diff --git a/fs/ceph/file.c b/fs/ceph/file.c
index b24442e27e4e0422fc352d2e40a53b3643e9f40c..c138e8126286cfe52996f982071003fbc95243a6 100644
--- a/fs/ceph/file.c
+++ b/fs/ceph/file.c
@@ -605,13 +605,25 @@ static int ceph_finish_async_create(struct inode *dir, struct dentry *dentry,
 	in.cap.realm = cpu_to_le64(ci->i_snap_realm->ino);
 	in.cap.flags = CEPH_CAP_FLAG_AUTH;
 	in.ctime = in.mtime = in.atime = iinfo.btime;
-	in.mode = cpu_to_le32((u32)mode);
 	in.truncate_seq = cpu_to_le32(1);
 	in.truncate_size = cpu_to_le64(-1ULL);
 	in.xattr_version = cpu_to_le64(1);
 	in.uid = cpu_to_le32(from_kuid(&init_user_ns, current_fsuid()));
-	in.gid = cpu_to_le32(from_kgid(&init_user_ns, dir->i_mode & S_ISGID ?
-				dir->i_gid : current_fsgid()));
+	if (dir->i_mode & S_ISGID) {
+		in.gid = cpu_to_le32(from_kgid(&init_user_ns, dir->i_gid));
+
+		/* Directories always inherit the setgid bit. */
+		if (S_ISDIR(mode))
+			mode |= S_ISGID;
+		else if ((mode & (S_ISGID | S_IXGRP)) == (S_ISGID | S_IXGRP) &&
+			 !in_group_p(dir->i_gid) &&
+			 !capable_wrt_inode_uidgid(&init_user_ns, dir, CAP_FSETID))
+			mode &= ~S_ISGID;
+	} else {
+		in.gid = cpu_to_le32(from_kgid(&init_user_ns, current_fsgid()));
+	}
+	in.mode = cpu_to_le32((u32)mode);
+
 	in.nlink = cpu_to_le32(1);
 	in.max_size = cpu_to_le64(lo->stripe_unit);