diff --git a/packages/nodes-base/nodes/Microsoft/Sql/MicrosoftSql.node.ts b/packages/nodes-base/nodes/Microsoft/Sql/MicrosoftSql.node.ts
index e1056ed5298..0290b643b2a 100644
--- a/packages/nodes-base/nodes/Microsoft/Sql/MicrosoftSql.node.ts
+++ b/packages/nodes-base/nodes/Microsoft/Sql/MicrosoftSql.node.ts
@@ -247,13 +247,24 @@ export class MicrosoftSql implements INodeType {
 	async execute(this: IExecuteFunctions): Promise<INodeExecutionData[][]> {
 		const credentials = await this.getCredentials('microsoftSql');
 
-		const pool = configurePool(credentials);
-		await pool.connect();
-
 		let responseData: IDataObject | IDataObject[] = [];
 		let returnData: INodeExecutionData[] = [];
-
 		const items = this.getInputData();
+		const pairedItem = generatePairedItemData(items.length);
+
+		const pool = configurePool(credentials);
+		try {
+			await pool.connect();
+		} catch (error) {
+			void pool.close();
+
+			if (this.continueOnFail()) {
+				return [[{ json: { error: error.message }, pairedItem }]];
+			} else {
+				throw error;
+			}
+		}
+
 		const operation = this.getNodeParameter('operation', 0);
 		const nodeVersion = this.getNode().typeVersion;
 
diff --git a/packages/nodes-base/nodes/Microsoft/Sql/test/MicrosoftSql.node.test.ts b/packages/nodes-base/nodes/Microsoft/Sql/test/MicrosoftSql.node.test.ts
new file mode 100644
index 00000000000..f07f1eb7798
--- /dev/null
+++ b/packages/nodes-base/nodes/Microsoft/Sql/test/MicrosoftSql.node.test.ts
@@ -0,0 +1,83 @@
+import { mock } from 'jest-mock-extended';
+import * as mssql from 'mssql';
+import { constructExecutionMetaData, returnJsonArray } from 'n8n-core';
+import type { IExecuteFunctions } from 'n8n-workflow';
+
+import { MicrosoftSql } from '../MicrosoftSql.node';
+
+jest.mock('mssql');
+
+function getMockedExecuteFunctions(overrides: Partial<IExecuteFunctions> = {}) {
+	return mock<IExecuteFunctions>({
+		getCredentials: jest.fn().mockResolvedValue({
+			server: 'localhost',
+			database: 'testdb',
+			user: 'testuser',
+			password: 'testpass',
+			port: 1433,
+			tls: false,
+			allowUnauthorizedCerts: true,
+			tdsVersion: '7_4',
+			connectTimeout: 1000,
+			requestTimeout: 10000,
+		}),
+		getInputData: jest.fn().mockReturnValue([{ json: {} }]),
+		getNode: jest.fn().mockReturnValue({ typeVersion: 1 }),
+		continueOnFail: jest.fn().mockReturnValue(true),
+		helpers: {
+			constructExecutionMetaData,
+			returnJsonArray,
+		},
+		evaluateExpression: jest.fn((_val) => _val),
+		...overrides,
+	});
+}
+
+describe('MicrosoftSql Node', () => {
+	let mockedConnectionPool: jest.MockedClass<typeof mssql.ConnectionPool>;
+
+	beforeEach(() => {
+		mockedConnectionPool = mssql.ConnectionPool as jest.MockedClass<typeof mssql.ConnectionPool>;
+	});
+
+	test('handles connection error with continueOnFail', async () => {
+		const fakeError = new Error('Connection failed');
+		mockedConnectionPool.mockReturnValue(
+			mock<mssql.ConnectionPool>({
+				connect: jest.fn().mockRejectedValue(fakeError),
+				close: jest.fn(),
+			}),
+		);
+
+		const node = new MicrosoftSql();
+		const context = getMockedExecuteFunctions();
+		const result = await node.execute.call(context);
+
+		expect(result).toEqual([[{ json: { error: 'Connection failed' }, pairedItem: [{ item: 0 }] }]]);
+	});
+
+	test('executes query on happy path', async () => {
+		const queryResult = { recordsets: [[{ value: 1 }]] };
+		const mockRequest = { query: jest.fn().mockResolvedValue(queryResult) };
+		const mockPool = mock<mssql.ConnectionPool>({
+			connect: jest.fn().mockResolvedValue(undefined),
+			close: jest.fn(),
+			request: jest.fn().mockReturnValue(mockRequest),
+		});
+
+		mockedConnectionPool.mockReturnValue(mockPool);
+
+		const node = new MicrosoftSql();
+		const context = getMockedExecuteFunctions({
+			getNodeParameter: jest
+				.fn()
+				.mockReturnValueOnce('executeQuery')
+				.mockReturnValueOnce('SELECT 1 AS value'),
+		});
+		const result = await node.execute.call(context);
+
+		expect(result).toEqual([[{ json: { value: 1 }, pairedItem: [{ item: 0 }] }]]);
+		expect(mockRequest.query).toHaveBeenCalledWith('SELECT 1 AS value');
+		expect(mockPool.close).toHaveBeenCalled();
+	});
+});