
+		inOrder.verify(producer).initTransactions();
+		inOrder.verify(producer).beginTransaction();
+		inOrder.verify(producer).send(any(), any());
+		inOrder.verify(producer).commitTransaction();
+		inOrder.verify(producer).beginTransaction();
+		inOrder.verify(producer).close();
+		inOrder.verifyNoMoreInteractions();
+		pf.destroy();
+	}
+
+}