diff --git a/monkey/monkey_island/cc/setup/data_dir.py b/monkey/monkey_island/cc/setup/data_dir.py
index bee9d0a05..c47aa1680 100644
--- a/monkey/monkey_island/cc/setup/data_dir.py
+++ b/monkey/monkey_island/cc/setup/data_dir.py
@@ -11,6 +11,7 @@ from monkey_island.cc.setup.version_file_setup import (
 )
 
 logger = logging.getLogger(__name__)
+_data_dir_backup_suffix = ".old"
 
 
 def setup_data_dir(data_dir_path: Path):
@@ -26,20 +27,28 @@ def _reset_data_dir(data_dir_path: Path):
         data_dir_version = get_version_from_dir(data_dir_path)
     except FileNotFoundError:
         logger.info("Version file not found on the data directory.")
-        _remove_data_dir(data_dir_path)
+        _backup_old_data_dir(data_dir_path)
         return
 
     island_version = get_version()
     logger.info(f"Version found in the data directory: {data_dir_version}")
     logger.info(f"Currently running version: {island_version}")
     if is_version_greater(island_version, data_dir_version):
-        _remove_data_dir(data_dir_path)
+        _backup_old_data_dir(data_dir_path)
 
 
-def _remove_data_dir(data_dir_path: str):
-    logger.info("Attempting to remove data directory.")
+def _backup_old_data_dir(data_dir_path: Path):
+    logger.info("Attempting to backup old data directory.")
     try:
-        shutil.rmtree(data_dir_path)
-        logger.info("Data directory removed.")
+        backup_path = _get_backup_path(data_dir_path)
+        if backup_path.is_dir():
+            shutil.rmtree(backup_path)
+        Path(data_dir_path).replace(backup_path)
+        logger.info(f"Old data directory moved to {backup_path}.")
     except FileNotFoundError:
-        logger.info("Data directory not found, nothing to remove.")
+        logger.info("Old data directory not found, nothing to backup.")
+
+
+def _get_backup_path(data_dir_path: Path) -> Path:
+    backup_dir_name = data_dir_path.name + _data_dir_backup_suffix
+    return Path(data_dir_path.parent, backup_dir_name)
diff --git a/monkey/tests/unit_tests/monkey_island/cc/setup/test_data_dir.py b/monkey/tests/unit_tests/monkey_island/cc/setup/test_data_dir.py
index 096c5b0f3..dfabfa54e 100644
--- a/monkey/tests/unit_tests/monkey_island/cc/setup/test_data_dir.py
+++ b/monkey/tests/unit_tests/monkey_island/cc/setup/test_data_dir.py
@@ -2,8 +2,8 @@ from pathlib import Path
 
 import pytest
 
-from monkey_island.cc.setup.data_dir import setup_data_dir
-from monkey_island.cc.setup.version_file_setup import _version_filename
+from monkey_island.cc.setup.data_dir import _get_backup_path, setup_data_dir
+from monkey_island.cc.setup.version_file_setup import _version_filename, get_version_from_dir
 
 current_version = "1.1.1"
 old_version = "1.1.0"
@@ -42,11 +42,29 @@ def test_old_version_present(mocked_data_dir_path, mocked_version_file_path):
     bogus_file_path = mocked_data_dir_path.joinpath("test.txt")
     bogus_file_path.touch()
 
-    # mock version
     setup_data_dir(mocked_data_dir_path)
 
     assert mocked_version_file_path.read_text() == current_version
     assert not bogus_file_path.is_file()
+    assert _get_backup_path(mocked_data_dir_path).joinpath("test.txt").is_file()
+
+
+def test_old_version_and_backup_present(mocked_data_dir_path, mocked_version_file_path):
+    mocked_data_dir_path.mkdir()
+    mocked_version_file_path.write_text(old_version)
+
+    old_backup_path = _get_backup_path(mocked_data_dir_path)
+    old_backup_path.mkdir()
+    bogus_file_path = old_backup_path.joinpath("test.txt")
+    bogus_file_path.touch()
+
+    setup_data_dir(mocked_data_dir_path)
+    new_backup_path = old_backup_path
+
+    # Make sure old backup got deleted and new backup took it's place
+    assert mocked_version_file_path.read_text() == current_version
+    assert get_version_from_dir(new_backup_path) == old_version
+    assert not _get_backup_path(mocked_data_dir_path).joinpath("test.txt").is_file()
 
 
 def test_data_dir_setup_not_needed(mocked_data_dir_path, mocked_version_file_path):