diff --git a/CHANGELOG.md b/CHANGELOG.md
index aa470c6a..ea81ecc7 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -10,6 +10,7 @@ project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.html).
 ### Fixed
 
 - Fix a package build deprecation warning caused by a non-string `license` value in `pyproject.toml` by [@kurtmckee] in [#648]
+- `set_key`, `unset_key` and the `dotenv set`/`unset` commands now name the `.env` path instead of an internal temporary file when its directory is missing or not writable, and the CLI prints a short error and exits with code 2 instead of a traceback by [@jamalkamaladdin] in [#711]
 
 ## [1.2.4] - 2026-10-01
 
@@ -459,6 +460,7 @@ os.PathLike]` instead of just `os.PathLike` (#347 by [@bbc2]).
 [#680]: https://github.com/theskumar/python-dotenv/pull/680
 [#698]: https://github.com/theskumar/python-dotenv/pull/698
 [#700]: https://github.com/theskumar/python-dotenv/pull/700
+[#711]: https://github.com/theskumar/python-dotenv/pull/711
 [790c5c0]: https://github.com/theskumar/python-dotenv/commit/790c5c02991100aa1bf41ee5330aca75edc51311
 
 <!-- contributors -->
@@ -493,6 +495,7 @@ os.PathLike]` instead of just `os.PathLike` (#347 by [@bbc2]).
 [@h1whelan]: https://github.com/h1whelan
 [@harveer07]: https://github.com/harveer07
 [@jadutter]: https://github.com/jadutter
+[@jamalkamaladdin]: https://github.com/jamalkamaladdin
 [@jankislinger]: https://github.com/jankislinger
 [@jctanner]: https://github.com/jctanner
 [@kurtmckee]: https://github.com/kurtmckee
diff --git a/src/dotenv/cli.py b/src/dotenv/cli.py
index c78231cf..44495e9b 100644
--- a/src/dotenv/cli.py
+++ b/src/dotenv/cli.py
@@ -124,7 +124,11 @@ def set_value(ctx: click.Context, key: Any, value: Any) -> None:
     file = ctx.obj["FILE"]
     quote = ctx.obj["QUOTE"]
     export = ctx.obj["EXPORT"]
-    success, key, value = set_key(file, key, value, quote, export)
+    try:
+        success, key, value = set_key(file, key, value, quote, export)
+    except OSError as exc:
+        print(f"Error writing env file: {exc}", file=sys.stderr)
+        sys.exit(2)
     if success:
         click.echo(f"{key}={value}")
     else:
@@ -159,7 +163,11 @@ def unset(ctx: click.Context, key: Any) -> None:
     """
     file = ctx.obj["FILE"]
     quote = ctx.obj["QUOTE"]
-    success, key = unset_key(file, key, quote)
+    try:
+        success, key = unset_key(file, key, quote)
+    except OSError as exc:
+        print(f"Error writing env file: {exc}", file=sys.stderr)
+        sys.exit(2)
     if success:
         click.echo(f"Successfully removed {key}")
     else:
diff --git a/src/dotenv/main.py b/src/dotenv/main.py
index 3123690a..95ee9db2 100644
--- a/src/dotenv/main.py
+++ b/src/dotenv/main.py
@@ -160,13 +160,21 @@ def rewrite(
         source = io.StringIO("")
         original_mode = None
 
-    with tempfile.NamedTemporaryFile(
-        mode="w",
-        encoding=encoding,
-        delete=False,
-        prefix=".tmp_",
-        dir=os.path.dirname(os.path.abspath(path)),
-    ) as dest:
+    try:
+        temp_file = tempfile.NamedTemporaryFile(
+            mode="w",
+            encoding=encoding,
+            delete=False,
+            prefix=".tmp_",
+            dir=os.path.dirname(os.path.abspath(path)),
+        )
+    except OSError as err:
+        source.close()
+        # Report the target path, not the name of the temporary file.
+        err.filename = os.fspath(path)
+        raise
+
+    with temp_file as dest:
         dest_path = pathlib.Path(dest.name)
         error = None
 
diff --git a/tests/test_cli.py b/tests/test_cli.py
index 1833b9d8..b6d29c20 100644
--- a/tests/test_cli.py
+++ b/tests/test_cli.py
@@ -191,6 +191,40 @@ def test_set_no_file(cli):
     assert "Missing argument" in result.output
 
 
+def test_set_missing_directory(cli, tmp_path):
+    dotenv_path = tmp_path / "nx_dir" / ".env"
+
+    result = cli.invoke(dotenv_cli, ["--file", dotenv_path, "set", "a", "b"])
+
+    assert (result.exit_code, result.output) == (
+        2,
+        f"Error writing env file: [Errno 2] No such file or directory: {str(dotenv_path)!r}\n",
+    )
+
+
+@pytest.mark.skipif(
+    sys.platform == "win32" or os.geteuid() == 0,
+    reason="Directory permissions are not enforced on Windows or for root.",
+)
+def test_unset_read_only_directory(cli, tmp_path):
+    directory = tmp_path / "ro"
+    directory.mkdir()
+    dotenv_path = directory / ".env"
+    dotenv_path.write_text("a=b\n")
+    directory.chmod(0o555)
+
+    try:
+        result = cli.invoke(dotenv_cli, ["--file", dotenv_path, "unset", "a"])
+    finally:
+        directory.chmod(0o755)
+
+    assert (result.exit_code, result.output) == (
+        2,
+        f"Error writing env file: [Errno 13] Permission denied: {str(dotenv_path)!r}\n",
+    )
+    assert dotenv_path.read_text() == "a=b\n"
+
+
 def test_get_default_path(tmp_path):
     (tmp_path / ".env").write_text("A=x")
 
diff --git a/tests/test_main.py b/tests/test_main.py
index 6f9d4c5c..ded4f1f6 100644
--- a/tests/test_main.py
+++ b/tests/test_main.py
@@ -195,6 +195,38 @@ def test_set_key_permission_error(dotenv_path):
     assert dotenv_path.read_text() == ""
 
 
+def test_set_key_missing_directory(tmp_path):
+    dotenv_path = tmp_path / "nx_dir" / ".env"
+
+    with pytest.raises(FileNotFoundError) as exc_info:
+        dotenv.set_key(dotenv_path, "a", "b")
+
+    assert exc_info.value.filename == str(dotenv_path)
+    assert not dotenv_path.parent.exists()
+
+
+@pytest.mark.skipif(
+    sys.platform == "win32" or os.geteuid() == 0,
+    reason="Directory permissions are not enforced on Windows or for root.",
+)
+def test_set_key_read_only_directory(tmp_path):
+    directory = tmp_path / "ro"
+    directory.mkdir()
+    dotenv_path = directory / ".env"
+    dotenv_path.write_text("a=x\n")
+    directory.chmod(0o555)
+
+    try:
+        with pytest.raises(PermissionError) as exc_info:
+            dotenv.set_key(dotenv_path, "a", "y")
+    finally:
+        directory.chmod(0o755)
+
+    assert exc_info.value.filename == str(dotenv_path)
+    assert dotenv_path.read_text() == "a=x\n"
+    assert list(directory.iterdir()) == [dotenv_path]
+
+
 def test_get_key_no_file(tmp_path):
     nx_path = tmp_path / "nx"
     logger = logging.getLogger("dotenv.main")