diff --git a/asterix-app/src/main/java/edu/uci/ics/asterix/aql/translator/AqlTranslator.java b/asterix-app/src/main/java/edu/uci/ics/asterix/aql/translator/AqlTranslator.java
index 976ec7c..0540417 100644
--- a/asterix-app/src/main/java/edu/uci/ics/asterix/aql/translator/AqlTranslator.java
+++ b/asterix-app/src/main/java/edu/uci/ics/asterix/aql/translator/AqlTranslator.java
@@ -518,6 +518,7 @@
         String dataverseName = null;
         String datasetName = null;
         String indexName = null;
+        Dataset ds = null;
         try {
             CreateIndexStatement stmtCreateIndex = (CreateIndexStatement) stmt;
             dataverseName = stmtCreateIndex.getDataverseName() == null ? activeDefaultDataverse == null ? null
@@ -527,7 +528,7 @@
             }
             datasetName = stmtCreateIndex.getDatasetName().getValue();
 
-            Dataset ds = MetadataManager.INSTANCE.getDataset(metadataProvider.getMetadataTxnContext(), dataverseName,
+            ds = MetadataManager.INSTANCE.getDataset(metadataProvider.getMetadataTxnContext(), dataverseName,
                     datasetName);
             if (ds == null) {
                 throw new AlgebricksException("There is no dataset with this name " + datasetName + " in dataverse "
@@ -599,37 +600,38 @@
                 MetadataManager.INSTANCE.abortTransaction(mdTxnCtx);
             }
 
-            //#. execute compensation operations
-            //   remove the index in NC
-            mdTxnCtx = MetadataManager.INSTANCE.beginTransaction();
-            bActiveTxn = true;
-            metadataProvider.setMetadataTxnContext(mdTxnCtx);
-            CompiledIndexDropStatement cds = new CompiledIndexDropStatement(dataverseName, datasetName, indexName);
-            try {
-                JobSpecification jobSpec = IndexOperations.buildDropSecondaryIndexJobSpec(cds, metadataProvider);
-                MetadataManager.INSTANCE.commitTransaction(mdTxnCtx);
-                bActiveTxn = false;
+            if (ds != null) {
+                //#. execute compensation operations
+                //   remove the index in NC
+                mdTxnCtx = MetadataManager.INSTANCE.beginTransaction();
+                bActiveTxn = true;
+                metadataProvider.setMetadataTxnContext(mdTxnCtx);
+                CompiledIndexDropStatement cds = new CompiledIndexDropStatement(dataverseName, datasetName, indexName);
+                try {
+                    JobSpecification jobSpec = IndexOperations.buildDropSecondaryIndexJobSpec(cds, metadataProvider);
+                    MetadataManager.INSTANCE.commitTransaction(mdTxnCtx);
+                    bActiveTxn = false;
 
-                runJob(hcc, jobSpec, true);
-            } catch (Exception e3) {
-                if (bActiveTxn) {
-                    MetadataManager.INSTANCE.abortTransaction(mdTxnCtx);
+                    runJob(hcc, jobSpec, true);
+                } catch (Exception e3) {
+                    if (bActiveTxn) {
+                        MetadataManager.INSTANCE.abortTransaction(mdTxnCtx);
+                    }
+                    //do no throw exception since still the metadata needs to be compensated. 
                 }
-                //do no throw exception since still the metadata needs to be compensated. 
-            }
 
-            //   remove the record from the metadata.
-            mdTxnCtx = MetadataManager.INSTANCE.beginTransaction();
-            metadataProvider.setMetadataTxnContext(mdTxnCtx);
-            try {
-                MetadataManager.INSTANCE.dropIndex(metadataProvider.getMetadataTxnContext(), dataverseName,
-                        datasetName, indexName);
-                MetadataManager.INSTANCE.commitTransaction(mdTxnCtx);
-            } catch (Exception e2) {
-                MetadataManager.INSTANCE.abortTransaction(mdTxnCtx);
-                throw new AlgebricksException(e2);
+                //   remove the record from the metadata.
+                mdTxnCtx = MetadataManager.INSTANCE.beginTransaction();
+                metadataProvider.setMetadataTxnContext(mdTxnCtx);
+                try {
+                    MetadataManager.INSTANCE.dropIndex(metadataProvider.getMetadataTxnContext(), dataverseName,
+                            datasetName, indexName);
+                    MetadataManager.INSTANCE.commitTransaction(mdTxnCtx);
+                } catch (Exception e2) {
+                    MetadataManager.INSTANCE.abortTransaction(mdTxnCtx);
+                    throw new AlgebricksException(e2);
+                }
             }
-
             throw new AlgebricksException(e);
         } finally {
             releaseWriteLatch();
diff --git a/asterix-app/src/test/resources/metadata/queries/exception/issue_272_create_index_error/issue_272_create_index_error.1.ddl.aql b/asterix-app/src/test/resources/metadata/queries/exception/issue_272_create_index_error/issue_272_create_index_error.1.ddl.aql
new file mode 100644
index 0000000..f35a83e
--- /dev/null
+++ b/asterix-app/src/test/resources/metadata/queries/exception/issue_272_create_index_error/issue_272_create_index_error.1.ddl.aql
@@ -0,0 +1,21 @@
+/*
+ * Description  : create an index on a non-existent dataset
+ * Expected Res : Failure
+ * Date         : 14 April 2013
+ * Issue        : 272
+ */
+
+drop dataverse test if exists;
+create dataverse test;
+
+use dataverse test;
+
+create type TestType as open {
+  id: int32,
+  name: string,
+  loc: point
+}
+
+create dataset TestDS(TestType) primary key id;
+create index loc_index on Foo(name);
+
diff --git a/asterix-app/src/test/resources/metadata/testsuite.xml b/asterix-app/src/test/resources/metadata/testsuite.xml
index d4fb915..a2aac74 100644
--- a/asterix-app/src/test/resources/metadata/testsuite.xml
+++ b/asterix-app/src/test/resources/metadata/testsuite.xml
@@ -212,6 +212,12 @@
         <expected-error>AsterixException</expected-error>
       </compilation-unit>
     </test-case>
+    <test-case FilePath="exception">
+      <compilation-unit name="issue_272_create_index_error">
+        <output-dir compare="Text">none</output-dir>
+        <expected-error>AlgebricksException</expected-error>
+      </compilation-unit>
+    </test-case>
   </test-group>
   <test-group name="transaction">
     <test-case FilePath="transaction">