diff --git a/dial9-tokio-telemetry/src/telemetry/writer.rs b/dial9-tokio-telemetry/src/telemetry/writer.rs
index 51a690e3..590a21db 100644
--- a/dial9-tokio-telemetry/src/telemetry/writer.rs
+++ b/dial9-tokio-telemetry/src/telemetry/writer.rs
@@ -432,24 +432,84 @@ impl RotatingWriter {
         let WriterState::Active { writer: raw, .. } = &mut self.state else {
             return Ok(());
         };
-        raw.flush()?;
-        // Seal the current segment: snapshot size and rename .active → .bin
+
+        // Advance timers up front. If anything below fails the flush loop must
+        // NOT see should_drain() return true on the next 5ms tick — otherwise
+        // it busy-spins re-attempting the same failing rotate.
+        let now = time_source().system_time().as_std();
+        self.next_rotation_time = Self::next_boundary(now, self.rotation_period);
+        self.next_drain_time = Self::next_boundary(now, self.drain_interval);
+
+        // Best-effort flush. If the underlying file is gone the buffered bytes
+        // are already lost; proceed to rotate rather than erroring.
+        let _ = raw.flush();
         let closed_size = raw.bytes_written();
-        let sealed = Self::file_path(&self.base_path, self.next_index - 1);
-        fs::rename(&self.active_path, &sealed)?;
-        self.closed_files.push_back((sealed, closed_size));
+        let sealed_path = Self::file_path(&self.base_path, self.next_index - 1);
+
+        // Seal the current segment. If `.active` was removed externally
+        // (operator, log rotation, container teardown) abandon the segment
+        // and start a fresh one. On any other error give up cleanly: mark
+        // the writer Finished so writes and rotations stop, instead of
+        // leaving inconsistent state.
+        match fs::rename(&self.active_path, &sealed_path) {
+            Ok(()) => self.closed_files.push_back((sealed_path, closed_size)),
+            Err(e) if e.kind() == std::io::ErrorKind::NotFound => {
+                rate_limited!(Duration::from_secs(60), {
+                    tracing::warn!(
+                        "active trace file {} disappeared before sealing; \
+                         abandoning segment and starting a fresh one",
+                        self.active_path.display()
+                    );
+                });
+            }
+            Err(e) => {
+                self.state = WriterState::Finished;
+                return Err(e);
+            }
+        }
 
         let new_path = Self::active_path(&self.base_path, self.next_index);
         self.next_index += 1;
-        let file = File::create(&new_path)?;
+
+        // Open the new active file. NotFound here typically means the parent
+        // directory itself was removed (the most likely real-world cause of
+        // the original `.active` file disappearing too). Try to recreate the
+        // directory once and retry. If that still fails, mark Finished so the
+        // writer stops cleanly rather than retrying every drain cycle.
+        let file = match File::create(&new_path) {
+            Ok(f) => f,
+            Err(e) if e.kind() == std::io::ErrorKind::NotFound => {
+                if let Some(parent) = new_path.parent()
+                    && let Err(mkdir_err) = fs::create_dir_all(parent)
+                {
+                    self.state = WriterState::Finished;
+                    return Err(mkdir_err);
+                }
+                match File::create(&new_path) {
+                    Ok(f) => f,
+                    Err(e) => {
+                        self.state = WriterState::Finished;
+                        return Err(e);
+                    }
+                }
+            }
+            Err(e) => {
+                self.state = WriterState::Finished;
+                return Err(e);
+            }
+        };
         let writer = BufWriter::new(file);
-        self.state = Self::prepare_segment(writer)?;
+        self.state = match Self::prepare_segment(writer) {
+            Ok(s) => s,
+            Err(e) => {
+                let _ = std::fs::remove_file(&new_path);
+                self.state = WriterState::Finished;
+                return Err(e);
+            }
+        };
         self.active_path = new_path;
         self.did_rotate = true;
         self.has_real_events = false;
-        let now = time_source().system_time().as_std();
-        self.next_rotation_time = Self::next_boundary(now, self.rotation_period);
-        self.next_drain_time = Self::next_boundary(now, self.drain_interval);
 
         tracing::debug!(
             segment_index = self.next_index - 1,
@@ -591,8 +651,8 @@ impl TraceWriter for RotatingWriter {
                 tracing::warn!("writer is already closed.");
             });
         }
-        self.flush()?;
-        // Rename .active → .bin for the current segment (if it has .active suffix)
+        // Best-effort flush: if the file is gone the bytes are already lost.
+        let _ = self.flush();
         if self
             .active_path
             .extension()
@@ -600,8 +660,22 @@ impl TraceWriter for RotatingWriter {
         {
             if self.has_real_events {
                 let sealed = Self::file_path(&self.base_path, self.next_index - 1);
-                fs::rename(&self.active_path, &sealed)?;
-                self.active_path = sealed;
+                match fs::rename(&self.active_path, &sealed) {
+                    Ok(()) => self.active_path = sealed,
+                    Err(e) if e.kind() == std::io::ErrorKind::NotFound => {
+                        rate_limited!(Duration::from_secs(60), {
+                            tracing::warn!(
+                                "active trace file {} disappeared before finalize; \
+                                 dropping segment",
+                                self.active_path.display()
+                            );
+                        });
+                    }
+                    Err(e) => {
+                        self.state = WriterState::Finished;
+                        return Err(e);
+                    }
+                }
             } else {
                 // No real events — just header + metadata. Remove instead of
                 // sealing so the background worker doesn't upload an empty segment.
