diff --git a/lib/commands/plugin/create-plugin.ts b/lib/commands/plugin/create-plugin.ts
index 423f0c815d..3eb4baa121 100644
--- a/lib/commands/plugin/create-plugin.ts
+++ b/lib/commands/plugin/create-plugin.ts
@@ -5,6 +5,7 @@ export class CreatePluginCommand implements ICommand {
 	public allowedParameters: ICommandParameter[] = [];
 	public userMessage = "What is your GitHub username?\n(will be used to update the Github URLs in the plugin's package.json)";
 	public nameMessage = "What will be the name of your plugin?\n(use lowercase characters and dashes only)";
+	public pathAlreadyExistsMessageTemplate = "Path already exists and is not empty %s";
 	constructor(private $options: IOptions,
 		private $errors: IErrors,
 		private $terminalSpinnerService: ITerminalSpinnerService,
@@ -22,8 +23,17 @@ export class CreatePluginCommand implements ICommand {
 		const selectedPath = path.resolve(pathToProject || ".");
 		const projectDir = path.join(selectedPath, pluginRepoName);
 
-		await this.downloadPackage(selectedTemplate, projectDir);
-		await this.setupSeed(projectDir, pluginRepoName);
+		// Must be out of try catch block, because will throw error if folder alredy exists and we don't want to delete it.
+		this.ensurePackageDir(projectDir);
+
+		try {
+			await this.downloadPackage(selectedTemplate, projectDir);
+			await this.setupSeed(projectDir, pluginRepoName);
+		} catch (err) {
+			// The call to this.ensurePackageDir() above will throw error if folder alredy exists, so it is safe to delete here.
+			this.$fs.deleteDirectory(projectDir);
+			throw err;
+		}
 
 		this.$logger.printMarkdown("Solution for `%s` was successfully created.", pluginRepoName);
 	}
@@ -66,13 +76,15 @@ export class CreatePluginCommand implements ICommand {
 		}
 	}
 
-	private async downloadPackage(selectedTemplate: string, projectDir: string): Promise<void> {
+	private ensurePackageDir(projectDir: string): void {
 		this.$fs.createDirectory(projectDir);
 
 		if (this.$fs.exists(projectDir) && !this.$fs.isEmptyDir(projectDir)) {
-			this.$errors.fail("Path already exists and is not empty %s", projectDir);
+			this.$errors.fail(this.pathAlreadyExistsMessageTemplate, projectDir);
 		}
+	}
 
+	private async downloadPackage(selectedTemplate: string, projectDir: string): Promise<void> {
 		if (selectedTemplate) {
 			this.$logger.printMarkdown("Make sure your custom template is compatible with the Plugin Seed at https://github.com/NativeScript/nativescript-plugin-seed/");
 		} else {
@@ -84,9 +96,6 @@ export class CreatePluginCommand implements ICommand {
 		try {
 			spinner.start();
 			await this.$pacoteService.extractPackage(packageToInstall, projectDir);
-		} catch (err) {
-			this.$fs.deleteDirectory(projectDir);
-			throw err;
 		} finally {
 			spinner.stop();
 		}
diff --git a/test/plugin-create.ts b/test/plugin-create.ts
index c6ab5b6f6b..a59e42f5a5 100644
--- a/test/plugin-create.ts
+++ b/test/plugin-create.ts
@@ -3,6 +3,11 @@ import * as stubs from "./stubs";
 import { CreatePluginCommand } from "../lib/commands/plugin/create-plugin";
 import { assert } from "chai";
 import helpers = require("../lib/common/helpers");
+import * as sinon from "sinon";
+import temp = require("temp");
+import * as path from "path";
+import * as util from "util";
+temp.track();
 
 interface IPacoteOutput {
 	packageName: string;
@@ -10,7 +15,8 @@ interface IPacoteOutput {
 }
 
 const originalIsInteractive = helpers.isInteractive;
-const dummyArgs = ["dummyProjectName"];
+const dummyProjectName = "dummyProjectName";
+const dummyArgs = [dummyProjectName];
 const dummyUser = "devUsername";
 const dummyName = "devPlugin";
 const dummyPacote: IPacoteOutput = { packageName: "", destinationDirectory: "" };
@@ -142,5 +148,62 @@ describe("Plugin create command tests", () => {
 			options.pluginName = dummyName;
 			await createPluginCommand.execute(dummyArgs);
 		});
+
+		describe("when fails", () => {
+			let sandbox: sinon.SinonSandbox;
+			let fsSpy: sinon.SinonSpy;
+			let projectPath: string;
+
+			beforeEach(() => {
+				sandbox = sinon.sandbox.create();
+				const workingPath = temp.mkdirSync("test_plugin");
+				options.path = workingPath;
+				projectPath = path.join(workingPath, dummyProjectName);
+				const fsService = testInjector.resolve("fs");
+				fsSpy = sandbox.spy(fsService, "deleteDirectory");
+			});
+
+			afterEach(() => {
+				sandbox.restore();
+			});
+
+			it("downloadPackage, should remove projectDir", async () => {
+				const errorMessage = "Test fail";
+				const pacoteService = testInjector.resolve("pacoteService");
+				sandbox.stub(pacoteService, "extractPackage").callsFake(() => {
+					return Promise.reject(new Error(errorMessage));
+				});
+
+				const executePromise = createPluginCommand.execute(dummyArgs);
+
+				await assert.isRejected(executePromise, errorMessage);
+				assert(fsSpy.calledWith(projectPath));
+			});
+
+			it("setupSeed, should remove projectDir", async () => {
+				const errorMessage = "Test fail";
+				const npmService = testInjector.resolve("npm");
+				sandbox.stub(npmService, "install").callsFake(() => {
+					return Promise.reject(new Error(errorMessage));
+				});
+
+				const executePromise = createPluginCommand.execute(dummyArgs);
+
+				await assert.isRejected(executePromise, errorMessage);
+				assert(fsSpy.calledWith(projectPath));
+			});
+
+			it("ensurePachageDir should not remove projectDir", async () => {
+				const fsService = testInjector.resolve("fs");
+				sandbox.stub(fsService, "isEmptyDir").callsFake(() => {
+					return false;
+				});
+
+				const executePromise = createPluginCommand.execute(dummyArgs);
+
+				await assert.isRejected(executePromise, util.format(createPluginCommand.pathAlreadyExistsMessageTemplate, projectPath));
+				assert(fsSpy.notCalled);
+			});
+		});
 	});
 });