diff --git a/server/filestore.go b/server/filestore.go
index df1ce61c434..e62ed5b7b1a 100644
--- a/server/filestore.go
+++ b/server/filestore.go
@@ -475,18 +475,20 @@ func newFileStoreWithCreated(fcfg FileStoreConfig, cfg StreamConfig, created tim
 		}
 
 		// Check if our prior state remembers a last sequence past where we can see.
-		if fs.ld != nil && prior.LastSeq > fs.state.LastSeq {
+		if prior.LastSeq > fs.state.LastSeq {
 			fs.state.LastSeq, fs.state.LastTime = prior.LastSeq, prior.LastTime
 			if fs.state.Msgs == 0 {
 				fs.state.FirstSeq = fs.state.LastSeq + 1
 				fs.state.FirstTime = time.Time{}
 			}
-			if _, err := fs.newMsgBlockForWrite(); err == nil {
-				if err = fs.writeTombstone(prior.LastSeq, prior.LastTime.UnixNano()); err != nil {
+			if fs.ld != nil {
+				if _, err := fs.newMsgBlockForWrite(); err == nil {
+					if err = fs.writeTombstone(prior.LastSeq, prior.LastTime.UnixNano()); err != nil {
+						return nil, err
+					}
+				} else {
 					return nil, err
 				}
-			} else {
-				return nil, err
 			}
 		}
 		// Since we recovered here, make sure to kick ourselves to write out our stream state.
diff --git a/server/filestore_test.go b/server/filestore_test.go
index 74665610afd..f3aede141d2 100644
--- a/server/filestore_test.go
+++ b/server/filestore_test.go
@@ -9555,3 +9555,33 @@ func TestFileStoreAllLastSeqs(t *testing.T) {
 	require_NoError(t, err)
 	require_True(t, reflect.DeepEqual(seqs, expected))
 }
+
+func TestFileStoreRecoverDoesNotResetStreamState(t *testing.T) {
+	cfg := StreamConfig{Name: "zzz", Subjects: []string{"ev.1"}, Storage: FileStorage, MaxAge: 5 * time.Second, Retention: WorkQueuePolicy}
+	fs, err := newFileStore(
+		FileStoreConfig{StoreDir: t.TempDir()},
+		cfg)
+
+	require_NoError(t, err)
+	defer fs.Stop()
+
+	subj, msg := "foo", []byte("Hello World")
+	toStore := 500
+	for i := 0; i < toStore; i++ {
+		_, _, err := fs.StoreMsg(subj, nil, msg, 0)
+		require_NoError(t, err)
+	}
+	time.Sleep(5 * time.Second)
+	fs, err = newFileStoreWithCreated(fs.fcfg, cfg, time.Now(), prf(&fs.fcfg), nil) //Expire all messages so stream does not hold any message, this is to simulate consumer consuming all messages.
+	require_NoError(t, err)
+	require_NoError(t, fs.Stop())      //To Ensure there is a state file created
+	require_True(t, len(fs.blks) == 1) //Since all messages are expire there should be only 1 blk file exist
+	os.Remove(fs.blks[0].mfn)          // we can change it to have a consumer and consumer all messages too, but removing blk files will simulate same behavior
+
+	//Now at this point stream has only index.db file and no blk files as all are deleted. previously it used to reset the stream state to 0
+	// now it will use index.db to populate stream state if could not be recovered from blk files.
+	fs, err = newFileStoreWithCreated(fs.fcfg, cfg, time.Now(), prf(&fs.fcfg), nil)
+	require_NoError(t, err)
+	require_True(t, fs.state.FirstSeq|fs.state.LastSeq != 0)
+
+}