diff --git a/changelogs/fragments/2634-terraform-switch-workspace.yml b/changelogs/fragments/2634-terraform-switch-workspace.yml
new file mode 100644
index 0000000000..247447b3a8
--- /dev/null
+++ b/changelogs/fragments/2634-terraform-switch-workspace.yml
@@ -0,0 +1,2 @@
+bugfixes:
+  - terraform - ensure the workspace is set back to its previous value when the apply fails (https://github.com/ansible-collections/community.general/pull/2634).
diff --git a/plugins/modules/cloud/misc/terraform.py b/plugins/modules/cloud/misc/terraform.py
index 8a34f9699b..86521ed264 100644
--- a/plugins/modules/cloud/misc/terraform.py
+++ b/plugins/modules/cloud/misc/terraform.py
@@ -447,7 +447,14 @@ def main():
         command.append(plan_file)
 
     if needs_application and not module.check_mode and not state == 'planned':
-        rc, out, err = module.run_command(command, check_rc=True, cwd=project_path)
+        rc, out, err = module.run_command(command, check_rc=False, cwd=project_path)
+        if rc != 0:
+            if workspace_ctx["current"] != workspace:
+                select_workspace(command[0], project_path, workspace_ctx["current"])
+            module.fail_json(msg=err.rstrip(), rc=rc, stdout=out,
+                             stdout_lines=out.splitlines(), stderr=err,
+                             stderr_lines=err.splitlines(),
+                             cmd=' '.join(command))
         # checks out to decide if changes were made during execution
         if ' 0 added, 0 changed' not in out and not state == "absent" or ' 0 destroyed' not in out:
             changed = True