diff --git a/core/src/main/java/io/grpc/internal/ChannelExecutor.java b/core/src/main/java/io/grpc/internal/ChannelExecutor.java
index af62cedced..4134df1425 100644
--- a/core/src/main/java/io/grpc/internal/ChannelExecutor.java
+++ b/core/src/main/java/io/grpc/internal/ChannelExecutor.java
@@ -34,7 +34,7 @@ import javax.annotation.concurrent.ThreadSafe;
  * order as they are submitted.
  */
 @ThreadSafe
-final class ChannelExecutor {
+class ChannelExecutor {
   private static final Logger log = Logger.getLogger(ChannelExecutor.class.getName());
 
   private final Object lock = new Object();
@@ -51,7 +51,7 @@ final class ChannelExecutor {
    * <p>Upon returning, it guarantees that all tasks submitted by {@code executeLater()} before it
    * have been or will eventually be run, while not requiring any more calls to {@code drain()}.
    */
-  void drain() {
+  final void drain() {
     boolean drainLeaseAcquired = false;
     while (true) {
       Runnable runnable;
@@ -72,7 +72,7 @@ final class ChannelExecutor {
       try {
         runnable.run();
       } catch (Throwable t) {
-        log.log(Level.WARNING, "Runnable threw exception in ChannelExecutor", t);
+        handleUncaughtThrowable(t);
       }
     }
   }
@@ -82,7 +82,7 @@ final class ChannelExecutor {
    *
    * @return this ChannelExecutor
    */
-  ChannelExecutor executeLater(Runnable runnable) {
+  final ChannelExecutor executeLater(Runnable runnable) {
     synchronized (lock) {
       queue.add(checkNotNull(runnable, "runnable is null"));
     }
@@ -90,9 +90,18 @@ final class ChannelExecutor {
   }
 
   @VisibleForTesting
-  int numPendingTasks() {
+  final int numPendingTasks() {
     synchronized (lock) {
       return queue.size();
     }
   }
+
+  /**
+   * Handle a throwable from a task.
+   *
+   * <p>The default implementation logs a warning.
+   */
+  void handleUncaughtThrowable(Throwable t) {
+    log.log(Level.WARNING, "Runnable threw exception in ChannelExecutor", t);
+  }
 }
diff --git a/core/src/main/java/io/grpc/internal/ManagedChannelImpl.java b/core/src/main/java/io/grpc/internal/ManagedChannelImpl.java
index ca7a33e474..1bec23ba64 100644
--- a/core/src/main/java/io/grpc/internal/ManagedChannelImpl.java
+++ b/core/src/main/java/io/grpc/internal/ManagedChannelImpl.java
@@ -121,7 +121,13 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
   private final ObjectPool<? extends Executor> executorPool;
   private final ObjectPool<? extends Executor> oobExecutorPool;
 
-  private final ChannelExecutor channelExecutor = new ChannelExecutor();
+  private final ChannelExecutor channelExecutor = new ChannelExecutor() {
+      @Override
+      void handleUncaughtThrowable(Throwable t) {
+        super.handleUncaughtThrowable(t);
+        panic(t);
+      }
+    };
 
   private boolean fullStreamDecompression;
 
@@ -156,10 +162,14 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
   @Nullable
   private LbHelperImpl lbHelper;
 
-  // Must be assigned from channelExecutor.  null if channel is in idle mode.
+  // Must ONLY be assigned from updateSubchannelPicker(), which is called from channelExecutor.
+  // null if channel is in idle mode.
   @Nullable
   private volatile SubchannelPicker subchannelPicker;
 
