diff --git a/src/csharp/Grpc.Core.Tests/Grpc.Core.Tests.csproj b/src/csharp/Grpc.Core.Tests/Grpc.Core.Tests.csproj
index b571fe90259..f730936062d 100644
--- a/src/csharp/Grpc.Core.Tests/Grpc.Core.Tests.csproj
+++ b/src/csharp/Grpc.Core.Tests/Grpc.Core.Tests.csproj
@@ -64,6 +64,7 @@
       <Link>Version.cs</Link>
     </Compile>
     <Compile Include="ClientBaseTest.cs" />
+    <Compile Include="MarshallingErrorsTest.cs" />
     <Compile Include="ShutdownTest.cs" />
     <Compile Include="Internal\AsyncCallTest.cs" />
     <Compile Include="Properties\AssemblyInfo.cs" />
diff --git a/src/csharp/Grpc.Core.Tests/MarshallingErrorsTest.cs b/src/csharp/Grpc.Core.Tests/MarshallingErrorsTest.cs
new file mode 100644
index 00000000000..83707e0c6da
--- /dev/null
+++ b/src/csharp/Grpc.Core.Tests/MarshallingErrorsTest.cs
@@ -0,0 +1,176 @@
+#region Copyright notice and license
+
+// Copyright 2015, Google Inc.
+// All rights reserved.
+//
+// Redistribution and use in source and binary forms, with or without
+// modification, are permitted provided that the following conditions are
+// met:
+//
+//     * Redistributions of source code must retain the above copyright
+// notice, this list of conditions and the following disclaimer.
+//     * Redistributions in binary form must reproduce the above
+// copyright notice, this list of conditions and the following disclaimer
+// in the documentation and/or other materials provided with the
+// distribution.
+//     * Neither the name of Google Inc. nor the names of its
+// contributors may be used to endorse or promote products derived from
+// this software without specific prior written permission.
+//
+// THIS SOFTWARE IS PROVIDED BY THE COPYRIGHT HOLDERS AND CONTRIBUTORS
+// "AS IS" AND ANY EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT
+// LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
+// A PARTICULAR PURPOSE ARE DISCLAIMED. IN NO EVENT SHALL THE COPYRIGHT
+// OWNER OR CONTRIBUTORS BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL,
+// SPECIAL, EXEMPLARY, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT
+// LIMITED TO, PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES; LOSS OF USE,
+// DATA, OR PROFITS; OR BUSINESS INTERRUPTION) HOWEVER CAUSED AND ON ANY
+// THEORY OF LIABILITY, WHETHER IN CONTRACT, STRICT LIABILITY, OR TORT
+// (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING IN ANY WAY OUT OF THE USE
+// OF THIS SOFTWARE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
+
+#endregion
+
+using System;
+using System.Collections.Generic;
+using System.Diagnostics;
+using System.IO;
+using System.Linq;
+using System.Threading;
+using System.Threading.Tasks;
+
+using Grpc.Core;
+using Grpc.Core.Internal;
+using Grpc.Core.Utils;
+using NUnit.Framework;
+
+namespace Grpc.Core.Tests
+{
+    public class MarshallingErrorsTest
+    {
+        const string Host = "127.0.0.1";
+
+        MockServiceHelper helper;
+        Server server;
+        Channel channel;
+
+        [SetUp]
+        public void Init()
+        {
+            var marshaller = new Marshaller<string>(
+                (str) =>
+                {
+                    if (str == "UNSERIALIZABLE_VALUE")
+                    {
+                        // Google.Protobuf throws exception inherited from IOException
+                        throw new IOException("Error serializing the message.");
+                    }
+                    return System.Text.Encoding.UTF8.GetBytes(str); 
+                },
+                (payload) =>
+                {
+                    var s = System.Text.Encoding.UTF8.GetString(payload);
+                    if (s == "UNPARSEABLE_VALUE")
+                    {
+                        // Google.Protobuf throws exception inherited from IOException
+                        throw new IOException("Error parsing the message.");
+                    }
+                    return s;
+                });
+            helper = new MockServiceHelper(Host, marshaller);
+            server = helper.GetServer();
+            server.Start();
+            channel = helper.GetChannel();
+        }
+
+        [TearDown]
+        public void Cleanup()
+        {
+            channel.ShutdownAsync().Wait();
+            server.ShutdownAsync().Wait();
+        }
+
+        [Test]
+        public void ResponseParsingError_UnaryResponse()
+        {
+            helper.UnaryHandler = new UnaryServerMethod<string, string>((request, context) =>
+            {
+                return Task.FromResult("UNPARSEABLE_VALUE");
