diff --git a/generator.c b/generator.c
index 420a88bd..5c012b4d 100644
--- a/generator.c
+++ b/generator.c
@@ -2253,6 +2253,7 @@ static void recv_generator(char *fname, struct file_struct *file, int ndx,
 	if (statret != 0) {
 #ifdef SUPPORT_HARD_LINKS
 		if (preserve_hard_links && F_HLINK_NOT_LAST(file)) {
+			file->flags |= FLAG_HLINK_WAIT;
 			cur_flist->in_progress++;
 			goto cleanup;
 		}
@@ -2358,6 +2359,7 @@ static void recv_generator(char *fname, struct file_struct *file, int ndx,
 		/* pretend the file didn't exist */
 #ifdef SUPPORT_HARD_LINKS
 		if (preserve_hard_links && F_HLINK_NOT_LAST(file)) {
+			file->flags |= FLAG_HLINK_WAIT;
 			cur_flist->in_progress++;
 			goto cleanup;
 		}
@@ -2595,7 +2597,10 @@ static void handle_skipped_hlink(struct file_struct *file, int itemizing,
 		return;
 
 	file = cur_flist->files[new_last_ndx - cur_flist->ndx_start];
-	cur_flist->in_progress--; /* undo prior increment */
+	if (file->flags & FLAG_HLINK_WAIT) {
+		file->flags &= ~FLAG_HLINK_WAIT;
+		cur_flist->in_progress--; /* undo prior increment */
+	}
 	f_name(file, fbuf);
 	recv_generator(fbuf, file, new_last_ndx, itemizing, code, f_out);
 
diff --git a/hlink.c b/hlink.c
index 2e84b49f..894f01a1 100644
--- a/hlink.c
+++ b/hlink.c
@@ -335,6 +335,7 @@ int hard_link_check(struct file_struct *file, int ndx, char *fname,
 				F_HL_PREV(file) = F_HL_PREV(prev_file);
 				F_HL_PREV(prev_file) = ndx;
 				file->flags |= FLAG_FILE_SENT;
+				file->flags |= FLAG_HLINK_WAIT;
 				cur_flist->in_progress++;
 				if (DEBUG_GTE(HLINK, 2)) {
 					rprintf(FINFO, "hlink for %d (%s,%d): waiting for %d\n",
@@ -535,7 +536,10 @@ void finish_hard_link(struct file_struct *file, const char *fname, int fin_ndx,
 		prev_statret = link_stat(f_name(file, prev_name), &prev_sx.st, 0);
 		val = maybe_hard_link(file, ndx, prev_name, prev_statret, &prev_sx,
 				      our_name, stp, fname, itemizing, code);
-		flist->in_progress--;
+		if (file->flags & FLAG_HLINK_WAIT) {
+			file->flags &= ~FLAG_HLINK_WAIT;
+			flist->in_progress--;
+		}
 		free_stat_x(&prev_sx);
 		if (val < 0)
 			continue;
@@ -555,9 +559,16 @@ void finish_hard_link(struct file_struct *file, const char *fname, int fin_ndx,
 			exit_cleanup(RERR_MESSAGEIO);
 		}
 		if (CVAL(node->data, 0) != 0) {
-			rprintf(FERROR, "Hlink node data for %d already has path=%s (%s)\n",
+			/* A finished leader was already recorded for this group.
+			 * This can happen when an earlier member of the group failed
+			 * to hard-link (e.g. EMLINK or EXDEV) and was written as a
+			 * regular file, then finished.  Keep the original leader's
+			 * path and tolerate the duplicate finish instead of aborting
+			 * the whole transfer.  (Upstream: RsyncProject/rsync#741.) */
+			rprintf(FINFO,
+				"hlink: group %d already finished at path=%s (%s); ignoring duplicate finish\n",
 				gnum, (char*)node->data, f_name(file, prev_name));
-			exit_cleanup(RERR_MESSAGEIO);
+			return;
 		}
 		free(node->data);
 		node->data = strdup(our_name);
diff --git a/rsync.h b/rsync.h
index 8e8e76e9..adf9bf1f 100644
--- a/rsync.h
+++ b/rsync.h
@@ -93,6 +93,7 @@
 #define FLAG_TIME_FAILED (1<<11)/* generator */
 #define FLAG_MOD_NSEC (1<<12)	/* sender/receiver/generator */
 #define FLAG_GOT_DIR_FLIST (1<<13)/* sender/receiver/generator - dir_flist only */
+#define FLAG_HLINK_WAIT (1<<14) /* generator (w/FLAG_HLINKED): counted in in_progress, pending hard-link processing */
 
 /* These flags are passed to functions but not stored. */