+  // Must be accessed from the channelExecutor
+  private boolean  panicMode;
+
   // Must be mutated from channelExecutor
   // If any monitoring hook to be added later needs to get a snapshot of this Set, we could
   // switch to a ConcurrentHashMap.
@@ -239,16 +249,8 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
         public void transportTerminated() {
           checkState(shutdown.get(), "Channel must have been shut down");
           terminating = true;
-          if (lbHelper != null) {
-            lbHelper.lb.shutdown();
-            lbHelper = null;
-          }
-          if (nameResolver != null) {
-            nameResolver.shutdown();
-            nameResolver = null;
-            nameResolverStarted = false;
-          }
-
+          shutdownNameResolverAndLoadBalancer(false);
+          // No need to call channelStateManager since we are already in SHUTDOWN state.
           // Until LoadBalancer is shutdown, it may still create new subchannels.  We catch them
           // here.
           maybeShutdownNowSubchannels();
@@ -324,6 +326,24 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
   @Nullable
   private IdleModeTimer idleModeTimer;
 
+  // Must be called from channelExecutor
+  private void shutdownNameResolverAndLoadBalancer(boolean verifyActive) {
+    if (verifyActive) {
+      checkState(nameResolver != null, "nameResolver is null");
+      checkState(lbHelper != null, "lbHelper is null");
+    }
+    if (nameResolver != null) {
+      nameResolver.shutdown();
+      nameResolver = null;
+      nameResolverStarted = false;
+    }
+    if (lbHelper != null) {
+      lbHelper.lb.shutdown();
+      lbHelper = null;
+    }
+    subchannelPicker = null;
+  }
+
   /**
    * Make the channel exit idle mode, if it's in it.
    *
@@ -331,7 +351,7 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
    */
   @VisibleForTesting
   void exitIdleMode() {
-    if (shutdown.get()) {
+    if (shutdown.get() || panicMode) {
       return;
     }
     if (inUseStateAggregator.isInUse()) {
@@ -366,12 +386,8 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
     // either the idleModeTimer ran twice without exiting the idle mode, or the task in shutdown()
     // did not cancel idleModeTimer, or prepareToLoseNetwork() ran while shutdown or in idle, all of
     // which are bugs.
-    nameResolver.shutdown();
-    nameResolverStarted = false;
+    shutdownNameResolverAndLoadBalancer(true);
     nameResolver = getNameResolver(target, nameResolverFactory, nameResolverParams);
-    lbHelper.lb.shutdown();
-    lbHelper = null;
-    subchannelPicker = null;
     channelStateManager.gotoState(IDLE);
   }
 
@@ -636,6 +652,35 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
     return this;
   }
 
+  // Called from channelExecutor
+  @VisibleForTesting
+  void panic(final Throwable t) {
+    if (panicMode) {
+      // Preserve the first panic information
+      return;
+    }
+    panicMode = true;
+    cancelIdleTimer();
+    shutdownNameResolverAndLoadBalancer(false);
+    SubchannelPicker newPicker = new SubchannelPicker() {
+      final PickResult panicPickResult =
+          PickResult.withDrop(
+              Status.INTERNAL.withDescription("Panic! This is a bug!").withCause(t));
+      @Override
+      public PickResult pickSubchannel(PickSubchannelArgs args) {
+        return panicPickResult;
+      }
+    };
+    updateSubchannelPicker(newPicker);
+    channelStateManager.gotoState(TRANSIENT_FAILURE);
+  }
+
+  // Called from channelExecutor
+  private void updateSubchannelPicker(SubchannelPicker newPicker) {
+    subchannelPicker = newPicker;
+    delayedTransport.reprocess(newPicker);
+  }
+
   @Override
   public boolean isShutdown() {
     return shutdown.get();
@@ -958,8 +1003,7 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
               if (LbHelperImpl.this != lbHelper) {
                 return;
               }
-              subchannelPicker = newPicker;
-              delayedTransport.reprocess(newPicker);
+              updateSubchannelPicker(newPicker);
               // It's not appropriate to report SHUTDOWN state from lb.
               // Ignore the case of newState == SHUTDOWN for now.
               if (newState != SHUTDOWN) {
@@ -1084,16 +1128,7 @@ public final class ManagedChannelImpl extends ManagedChannel implements Instrume
                 re);
           }
 
