diff --git a/src/compiler/compiler.c b/src/compiler/compiler.c
index 2702f82c..8717f643 100644
--- a/src/compiler/compiler.c
+++ b/src/compiler/compiler.c
@@ -2798,6 +2798,8 @@ static Error* compile_stmt(Compiler* self) {
         case TK_WITH: {
             check(EXPR(self));  // [ <expr> ]
             Ctx__s_emit_top(ctx());
+            // Save context manager for later __exit__ call
+            Ctx__emit_(ctx(), OP_DUP_TOP, BC_NOARG, prev()->line);
             Ctx__enter_block(ctx(), CodeBlockType_WITH);
             NameExpr* as_name = NULL;
             if(match(TK_AS)) {
@@ -2806,17 +2808,33 @@ static Error* compile_stmt(Compiler* self) {
                 as_name = NameExpr__new(prev()->line, name, name_scope(self));
             }
             Ctx__emit_(ctx(), OP_WITH_ENTER, BC_NOARG, prev()->line);
-            // [ <expr> <expr>.__enter__() ]
             if(as_name) {
                 bool ok = vtemit_store((Expr*)as_name, ctx());
                 vtdelete((Expr*)as_name);
                 if(!ok) return SyntaxError(self, "invalid syntax");
             } else {
-                // discard `__enter__()`'s return value
                 Ctx__emit_(ctx(), OP_POP_TOP, BC_NOARG, BC_KEEPLINE);
             }
+            // Wrap body in try-except to ensure __exit__ is called even on exception
+            Ctx__enter_block(ctx(), CodeBlockType_TRY);
+            Ctx__emit_(ctx(), OP_BEGIN_TRY, BC_NOARG, prev()->line);
             check(compile_block_body(self));
+            Ctx__emit_(ctx(), OP_END_TRY, BC_NOARG, BC_KEEPLINE);
+            // Normal exit: call __exit__(None, None, None)
+            Ctx__emit_(ctx(), OP_LOAD_NONE, BC_NOARG, prev()->line);
+            Ctx__emit_(ctx(), OP_LOAD_NONE, BC_NOARG, prev()->line);
+            Ctx__emit_(ctx(), OP_LOAD_NONE, BC_NOARG, prev()->line);
             Ctx__emit_(ctx(), OP_WITH_EXIT, BC_NOARG, prev()->line);
+            int jump_patch = Ctx__emit_(ctx(), OP_JUMP_FORWARD, BC_NOARG, BC_KEEPLINE);
+            Ctx__exit_block(ctx());
+            // Exception handler: call __exit__ with exception info, then re-raise
+            Ctx__emit_(ctx(), OP_PUSH_EXCEPTION, BC_NOARG, BC_KEEPLINE);
+            Ctx__emit_(ctx(), OP_LOAD_NONE, BC_NOARG, BC_KEEPLINE);  // exc_type
+            Ctx__emit_(ctx(), OP_ROT_TWO, BC_NOARG, BC_KEEPLINE);     // reorder: [cm, None, exc]
+            Ctx__emit_(ctx(), OP_LOAD_NONE, BC_NOARG, BC_KEEPLINE);  // exc_tb
+            Ctx__emit_(ctx(), OP_WITH_EXIT, BC_NOARG, prev()->line);
+            Ctx__emit_(ctx(), OP_RE_RAISE, BC_NOARG, BC_KEEPLINE);
+            Ctx__patch_jump(ctx(), jump_patch);
             Ctx__exit_block(ctx());
         } break;
         /*************************************************/
diff --git a/src/interpreter/ceval.c b/src/interpreter/ceval.c
index 6076464b..95e0dc85 100644
--- a/src/interpreter/ceval.c
+++ b/src/interpreter/ceval.c
@@ -1122,14 +1122,35 @@ __NEXT_STEP:
             DISPATCH();
         }
         case OP_WITH_EXIT: {
-            // [expr]
-            py_push(TOP());
+            // Stack: [cm, exc_type, exc_val, exc_tb]
+            // Call cm.__exit__(exc_type, exc_val, exc_tb)
+            py_Ref exc_tb = TOP();
+            py_Ref exc_val = SECOND();
+            py_Ref exc_type = THIRD();
+            py_Ref cm = FOURTH();
+            
+            // Save all values from stack
+            py_TValue saved_cm = *cm;
+            py_TValue saved_exc_type = *exc_type;
+            py_TValue saved_exc_val = *exc_val;
+            py_TValue saved_exc_tb = *exc_tb;
+            self->stack.sp -= 4;
+            
+            // Push cm and get __exit__ method
+            py_push(&saved_cm);
             if(!py_pushmethod(__exit__)) {
-                TypeError("'%t' object does not support the context manager protocol", TOP()->type);
+                TypeError("'%t' object does not support the context manager protocol", saved_cm.type);
                 goto __ERROR;
             }
-            if(!py_vectorcall(0, 0)) goto __ERROR;
-            POP();
+            
+            // Push arguments: exc_type, exc_val, exc_tb
+            PUSH(&saved_exc_type);
+            PUSH(&saved_exc_val);
+            PUSH(&saved_exc_tb);
+            
+            // Call __exit__(exc_type, exc_val, exc_tb)
+            if(!py_vectorcall(3, 0)) goto __ERROR;
+            py_pop();  // discard return value
             DISPATCH();
         }
         ///////////
diff --git a/tests/520_context.py b/tests/520_context.py
index 53d22336..5fc0ad30 100644
--- a/tests/520_context.py
+++ b/tests/520_context.py
@@ -27,4 +27,29 @@ assert path == ['enter', 'in', 'exit']
 
 path.clear()
 
+# Test that __exit__ is called even when an exception occurs
+class B:
+    def __init__(self):
+        self.path = []
+    
+    def __enter__(self):
+        path.append('enter')
+        return self
+    
+    def __exit__(self, exc_type, exc_val, exc_tb):
+        path.append('exit')
+        if exc_type is not None:
+            path.append('exception')
+        return False  # propagate exception
+
+try:
+    with B():
+        path.append('before_raise')
+        raise ValueError('test')
+        path.append('after_raise')  # should not be reached
+except ValueError:
+    pass
+
+assert path == ['enter', 'before_raise', 'exit', 'exception'], f"Expected ['enter', 'before_raise', 'exit', 'exception'], got {path}"
+