@@ -612,6 +686,7 @@ impl TraceWriter for RotatingWriter {
                 if let Err(e) = fs::remove_file(&self.active_path)
                     && e.kind() != std::io::ErrorKind::NotFound
                 {
+                    self.state = WriterState::Finished;
                     return Err(e);
                 }
             }
@@ -2024,4 +2099,118 @@ mod tests {
             "identical update_segment_metadata should not trigger another write"
         );
     }
+
+    /// Regression test for https://github.com/dial9-rs/dial9/issues/386
+    ///
+    /// If the `.active` file is removed externally (e.g. by an operator,
+    /// log-rotation tool, or container teardown) the flush loop calls
+    /// `drained()` → `rotate()` → `fs::rename(.active, .bin)` which fails
+    /// with `NotFound`. Without recovery, `next_drain_time` is never
+    /// advanced, so `should_drain()` returns true on every subsequent
+    /// 5ms tick and the flush thread busy-loops.
+    ///
+    /// `drained()` must recover by abandoning the missing segment, opening a
+    /// fresh one, and advancing the drain/rotation timers.
+    #[tokio::test(start_paused = true)]
+    async fn test_drained_recovers_when_active_file_deleted() {
+        use metrique_timesource::{TimeSource, tokio::set_time_source_for_current_runtime};
+        let _guard = set_time_source_for_current_runtime(TimeSource::tokio(std::time::UNIX_EPOCH));
+
+        let dir = TempDir::new().unwrap();
+        let base = dir.path().join("trace");
+        let mut writer = RotatingWriter::builder()
+            .base_path(&base)
+            .max_file_size(u64::MAX)
+            .max_total_size(100_000)
+            .rotation_period(Duration::from_secs(60))
+            .build()
+            .unwrap();
+
+        writer.write_encoded_batch(&test_batch()).unwrap();
+        writer.flush().unwrap();
+
+        // Simulate external deletion of the .active file.
+        let active_path = writer.current_active_path().to_owned();
+        assert!(active_path.exists());
+        std::fs::remove_file(&active_path).unwrap();
+
+        // Cross the rotation boundary so drained() will try to rotate.
+        tokio::time::advance(Duration::from_secs(61)).await;
+
+        assert!(writer.should_drain(), "should_drain should fire");
+
+        // drained() must succeed despite the missing .active file. Returning
+        // an error here is what causes the flush thread to busy-loop because
+        // the timers are never advanced.
+        writer
+            .drained()
+            .expect("drained() must recover from missing .active file");
+
+        // After recovery, should_drain() must return false — otherwise the
+        // flush thread would spin calling drained() every 5ms.
+        assert!(
+            !writer.should_drain(),
+            "should_drain must return false after recovery (otherwise flush loop spins)"
+        );
+
+        // The writer must still be usable: a fresh active file exists and
+        // subsequent writes succeed.
+        writer.write_encoded_batch(&test_batch()).unwrap();
+        writer.flush().unwrap();
+        assert!(
+            writer.current_active_path().exists(),
+            "writer must have a fresh active file after recovery"
+        );
+
+        writer.finalize().unwrap();
+    }
+
+    /// Companion to `test_drained_recovers_when_active_file_deleted` covering
+    /// the more realistic case where the entire trace directory has been
+    /// removed (e.g. `rm -rf /var/log/dial9/`). Both the rename AND the
+    /// `File::create` for the new segment fail with `NotFound`. `drained()`
+    /// must still advance timers so `should_drain()` stops firing — the
+    /// writer can transition to `Finished`, but the flush loop must NOT
+    /// busy-spin.
+    #[tokio::test(start_paused = true)]
+    async fn test_drained_recovers_when_parent_dir_deleted() {
+        use metrique_timesource::{TimeSource, tokio::set_time_source_for_current_runtime};
+        let _guard = set_time_source_for_current_runtime(TimeSource::tokio(std::time::UNIX_EPOCH));
+
+        let dir = TempDir::new().unwrap();
+        let trace_dir = dir.path().join("traces");
+        std::fs::create_dir_all(&trace_dir).unwrap();
+        let base = trace_dir.join("trace");
+        let mut writer = RotatingWriter::builder()
+            .base_path(&base)
+            .max_file_size(u64::MAX)
+            .max_total_size(100_000)
+            .rotation_period(Duration::from_secs(60))
+            .build()
+            .unwrap();
+
+        writer.write_encoded_batch(&test_batch()).unwrap();
+        writer.flush().unwrap();
+
+        std::fs::remove_dir_all(&trace_dir).unwrap();
+        assert!(!writer.current_active_path().exists());
+
+        tokio::time::advance(Duration::from_secs(61)).await;
+        assert!(writer.should_drain());
+
+        // `drained()` may surface the underlying error, but the critical
+        // invariant is that `should_drain()` must NOT fire on the next tick —
+        // otherwise the flush thread busy-loops.
+        let _ = writer.drained();
+        assert!(
+            !writer.should_drain(),
+            "should_drain must return false after a failed rotation \
+             (otherwise the flush loop spins on every 5ms tick)"
+        );
+
+        // Subsequent drained() calls must not re-fire either.
+        tokio::time::advance(Duration::from_millis(5)).await;
+        let _ = writer.drained();
+        assert!(!writer.should_drain());
+    }
 }