diff --git a/include/zephyr/bluetooth/audio/cap.h b/include/zephyr/bluetooth/audio/cap.h
index cfa841afb85d..046002318dbf 100644
--- a/include/zephyr/bluetooth/audio/cap.h
+++ b/include/zephyr/bluetooth/audio/cap.h
@@ -542,7 +542,12 @@ struct bt_cap_initiator_broadcast_create_param {
  * @param[in]  param             Parameters to start the audio streams.
  * @param[out] broadcast_source  Pointer to the broadcast source created.
  *
- * @return 0 on success or negative error value on failure.
+ * @retval 0 Success
+ * @retval -EINVAL @p param is invalid or @p broadcast_source is NULL
+ * @retval -ENOMEM Could not allocate more broadcast sources, subgroups or ISO streams, or the
+ *         provided codec configuration data is too large when merging the BIS and subgroup
+ *         configuration data.
+ * @retval -ENOEXEC The broadcast source failed to be created for other reasons
  */
 int bt_cap_initiator_broadcast_audio_create(
 	const struct bt_cap_initiator_broadcast_create_param *param,
diff --git a/subsys/bluetooth/audio/cap_initiator.c b/subsys/bluetooth/audio/cap_initiator.c
index 92716c84c24a..849cc99ed147 100644
--- a/subsys/bluetooth/audio/cap_initiator.c
+++ b/subsys/bluetooth/audio/cap_initiator.c
@@ -228,6 +228,7 @@ int bt_cap_initiator_broadcast_audio_create(
 	struct bt_bap_broadcast_source_stream_param
 		bap_stream_params[CONFIG_BT_BAP_BROADCAST_SRC_STREAM_COUNT];
 	struct bt_bap_broadcast_source_param bap_create_param = {0};
+	int err;
 
 	CHECKIF(param == NULL) {
 		LOG_DBG("param is NULL");
@@ -243,6 +244,7 @@ int bt_cap_initiator_broadcast_audio_create(
 		return -EINVAL;
 	}
 
+	*broadcast_source = NULL;
 	for (size_t i = 0; i < ARRAY_SIZE(broadcast_sources); i++) {
 		if (broadcast_sources[i].bap_broadcast == NULL) {
 			*broadcast_source = &broadcast_sources[i];
@@ -250,11 +252,28 @@ int bt_cap_initiator_broadcast_audio_create(
 		}
 	}
 
+	if (*broadcast_source == NULL) {
+		LOG_DBG("Failed to allocate a new broadcast source");
+		return -ENOMEM;
+	}
+
 	cap_initiator_broadcast_to_bap_broadcast_param(param, &bap_create_param,
 						       bap_subgroup_params, bap_stream_params);
 
-	return bt_bap_broadcast_source_create(&bap_create_param,
-					      &(*broadcast_source)->bap_broadcast);
+	err = bt_bap_broadcast_source_create(&bap_create_param,
+					     &(*broadcast_source)->bap_broadcast);
+	if (err != 0) {
+		/* Return known errors */
+		if (err == -EINVAL || err == -ENOMEM) {
+			return err;
+		}
+
+		LOG_DBG("Unexpected error from bt_bap_broadcast_source_create: %d", err);
+
+		return -ENOEXEC;
+	}
+
+	return 0;
 }
 
 static struct bt_cap_broadcast_source *get_cap_broadcast_source_by_bap_broadcast_source(
diff --git a/tests/bsim/bluetooth/audio/src/cap_initiator_broadcast_test.c b/tests/bsim/bluetooth/audio/src/cap_initiator_broadcast_test.c
index c84fc83742ff..369a9544f54e 100644
--- a/tests/bsim/bluetooth/audio/src/cap_initiator_broadcast_test.c
+++ b/tests/bsim/bluetooth/audio/src/cap_initiator_broadcast_test.c
@@ -299,7 +299,7 @@ static void test_broadcast_audio_create_inval(void)
 		stream_params[ARRAY_SIZE(broadcast_source_streams)];
 	struct bt_cap_initiator_broadcast_subgroup_param subgroup_param;
 	struct bt_cap_initiator_broadcast_create_param create_param;
-	struct bt_cap_broadcast_source *broadcast_source;
+	struct bt_cap_broadcast_source *broadcast_sources[CONFIG_BT_BAP_BROADCAST_SRC_COUNT + 1];
 	struct bt_audio_codec_cfg invalid_codec = BT_AUDIO_CODEC_LC3_CONFIG(
 		BT_AUDIO_CODEC_CFG_FREQ_16KHZ, BT_AUDIO_CODEC_CFG_DURATION_10,
 		BT_AUDIO_LOCATION_FRONT_LEFT, 40U, 1, BT_AUDIO_CONTEXT_TYPE_MEDIA);
@@ -323,7 +323,7 @@ static void test_broadcast_audio_create_inval(void)
 	create_param.encryption = false;
 
 	/* Test NULL parameters */
-	err = bt_cap_initiator_broadcast_audio_create(NULL, &broadcast_source);
+	err = bt_cap_initiator_broadcast_audio_create(NULL, &broadcast_sources[0]);
 	if (err == 0) {
 		FAIL("bt_cap_initiator_broadcast_audio_create with NULL param did not fail\n");
 		return;
@@ -345,6 +345,38 @@ static void test_broadcast_audio_create_inval(void)
 		     "fail\n");
 		return;
 	}
+	subgroup_param.codec_cfg = &broadcast_preset_16_2_1.codec_cfg;
+
+	/* Test allocating too many sources */
+	ARRAY_FOR_EACH(broadcast_sources, i) {
+		err = bt_cap_initiator_broadcast_audio_create(&create_param, &broadcast_sources[i]);
+		if (i < CONFIG_BT_BAP_BROADCAST_SRC_COUNT) {
+			if (err != 0) {
+				FAIL("[%zu]: bt_cap_initiator_broadcast_audio_create failed: %d\n",
+				     i, err);
+				return;
+			}
+		} else {
+			if (err != -ENOMEM) {
+				FAIL("bt_cap_initiator_broadcast_audio_create did not fail with "
+				     "-ENOMEM when allocating too many sources: %d\n",
+				     err);
+				return;
+			}
+		}
+	}
+
+	/* Cleanup the created broadcast sources */
+	ARRAY_FOR_EACH(broadcast_sources, i) {
+		if (i < CONFIG_BT_BAP_BROADCAST_SRC_COUNT) {
+			err = bt_cap_initiator_broadcast_audio_delete(broadcast_sources[i]);
+			if (err != 0) {
+				FAIL("[%zu]: bt_cap_initiator_broadcast_audio_delete failed: %d\n",
+				     i, err);
+				return;
+			}
+		}
+	}
 
 	/* Since we are just casting the CAP parameters to BAP parameters,
 	 * we can rely on the BAP tests to verify the values