Whether, and to what extent, employees learn from their failure experiences remains an unresolved issue for practitioners and scholars alike. On the one hand, failure provides individuals with opportunities for learning, whereas on the other hand, failure can also trigger defensive reactions that stifle learning. The present study expands experiential learning theories by incorporating the social context, thus offering a more comprehensive understanding of employee learning from failure. Specifically, we propose that team contexts that are psychologically safe and exhibit a well-developed transactive memory system provide important socio-emotional and informational resources, enabling individual employees to seize the learning opportunities inherent in failure. Analysis of archival data on individual failure and subsequent performance in the domain of workplace creativity from 218 employees working in 42 teams support our hypotheses. Employees are more likely to learn from their failure experiences if they work in teams with medium-to-high levels of psychological safety. Under these conditions, individual learning from failure is further stimulated by a well-developed transactive memory system. Our results also demonstrate the behavioral pathway linking failure experiences to subsequent outcomes. Interview data from 28 employees further illustrate the processes underlying these findings.