-          try {
-            balancer.handleResolvedAddressGroups(servers, config);
-          } catch (Throwable e) {
-            logger.log(
-                Level.WARNING, "[" + getLogId() + "] Unexpected exception from LoadBalancer", e);
-            // It must be a bug! Push the exception back to LoadBalancer in the hope that it may
-            // be propagated to the application.
-            balancer.handleNameResolutionError(Status.INTERNAL.withCause(e)
-                .withDescription("Thrown from handleResolvedAddresses(): " + e));
-          }
+          balancer.handleResolvedAddressGroups(servers, config);
         }
       }
 
diff --git a/core/src/test/java/io/grpc/internal/ChannelExecutorTest.java b/core/src/test/java/io/grpc/internal/ChannelExecutorTest.java
index 9b0b3c53c1..a3f9c941b3 100644
--- a/core/src/test/java/io/grpc/internal/ChannelExecutorTest.java
+++ b/core/src/test/java/io/grpc/internal/ChannelExecutorTest.java
@@ -16,14 +16,18 @@
 
 package io.grpc.internal;
 
+import static com.google.common.truth.Truth.assertThat;
 import static org.junit.Assert.assertSame;
 import static org.junit.Assert.assertTrue;
 import static org.mockito.Mockito.doAnswer;
 import static org.mockito.Mockito.inOrder;
 
+import java.util.concurrent.BlockingQueue;
 import java.util.concurrent.CountDownLatch;
+import java.util.concurrent.LinkedBlockingQueue;
 import java.util.concurrent.TimeUnit;
 import java.util.concurrent.atomic.AtomicReference;
+import org.junit.After;
 import org.junit.Before;
 import org.junit.Test;
 import org.junit.runner.RunWith;
@@ -39,7 +43,13 @@ import org.mockito.stubbing.Answer;
  */
 @RunWith(JUnit4.class)
 public class ChannelExecutorTest {
-  private final ChannelExecutor executor = new ChannelExecutor();
+  private final BlockingQueue<Throwable> uncaughtErrors = new LinkedBlockingQueue<Throwable>();
+  private final ChannelExecutor executor = new ChannelExecutor() {
+      @Override
+      void handleUncaughtThrowable(Throwable t) {
+        uncaughtErrors.add(t);
+      }
+    };
 
   @Mock
   private Runnable task1;
@@ -54,6 +64,10 @@ public class ChannelExecutorTest {
     MockitoAnnotations.initMocks(this);
   }
 
+  @After public void tearDown() {
+    assertThat(uncaughtErrors).isEmpty();
+  }
+
   @Test
   public void singleThread() {
     executor.executeLater(task1);
@@ -135,10 +149,11 @@ public class ChannelExecutorTest {
   @Test
   public void taskThrows() {
     InOrder inOrder = inOrder(task1, task2, task3);
+    final RuntimeException e = new RuntimeException("Simulated");
     doAnswer(new Answer<Void>() {
         @Override
         public Void answer(InvocationOnMock invocation) {
-          throw new RuntimeException("Simulated");
+          throw e;
         }
       }).when(task2).run();
     executor.executeLater(task1);
@@ -148,5 +163,7 @@ public class ChannelExecutorTest {
     inOrder.verify(task1).run();
     inOrder.verify(task2).run();
     inOrder.verify(task3).run();
+    assertThat(uncaughtErrors).containsExactly(e);
+    uncaughtErrors.clear();
   }
 }
diff --git a/core/src/test/java/io/grpc/internal/ManagedChannelImplTest.java b/core/src/test/java/io/grpc/internal/ManagedChannelImplTest.java
index 2edb025abd..b85eb25d7b 100644
--- a/core/src/test/java/io/grpc/internal/ManagedChannelImplTest.java
+++ b/core/src/test/java/io/grpc/internal/ManagedChannelImplTest.java
@@ -26,6 +26,7 @@ import static io.grpc.ConnectivityState.TRANSIENT_FAILURE;
 import static junit.framework.TestCase.assertNotSame;
 import static org.junit.Assert.assertEquals;
 import static org.junit.Assert.assertFalse;
+import static org.junit.Assert.assertNotEquals;
 import static org.junit.Assert.assertNotNull;
 import static org.junit.Assert.assertNull;
 import static org.junit.Assert.assertSame;
@@ -56,6 +57,7 @@ import io.grpc.Channel;
 import io.grpc.ClientCall;
 import io.grpc.ClientInterceptor;
 import io.grpc.ClientStreamTracer;
+import io.grpc.ConnectivityState;
 import io.grpc.ConnectivityStateInfo;
 import io.grpc.Context;
 import io.grpc.EquivalentAddressGroup;
@@ -622,11 +624,8 @@ public class ManagedChannelImplTest {
     // NameResolver returns addresses.
     nameResolverFactory.allResolved();
 
