diff --git a/CHANGELOG.md b/CHANGELOG.md
index db917b2..e62409f 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -3,6 +3,7 @@
 - Upgrade package `@qetza/replacetokens` to `1.7.0`.
 - Add support for case insensitive path matching in _sources_ and _variables_.
 - Add support for matching directories and files starting with a dot in _sources_ and _variables_.
+- Fix _if-no-files-found_ when set to `warn`.
 
 ## v1.1.2
 - Change telemetry provider.
diff --git a/src/main.ts b/src/main.ts
index f7248f3..144ccd9 100644
--- a/src/main.ts
+++ b/src/main.ts
@@ -159,8 +159,10 @@ export async function run(): Promise<void> {
       switch (ifNoFilesFound) {
         case 'warn':
           core.warning('No files were found with provided sources.');
+          break;
         case 'error':
           core.setFailed('No files were found with provided sources.');
+          break;
         default:
           core.info('No files were found with provided sources.');
       }
diff --git a/tests/run.test.ts b/tests/run.test.ts
index caeb382..5084d86 100644
--- a/tests/run.test.ts
+++ b/tests/run.test.ts
@@ -657,6 +657,70 @@ describe('run', () => {
     );
   });
 
+  it('if-no-files-found: ignore', async () => {
+    // arrange
+    getInputSpy.mockImplementation(name => {
+      switch (name) {
+        case 'if-no-files-found':
+          return 'ignore';
+        default:
+          return '';
+      }
+    });
+
+    replaceTokenSpy.mockResolvedValue({ defaults: 0, files: 0, replaced: 0, tokens: 0, transforms: 0 })
+
+    // act
+    await run();
+
+    // assert
+    expect(setFailedSpy).not.toHaveBeenCalled();
+
+    expect(infoSpy).toHaveBeenCalledWith('No files were found with provided sources.');
+  });
+
+  it('if-no-files-found: warn', async () => {
+    // arrange
+    getInputSpy.mockImplementation(name => {
+      switch (name) {
+        case 'if-no-files-found':
+          return 'warn';
+        default:
+          return '';
+      }
+    });
+
+    replaceTokenSpy.mockResolvedValue({ defaults: 0, files: 0, replaced: 0, tokens: 0, transforms: 0 })
+
+    // act
+    await run();
+
+    // assert
+    expect(setFailedSpy).not.toHaveBeenCalled();
+
+    expect(warningSpy).toHaveBeenCalledWith('No files were found with provided sources.');
+  });
+
+  it('if-no-files-found: error', async () => {
+    // arrange
+    getInputSpy.mockImplementation(name => {
+      switch (name) {
+        case 'if-no-files-found':
+          return 'error';
+        default:
+          return '';
+      }
+    });
+
+    replaceTokenSpy.mockResolvedValue({ defaults: 0, files: 0, replaced: 0, tokens: 0, transforms: 0 })
+
+    // act
+    await run();
+
+    // assert
+    expect(setFailedSpy).toHaveBeenCalledWith('No files were found with provided sources.');
+  });
+
   it('include-dot-paths', async () => {
     // arrange
     getBooleanInputSpy.mockImplementation(name => {