diff --git a/server/filestore.go b/server/filestore.go
index 4de4d0dcda..4abc0c3c7f 100644
--- a/server/filestore.go
+++ b/server/filestore.go
@@ -1854,6 +1854,7 @@ func (fs *fileStore) removeMsg(seq uint64, secure, needFSLock bool) (bool, error
 			mb.dmap[seq] = struct{}{}
 			// Check if <50% utilization and minimum size met.
 			if mb.rbytes > compactMinimum && mb.rbytes>>1 > mb.bytes {
+				// FIXME(dlc) - Might want this out of band.
 				mb.compact()
 			}
 		}
@@ -1938,6 +1939,9 @@ func (mb *msgBlock) compact() {
 		return false
 	}
 
+	// For skip msgs.
+	var smh [msgHdrSize]byte
+
 	for index, lbuf := uint32(0), uint32(len(buf)); index < lbuf; {
 		if index+msgHdrSize >= lbuf {
 			return
@@ -1960,9 +1964,20 @@ func (mb *msgBlock) compact() {
 				firstSet = true
 				mb.first.seq = seq
 			}
+		} else if firstSet {
+			// This is an interior delete that we need to make sure we have a placeholder for.
+			le.PutUint32(smh[0:], emptyRecordLen)
+			le.PutUint64(smh[4:], seq|ebit)
+			le.PutUint64(smh[12:], 0)
+			le.PutUint16(smh[20:], 0)
+			nbuf = append(nbuf, smh[:]...)
+			mb.hh.Reset()
+			mb.hh.Write(smh[4:20])
+			checksum := mb.hh.Sum(nil)
+			nbuf = append(nbuf, checksum...)
 		}
 		// Always set last.
-		mb.last.seq = seq
+		mb.last.seq = seq &^ ebit
 		// Advance to next record.
 		index += rl
 	}
@@ -1986,7 +2001,9 @@ func (mb *msgBlock) compact() {
 	if err := ioutil.WriteFile(mfn, nbuf, defaultFilePerms); err != nil {
 		return
 	}
-	os.Rename(mfn, mb.mfn)
+	if err := os.Rename(mfn, mb.mfn); err != nil {
+		return
+	}
 
 	// Close cache and open FDs and index file.
 	mb.clearCacheAndOffset()
@@ -2747,6 +2764,7 @@ func (fs *fileStore) selectMsgBlock(seq uint64) *msgBlock {
 			return mb
 		}
 	}
+
 	return nil
 }
 
@@ -3168,8 +3186,10 @@ func (mb *msgBlock) cacheLookup(seq uint64) (*fileStoredMsg, error) {
 		return nil, err
 	}
 	if seq != mseq {
+		mb.cache.buf = nil
 		return nil, fmt.Errorf("sequence numbers for cache load did not match, %d vs %d", seq, mseq)
 	}
+
 	sm := &fileStoredMsg{
 		subj: subj,
 		hdr:  hdr,
@@ -3179,7 +3199,6 @@ func (mb *msgBlock) cacheLookup(seq uint64) (*fileStoredMsg, error) {
 		mb:   mb,
 		off:  int64(bi),
 	}
-
 	return sm, nil
 }
 
diff --git a/server/filestore_test.go b/server/filestore_test.go
index 2ea1812c99..5895ab16bf 100644
--- a/server/filestore_test.go
+++ b/server/filestore_test.go
@@ -3266,9 +3266,6 @@ func TestFileStoreSparseCompaction(t *testing.T) {
 		if ta >= tb {
 			t.Fatalf("Expected total after to be less then before, got %d vs %d", tb, ta)
 		}
-		if ta != ua {
-			t.Fatalf("Expected compact to make total and used same, got %d vs %d", ta, ua)
-		}
 	}
 
 	// Actual testing here.
@@ -3314,3 +3311,47 @@ func TestFileStoreSparseCompaction(t *testing.T) {
 	eraseMsgs(500, 502, 504, 506, 508, 510)
 	compact()
 }
+
+func TestFileStoreSparseCompactionWithInteriorDeletes(t *testing.T) {
+	storeDir := createDir(t, JetStreamStoreDir)
+	defer removeDir(t, storeDir)
+
+	cfg := StreamConfig{Name: "KV", Subjects: []string{"kv.>"}, Storage: FileStorage}
+	var fs *fileStore
+
+	fs, err := newFileStore(FileStoreConfig{StoreDir: storeDir}, cfg)
+	if err != nil {
+		t.Fatalf("Unexpected error: %v", err)
+	}
+
+	for i := 1; i <= 1000; i++ {
+		if _, _, err := fs.StoreMsg(fmt.Sprintf("kv.%d", i%10), nil, []byte("OK")); err != nil {
+			t.Fatalf("Unexpected error: %v", err)
+		}
+	}
+
+	// Now do interior deletes.
+	for _, seq := range []uint64{500, 600, 700, 800} {
+		removed, err := fs.RemoveMsg(seq)
+		if err != nil || !removed {
+			t.Fatalf("Got an error on remove of %d: %v", seq, err)
+		}
+	}
+
+	_, _, _, _, err = fs.LoadMsg(900)
+	if err != nil {
+		t.Fatalf("Unexpected error: %v", err)
+	}
+
+	// Do compact by hand, make sure we can still access msgs past the interior deletes.
+	fs.mu.RLock()
+	lmb := fs.lmb
+	lmb.dirtyCloseWithRemove(false)
+	lmb.compact()
+	fs.mu.RUnlock()
+
+	_, _, _, _, err = fs.LoadMsg(900)
+	if err != nil {
+		t.Fatalf("Unexpected error: %v", err)
+	}
+}