-    // The LoadBalancer will receive the error that it has thrown.
-    verify(mockLoadBalancer).handleNameResolutionError(statusCaptor.capture());
-    Status status = statusCaptor.getValue();
-    assertSame(Status.Code.INTERNAL, status.getCode());
-    assertSame(ex, status.getCause());
+    // Exception thrown from balancer is caught by ChannelExecutor, making channel enter panic mode.
+    verifyPanicMode(ex);
   }
 
   @Test
@@ -1483,6 +1482,151 @@ public class ManagedChannelImplTest {
     assertEquals(IDLE, channel.getState(false));
   }
 
+  @Test
+  public void panic_whenIdle() {
+    subtestPanic(IDLE);
+  }
+
+  @Test
+  public void panic_whenConnecting() {
+    subtestPanic(CONNECTING);
+  }
+
+  @Test
+  public void panic_whenTransientFailure() {
+    subtestPanic(TRANSIENT_FAILURE);
+  }
+
+  @Test
+  public void panic_whenReady() {
+    subtestPanic(READY);
+  }
+
+  private void subtestPanic(ConnectivityState initialState) {
+    assertNotEquals("We don't test panic mode if it's already SHUTDOWN", SHUTDOWN, initialState);
+    long idleTimeoutMillis = 2000L;
+    FakeNameResolverFactory nameResolverFactory = new FakeNameResolverFactory(true);
+    createChannel(nameResolverFactory, NO_INTERCEPTOR, true, idleTimeoutMillis);
+
+    verify(mockLoadBalancerFactory).newLoadBalancer(any(Helper.class));
+    assertEquals(1, nameResolverFactory.resolvers.size());
+    FakeNameResolverFactory.FakeNameResolver resolver = nameResolverFactory.resolvers.remove(0);
+
+    Throwable panicReason = new Exception("Simulated uncaught exception");
+    if (initialState == IDLE) {
+      timer.forwardNanos(TimeUnit.MILLISECONDS.toNanos(idleTimeoutMillis));
+    } else {
+      helper.updateBalancingState(initialState, mockPicker);
+    }
+    assertEquals(initialState, channel.getState(false));
+
+    if (initialState == IDLE) {
+      // IDLE mode will shutdown resolver and balancer
+      verify(mockLoadBalancer).shutdown();
+      assertTrue(resolver.shutdown);
+      // A new resolver is created
+      assertEquals(1, nameResolverFactory.resolvers.size());
+      resolver = nameResolverFactory.resolvers.remove(0);
+      assertFalse(resolver.shutdown);
+    } else {
+      verify(mockLoadBalancer, never()).shutdown();
+      assertFalse(resolver.shutdown);
+    }
+
+    // Make channel panic!
+    channel.panic(panicReason);
+
+    // Calls buffered in delayedTransport will fail
+
+    // Resolver and balancer are shutdown
+    verify(mockLoadBalancer).shutdown();
+    assertTrue(resolver.shutdown);
+
+    // Channel will stay in TRANSIENT_FAILURE. getState(true) will not revive it.
+    assertEquals(TRANSIENT_FAILURE, channel.getState(true));
+    assertEquals(TRANSIENT_FAILURE, channel.getState(true));
+    verifyPanicMode(panicReason);
+
+    // No new resolver or balancer are created
+    verifyNoMoreInteractions(mockLoadBalancerFactory);
+    assertEquals(0, nameResolverFactory.resolvers.size());
+
+    // A misbehaving balancer that calls updateBalancingState() after it's shut down will not be
+    // able to revive it.
