diff --git a/tools/clang/lib/Sema/SemaHLSL.cpp b/tools/clang/lib/Sema/SemaHLSL.cpp
index 6e58c0e872..16fbb9b5d9 100644
--- a/tools/clang/lib/Sema/SemaHLSL.cpp
+++ b/tools/clang/lib/Sema/SemaHLSL.cpp
@@ -850,11 +850,10 @@ GetOrCreateTemplateSpecialization(ASTContext &context, Sema &sema,
     if (specializationDecl->getInstantiatedFrom().isNull()) {
       // InstantiateClassTemplateSpecialization returns true if it finds an
       // error.
-      DXVERIFY_NOMSG(false ==
-                     sema.InstantiateClassTemplateSpecialization(
-                         NoLoc, specializationDecl,
-                         TemplateSpecializationKind::TSK_ImplicitInstantiation,
-                         true));
+      if (sema.InstantiateClassTemplateSpecialization(
+              NoLoc, specializationDecl,
+              TemplateSpecializationKind::TSK_ImplicitInstantiation, true))
+        return QualType();
     }
     return context.getTemplateSpecializationType(
         TemplateName(templateDecl), templateArgs.data(), templateArgs.size(),
@@ -865,18 +864,20 @@ GetOrCreateTemplateSpecialization(ASTContext &context, Sema &sema,
       context, TagDecl::TagKind::TTK_Class, currentDeclContext, NoLoc, NoLoc,
       templateDecl, templateArgsForDecl.data(), templateArgsForDecl.size(),
       nullptr);
-  // InstantiateClassTemplateSpecialization returns true if it finds an error.
-  DXVERIFY_NOMSG(false ==
-                 sema.InstantiateClassTemplateSpecialization(
-                     NoLoc, specializationDecl,
-                     TemplateSpecializationKind::TSK_ImplicitInstantiation,
-                     true));
+  // template specialization isn't performed if a fatal error has occurred
+  if (!sema.Diags.hasFatalErrorOccurred()) {
+    // InstantiateClassTemplateSpecialization returns true if it finds an error.
+    [[maybe_unused]] bool errorFound =
+        sema.InstantiateClassTemplateSpecialization(
+            NoLoc, specializationDecl,
+            TemplateSpecializationKind::TSK_ImplicitInstantiation, true);
+    assert(!errorFound && "template specialization failed");
+  }
   templateDecl->AddSpecialization(specializationDecl, InsertPos);
   specializationDecl->setImplicit(true);
-
   QualType canonType = context.getTypeDeclType(specializationDecl);
-  DXASSERT(isa<RecordType>(canonType),
-           "type of non-dependent specialization is not a RecordType");
+  assert(isa<RecordType>(canonType) &&
+         "type of non-dependent specialization is not a RecordType");
   TemplateArgumentListInfo templateArgumentList(NoLoc, NoLoc);
   TemplateArgumentLocInfo NoTemplateArgumentLocInfo;
   for (unsigned i = 0; i < templateArgs.size(); i++) {
@@ -911,16 +912,17 @@ static QualType GetOrCreateMatrixSpecialization(
       context, *sema, matrixTemplateDecl,
       ArrayRef<TemplateArgument>(templateArgs));
 
-#ifndef NDEBUG
-  // Verify that we can read the field member from the template record.
-  DXASSERT(matrixSpecializationType->getAsCXXRecordDecl(),
+  if (!matrixSpecializationType.isNull() &&
+      !sema->Diags.hasFatalErrorOccurred()) {
+    assert(matrixSpecializationType->getAsCXXRecordDecl() &&
            "type of non-dependent specialization is not a RecordType");
-  DeclContext::lookup_result lookupResult =
-      matrixSpecializationType->getAsCXXRecordDecl()->lookup(
-          DeclarationName(&context.Idents.get(StringRef("h"))));
-  DXASSERT(!lookupResult.empty(),
+    // Verify that we can read the field member from the template record.
+    [[maybe_unused]] DeclContext::lookup_result lookupResult =
+        matrixSpecializationType->getAsCXXRecordDecl()->lookup(
+            DeclarationName(&context.Idents.get(StringRef("h"))));
+    assert(!lookupResult.empty() &&
            "otherwise matrix handle cannot be looked up");
-#endif
+  }
 
   return matrixSpecializationType;
 }
@@ -946,16 +948,17 @@ GetOrCreateVectorSpecialization(ASTContext &context, Sema *sema,
       context, *sema, vectorTemplateDecl,
       ArrayRef<TemplateArgument>(templateArgs));
 
