diff --git a/src/proto/streams/streams.rs b/src/proto/streams/streams.rs
index fce6bfd1..72f2d11e 100644
--- a/src/proto/streams/streams.rs
+++ b/src/proto/streams/streams.rs
@@ -555,6 +555,13 @@ impl Inner {
                         id,
                         self.actions.recv.max_stream_id()
                     );
+
+                    // We still need to account for connection-level flow control.
+                    let sz = frame.flow_controlled_len();
+                    assert!(sz <= super::MAX_WINDOW_SIZE as usize);
+                    let sz = sz as WindowSize;
+                    self.actions.recv.ignore_data(sz)?;
+
                     return Ok(());
                 }
 
@@ -566,8 +573,8 @@ impl Inner {
                     // this is just a sanity check.
                     assert!(sz <= super::MAX_WINDOW_SIZE as usize);
                     let sz = sz as WindowSize;
-
                     self.actions.recv.ignore_data(sz)?;
+
                     return Err(Error::library_reset(id, Reason::STREAM_CLOSED));
                 }
 
diff --git a/tests/h2-tests/tests/flow_control.rs b/tests/h2-tests/tests/flow_control.rs
index 57453e78..bb04cc9b 100644
--- a/tests/h2-tests/tests/flow_control.rs
+++ b/tests/h2-tests/tests/flow_control.rs
@@ -2237,3 +2237,113 @@ async fn too_many_window_update_resets_causes_go_away() {
 
     join(srv, client).await;
 }
+
+#[tokio::test]
+async fn goaway_ignores_data_but_returns_connection_capacity() {
+    h2_support::trace_init!();
+
+    for padded in [false, true] {
+        let (io, mut client) = mock::new();
+
+        // Test both with and without padding
+        let data = if padded {
+            let mut frame = vec![0u8; 16_384];
+            frame[0] = 5; // 5 bytes of padding
+            frame
+        } else {
+            vec![0u8; 16_384]
+        };
+
+        let client = async move {
+            let _ = client.assert_server_handshake().await;
+
+            client
+                .send_frame(
+                    frames::headers(1)
+                        .request("GET", "https://example.com/")
+                        .eos(),
+                )
+                .await;
+
+            // Receive GOAWAY(MAX) + PING from graceful shutdown.
+            client.recv_frame(frames::go_away(2147483647)).await;
+            client.recv_frame(frames::ping(frame::Ping::SHUTDOWN)).await;
+
+            client
+                .recv_frame(frames::headers(1).response(200).eos())
+                .await;
+
+            // Stream 3 arrives "in flight" before client processes GOAWAY.
+            client
+                .send_frame(frames::headers(3).request("POST", "https://example.com/"))
+                .await;
+
+            // Complete the graceful shutdown handshake.
+            client
+                .send_frame(frames::ping(frame::Ping::SHUTDOWN).pong())
+                .await;
+
+            // Final GOAWAY(3): streams 1 and 3 are accepted, everything above is rejected.
+            client.recv_frame(frames::go_away(3)).await;
+
+            // Stream 5 is above last_stream_id=3; DATA will be ignored,
+            // but connection window must still be replenished.
+            client
+                .send_frame(frames::headers(5).request("POST", "https://example.com/"))
+                .await;
+            client
+                .send_frame(if padded {
+                    frames::data(5, &data[..]).padded()
+                } else {
+                    frames::data(5, &data[..])
+                })
+                .await;
+            client
+                .send_frame(if padded {
+                    frames::data(5, &data[..]).padded()
+                } else {
+                    frames::data(5, &data[..])
+                })
+                .await;
+
+            client
+                .recv_frame(frames::window_update(0, 16_384 * 2))
+                .await;
+
+            client.send_frame(frames::data(3, "").eos()).await;
+
+            client
+                .recv_frame(frames::headers(3).response(200).eos())
+                .await;
+
+            client.recv_eof().await;
+        };
+
+        let srv = async move {
+            let mut srv = server::handshake(io).await.expect("handshake");
+
+            let (_req, mut stream) = srv.next().await.unwrap().unwrap();
+            srv.graceful_shutdown();
+            let rsp = http::Response::builder().status(200).body(()).unwrap();
+            stream.send_response(rsp, true).unwrap();
+
+            let (req, mut stream) = srv.next().await.unwrap().unwrap();
+            let body = req.into_parts().1;
+
+            let body = async move {
+                let buf = util::concat(body).await.unwrap();
+                assert!(buf.is_empty());
+                let rsp = http::Response::builder().status(200).body(()).unwrap();
+                stream.send_response(rsp, true).unwrap();
+            };
+
+            let mut srv = Box::pin(async move {
+                assert!(srv.next().await.is_none(), "unexpected stream after GOAWAY");
+            });
+            srv.drive(body).await;
+            srv.await;
+        };
+
+        join(client, srv).await;
+    }
+}