diff --git a/fs/ext4/ialloc.c b/fs/ext4/ialloc.c
index 088afe07ddda..e57e8d90ea54 100644
--- a/fs/ext4/ialloc.c
+++ b/fs/ext4/ialloc.c
@@ -1115,8 +1115,7 @@ struct inode *__ext4_new_inode(handle_t *handle, struct inode *dir,
 	}
 
 	if (encrypt) {
-		/* give pointer to avoid set_context with journal ops. */
-		err = fscrypt_inherit_context(dir, inode, &encrypt, true);
+		err = fscrypt_inherit_context(dir, inode, handle, true);
 		if (err)
 			goto fail_free_drop;
 	}
diff --git a/fs/ext4/super.c b/fs/ext4/super.c
index cbfaee175fa5..bb3a8edc75db 100644
--- a/fs/ext4/super.c
+++ b/fs/ext4/super.c
@@ -1114,14 +1114,22 @@ static int ext4_prepare_context(struct inode *inode)
 static int ext4_set_context(struct inode *inode, const void *ctx, size_t len,
 							void *fs_data)
 {
-	handle_t *handle;
-	int res, res2;
+	handle_t *handle = fs_data;
+	int res, res2, retries = 0;
 
-	/* fs_data is null when internally used. */
-	if (fs_data) {
-		res  = ext4_xattr_set(inode, EXT4_XATTR_INDEX_ENCRYPTION,
-				EXT4_XATTR_NAME_ENCRYPTION_CONTEXT, ctx,
-				len, 0);
+	/*
+	 * If a journal handle was specified, then the encryption context is
+	 * being set on a new inode via inheritance and is part of a larger
+	 * transaction to create the inode.  Otherwise the encryption context is
+	 * being set on an existing inode in its own transaction.  Only in the
+	 * latter case should the "retry on ENOSPC" logic be used.
+	 */
+
+	if (handle) {
+		res = ext4_xattr_set_handle(handle, inode,
+					    EXT4_XATTR_INDEX_ENCRYPTION,
+					    EXT4_XATTR_NAME_ENCRYPTION_CONTEXT,
+					    ctx, len, 0);
 		if (!res) {
 			ext4_set_inode_flag(inode, EXT4_INODE_ENCRYPT);
 			ext4_clear_inode_state(inode,
@@ -1134,14 +1142,15 @@ static int ext4_set_context(struct inode *inode, const void *ctx, size_t len,
 		return res;
 	}
 
+retry:
 	handle = ext4_journal_start(inode, EXT4_HT_MISC,
 			ext4_jbd2_credits_xattr(inode));
 	if (IS_ERR(handle))
 		return PTR_ERR(handle);
 
-	res = ext4_xattr_set(inode, EXT4_XATTR_INDEX_ENCRYPTION,
-			EXT4_XATTR_NAME_ENCRYPTION_CONTEXT, ctx,
-			len, 0);
+	res = ext4_xattr_set_handle(handle, inode, EXT4_XATTR_INDEX_ENCRYPTION,
+				    EXT4_XATTR_NAME_ENCRYPTION_CONTEXT,
+				    ctx, len, 0);
 	if (!res) {
 		ext4_set_inode_flag(inode, EXT4_INODE_ENCRYPT);
 		/* Update inode->i_flags - e.g. S_DAX may get disabled */
@@ -1151,6 +1160,9 @@ static int ext4_set_context(struct inode *inode, const void *ctx, size_t len,
 			EXT4_ERROR_INODE(inode, "Failed to mark inode dirty");
 	}
 	res2 = ext4_journal_stop(handle);
+
+	if (res == -ENOSPC && ext4_should_retry_alloc(inode->i_sb, &retries))
+		goto retry;
 	if (!res)
 		res = res2;
 	return res;