diff --git a/module/zfs/dsl_dataset.c b/module/zfs/dsl_dataset.c
index 91d9120a5..3d5551cc4 100644
--- a/module/zfs/dsl_dataset.c
+++ b/module/zfs/dsl_dataset.c
@@ -686,7 +686,13 @@ dsl_dataset_create_sync_dd(dsl_dir_t *dd, dsl_dataset_t *origin,
 		dsphys->ds_uncompressed_bytes =
 		    origin->ds_phys->ds_uncompressed_bytes;
 		dsphys->ds_bp = origin->ds_phys->ds_bp;
-		dsphys->ds_flags |= origin->ds_phys->ds_flags;
+
+		/*
+		 * Inherit flags that describe the dataset's contents
+		 * (INCONSISTENT) or properties (Case Insensitive).
+		 */
+		dsphys->ds_flags |= origin->ds_phys->ds_flags &
+		    (DS_FLAG_INCONSISTENT | DS_FLAG_CI_DATASET);
 
 		dmu_buf_will_dirty(origin->ds_dbuf, tx);
 		origin->ds_phys->ds_num_children++;