-#ifndef NDEBUG
-  // Verify that we can read the field member from the template record.
-  DXASSERT(vectorSpecializationType->getAsCXXRecordDecl(),
+  if (!vectorSpecializationType.isNull() &&
+      !sema->Diags.hasFatalErrorOccurred()) {
+    assert(vectorSpecializationType->getAsCXXRecordDecl() &&
            "type of non-dependent specialization is not a RecordType");
-  DeclContext::lookup_result lookupResult =
-      vectorSpecializationType->getAsCXXRecordDecl()->lookup(
-          DeclarationName(&context.Idents.get(StringRef("h"))));
-  DXASSERT(!lookupResult.empty(),
+    // Verify that we can read the field member from the template record.
+    [[maybe_unused]] DeclContext::lookup_result lookupResult =
+        vectorSpecializationType->getAsCXXRecordDecl()->lookup(
+            DeclarationName(&context.Idents.get(StringRef("h"))));
+    assert(!lookupResult.empty() &&
            "otherwise vector handle cannot be looked up");
-#endif
+  }
 
   return vectorSpecializationType;
 }
@@ -974,16 +977,16 @@ GetOrCreateNodeOutputRecordSpecialization(ASTContext &context, Sema *sema,
   QualType specializationType = GetOrCreateTemplateSpecialization(
       context, *sema, templateDecl, ArrayRef<TemplateArgument>(templateArgs));
 
-#ifdef DBG
-  // Verify that we can read the field member from the template record.
-  DXASSERT(specializationType->getAsCXXRecordDecl(),
+  if (!specializationType.isNull() && !sema->Diags.hasFatalErrorOccurred()) {
+    assert(specializationType->getAsCXXRecordDecl() &&
            "type of non-dependent specialization is not a RecordType");
-  DeclContext::lookup_result lookupResult =
-      specializationType->getAsCXXRecordDecl()->lookup(
-          DeclarationName(&context.Idents.get(StringRef("h"))));
-  DXASSERT(!lookupResult.empty(),
+    // Verify that we can read the field member from the template record.
+    [[maybe_unused]] DeclContext::lookup_result lookupResult =
+        specializationType->getAsCXXRecordDecl()->lookup(
+            DeclarationName(&context.Idents.get(StringRef("h"))));
+    assert(!lookupResult.empty() &&
            "otherwise *NodeOutputRecords handle cannot be looked up");
-#endif
+  }
 
   return specializationType;
 }
diff --git a/tools/clang/test/DXC/specialization_with_fatal_error.hlsl b/tools/clang/test/DXC/specialization_with_fatal_error.hlsl
new file mode 100644
index 0000000000..c5e20d9bb7
--- /dev/null
+++ b/tools/clang/test/DXC/specialization_with_fatal_error.hlsl
@@ -0,0 +1,22 @@
+// RUN: %dxc -T lib_6_8 -verify %s
+
+// Clang suppresses template specialization if a fatal error has been
+// registered (this reduces the risk of a cascade of secondary errors).
+// However, DXC asserted if a template specialization failed - which
+// prevented the error diagnostic being generated.
+// We check here that an assert is no longer raised if a fatal error
+// has been registered, and that the error diagnostic is generated.
+
+float a;
+
+// the include file doesn't exist - this should produce a fatal error diagnostic
+// expected-error@+1 {{'a.h' file not found}}
+#include "a.h"
+
+void b() {};
+
+int3 c(int X) {
+  // an assert was triggered for the expression below when include file a.h
+  // doesn't exist, and the error diagnostic expected above was not produced.
+  return X.xxx;
+}