+    helper.updateBalancingState(READY, mockPicker);
+    verifyPanicMode(panicReason);
+
+    // Cannot be revived by exitIdleMode()
+    channel.exitIdleMode();
+    verifyPanicMode(panicReason);
+
+    // Can still shutdown normally
+    channel.shutdown();
+    assertTrue(channel.isShutdown());
+    assertTrue(channel.isTerminated());
+    assertEquals(SHUTDOWN, channel.getState(false));
+
+    // We didn't stub mockPicker, because it should have never been called in this test.
+    verifyZeroInteractions(mockPicker);
+  }
+
+  @Test
+  public void panic_bufferedCallsWillFail() {
+    FakeNameResolverFactory nameResolverFactory = new FakeNameResolverFactory(true);
+    createChannel(nameResolverFactory, NO_INTERCEPTOR);
+
+    when(mockPicker.pickSubchannel(any(PickSubchannelArgs.class)))
+        .thenReturn(PickResult.withNoResult());
+    helper.updateBalancingState(CONNECTING, mockPicker);
+
+    // Start RPCs that will be buffered in delayedTransport
+    ClientCall<String, Integer> call =
+        channel.newCall(method, CallOptions.DEFAULT.withoutWaitForReady());
+    call.start(mockCallListener, new Metadata());
+
+    ClientCall<String, Integer> call2 =
+        channel.newCall(method, CallOptions.DEFAULT.withWaitForReady());
+    call2.start(mockCallListener2, new Metadata());
+
+    executor.runDueTasks();
+    verifyZeroInteractions(mockCallListener, mockCallListener2);
+
+    // Enter panic
+    Throwable panicReason = new Exception("Simulated uncaught exception");
+    channel.panic(panicReason);
+
+    // Buffered RPCs fail immediately
+    executor.runDueTasks();
+    verifyCallListenerClosed(mockCallListener, Status.Code.INTERNAL, panicReason);
+    verifyCallListenerClosed(mockCallListener2, Status.Code.INTERNAL, panicReason);
+  }
+
+  private void verifyPanicMode(Throwable cause) {
+    @SuppressWarnings("unchecked")
+    ClientCall.Listener<Integer> mockListener =
+        (ClientCall.Listener<Integer>) mock(ClientCall.Listener.class);
+    assertEquals(TRANSIENT_FAILURE, channel.getState(false));
+    ClientCall<String, Integer> call = channel.newCall(method, CallOptions.DEFAULT);
+    call.start(mockListener, new Metadata());
+    executor.runDueTasks();
+    verifyCallListenerClosed(mockListener, Status.Code.INTERNAL, cause);
+
+    // Channel is dead.  No more pending task to possibly revive it.
+    assertEquals(0, timer.numPendingTasks());
+    assertEquals(0, executor.numPendingTasks());
+    assertEquals(0, oobExecutor.numPendingTasks());
+  }
+
+  private void verifyCallListenerClosed(
+      ClientCall.Listener<Integer> listener, Status.Code code, Throwable cause) {
+    ArgumentCaptor<Status> captor = ArgumentCaptor.forClass(null);
+    verify(listener).onClose(captor.capture(), any(Metadata.class));
+    Status rpcStatus = captor.getValue();
+    assertEquals(code, rpcStatus.getCode());
+    assertSame(cause, rpcStatus.getCause());
+    verifyNoMoreInteractions(listener);
+  }
+
   @Test
   public void idleTimeoutAndReconnect() {
     long idleTimeoutMillis = 2000L;