Index: src/wp-includes/rest-api/endpoints/class-wp-rest-users-controller.php
===================================================================
--- src/wp-includes/rest-api/endpoints/class-wp-rest-users-controller.php	(revision 42205)
+++ src/wp-includes/rest-api/endpoints/class-wp-rest-users-controller.php	(working copy)
@@ -501,6 +501,11 @@
 			$user_id = wp_insert_user( wp_slash( (array) $user ) );
 
 			if ( is_wp_error( $user_id ) ) {
+
+				if ( in_array( $user_id->get_error_code(), array( 'existing_user_email', 'existing_user_login' ) ) ) {
+					$user_id->add_data( array( 'status' => 409 ) );
+				}
+
 				return $user_id;
 			}
 		}
Index: src/wp-includes/user.php
===================================================================
--- src/wp-includes/user.php	(revision 42205)
+++ src/wp-includes/user.php	(working copy)
@@ -1482,8 +1482,23 @@
 		return new WP_Error( 'user_login_too_long', __( 'Username may not be longer than 60 characters.' ) );
 	}
 
+	$raw_user_email = empty( $userdata['user_email'] ) ? '' : $userdata['user_email'];
+
+	/**
+	 * Filters a user's email before the user is created or updated.
+	 *
+	 * @since 2.0.3
+	 *
+	 * @param string $raw_user_email The user's email.
+	 */
+	$user_email = apply_filters( 'pre_user_email', $raw_user_email );
+
 	if ( ! $update && username_exists( $user_login ) ) {
-		return new WP_Error( 'existing_user_login', __( 'Sorry, that username already exists!' ) );
+		if ( email_exists( $user_email ) ) {
+			return new WP_Error( 'existing_user_email', __( 'Sorry, that email address is already used!' ) );
+		} else {
+			return new WP_Error( 'existing_user_login', __( 'Sorry, that username already exists!' ) );
+		}
 	}
 
 	/**
@@ -1537,17 +1552,6 @@
 	 */
 	$user_url = apply_filters( 'pre_user_url', $raw_user_url );
 
-	$raw_user_email = empty( $userdata['user_email'] ) ? '' : $userdata['user_email'];
-
-	/**
-	 * Filters a user's email before the user is created or updated.
-	 *
-	 * @since 2.0.3
-	 *
-	 * @param string $raw_user_email The user's email.
-	 */
-	$user_email = apply_filters( 'pre_user_email', $raw_user_email );
-
 	/*
 	 * If there is no update, just check for `email_exists`. If there is an update,
 	 * check if current email and new email are the same, or not, and check `email_exists`
Index: tests/phpunit/tests/rest-api/rest-users-controller.php
===================================================================
--- tests/phpunit/tests/rest-api/rest-users-controller.php	(revision 42205)
+++ tests/phpunit/tests/rest-api/rest-users-controller.php	(working copy)
@@ -1160,6 +1160,46 @@
 		$this->check_add_edit_user_response( $response );
 	}
 
+	/***
+	 * @ticket 41672
+	 */
+	public function test_json_create_user_with_existing_username_or_email() {
+		$this->allow_user_to_manage_multisite();
+		wp_set_current_user( self::$user );
+
+		$params = array(
+			'username' => 'testjsonuser',
+			'password' => 'testjsonpassword',
+			'email'    => 'testjson@example.com',
+		);
+
+		$request = new WP_REST_Request( 'POST', '/wp/v2/users' );
+		$request->add_header( 'content-type', 'application/json' );
+		$request->set_body( wp_json_encode( $params ) );
+
+		$response = $this->server->dispatch( $request );
+		$this->check_add_edit_user_response( $response );
+
+		// Make request again, expecting existing_user_email response
+		$response = $this->server->dispatch( $request );
+		$this->assertErrorResponse( 'existing_user_email', $response, 409 );
+
+		// Make request again, expecting existing_user_login response
+		$params = array(
+			'username' => 'testjsonuser',
+			'password' => 'testjsonpassword',
+			'email'    => 'testjson1@example.com',
+		);
+
+		$request = new WP_REST_Request( 'POST', '/wp/v2/users' );
+		$request->add_header( 'content-type', 'application/json' );
+		$request->set_body( wp_json_encode( $params ) );
+
+		$response = $this->server->dispatch( $request );
+		$this->assertErrorResponse( 'existing_user_login', $response, 409 );
+
+	}
+
 	public function test_create_user_without_permission() {
 		wp_set_current_user( self::$editor );