+            });
+
+            var ex = Assert.Throws<RpcException>(() => Calls.BlockingUnaryCall(helper.CreateUnaryCall(), "REQUEST"));
+            Assert.AreEqual(StatusCode.Internal, ex.Status.StatusCode);
+        }
+
+        [Test]
+        public void ResponseParsingError_StreamingResponse()
+        {
+            helper.ServerStreamingHandler = new ServerStreamingServerMethod<string, string>(async (request, responseStream, context) =>
+            {
+                await responseStream.WriteAsync("UNPARSEABLE_VALUE");
+                await Task.Delay(10000);
+            });
+
+            var call = Calls.AsyncServerStreamingCall(helper.CreateServerStreamingCall(), "REQUEST");
+            var ex = Assert.Throws<RpcException>(async () => await call.ResponseStream.MoveNext());
+            Assert.AreEqual(StatusCode.Internal, ex.Status.StatusCode);
+        }
+
+        [Test]
+        public void RequestParsingError_UnaryRequest()
+        {
+            helper.UnaryHandler = new  UnaryServerMethod<string, string>((request, context) =>
+            {
+                return Task.FromResult("RESPONSE");
+            });
+
+            var ex = Assert.Throws<RpcException>(() => Calls.BlockingUnaryCall(helper.CreateUnaryCall(), "UNPARSEABLE_VALUE"));
+            // Spec doesn't define the behavior. With the current implementation server handler throws exception which results in StatusCode.Unknown.
+            Assert.AreEqual(StatusCode.Unknown, ex.Status.StatusCode);
+        }
+
+        [Test]
+        public async Task RequestParsingError_StreamingRequest()
+        {
+            helper.ClientStreamingHandler = new ClientStreamingServerMethod<string, string>(async (requestStream, context) =>
+            {
+                Assert.Throws<IOException>(async () => await requestStream.MoveNext());
+                return "RESPONSE";
+            });
+
+            var call = Calls.AsyncClientStreamingCall(helper.CreateClientStreamingCall());
+            await call.RequestStream.WriteAsync("UNPARSEABLE_VALUE");
+
+            Assert.AreEqual("RESPONSE", await call);
+        }
+
+        [Test]
+        public void RequestSerializationError_BlockingUnary()
+        {
+            Assert.Throws<IOException>(() => Calls.BlockingUnaryCall(helper.CreateUnaryCall(), "UNSERIALIZABLE_VALUE"));
+        }
+
+        [Test]
+        public void RequestSerializationError_AsyncUnary()
+        {
+            Assert.Throws<IOException>(async () => await Calls.AsyncUnaryCall(helper.CreateUnaryCall(), "UNSERIALIZABLE_VALUE"));
+        }
+
+        [Test]
+        public async Task RequestSerializationError_ClientStreaming()
+        {
+            helper.ClientStreamingHandler = new ClientStreamingServerMethod<string, string>(async (requestStream, context) =>
+            {
+                CollectionAssert.AreEqual(new [] {"A", "B"}, await requestStream.ToListAsync());
+                return "RESPONSE";
+            });
+            var call = Calls.AsyncClientStreamingCall(helper.CreateClientStreamingCall());
+            await call.RequestStream.WriteAsync("A");
+            Assert.Throws<IOException>(async () => await call.RequestStream.WriteAsync("UNSERIALIZABLE_VALUE"));
+            await call.RequestStream.WriteAsync("B");
+            await call.RequestStream.CompleteAsync();
+
+            Assert.AreEqual("RESPONSE", await call);
+        }
+    }
+}
diff --git a/src/csharp/Grpc.Core.Tests/MockServiceHelper.cs b/src/csharp/Grpc.Core.Tests/MockServiceHelper.cs
index bb69648d8bf..765732c7687 100644
--- a/src/csharp/Grpc.Core.Tests/MockServiceHelper.cs
+++ b/src/csharp/Grpc.Core.Tests/MockServiceHelper.cs
@@ -50,37 +50,14 @@ namespace Grpc.Core.Tests
     {
         public const string ServiceName = "tests.Test";
 
-        public static readonly Method<string, string> UnaryMethod = new Method<string, string>(
-            MethodType.Unary,
-            ServiceName,
-            "Unary",
-            Marshallers.StringMarshaller,
-            Marshallers.StringMarshaller);
-
-        public static readonly Method<string, string> ClientStreamingMethod = new Method<string, string>(
-            MethodType.ClientStreaming,
-            ServiceName,
-            "ClientStreaming",
-            Marshallers.StringMarshaller,
-            Marshallers.StringMarshaller);
-
-        public static readonly Method<string, string> ServerStreamingMethod = new Method<string, string>(
-            MethodType.ServerStreaming,
-            ServiceName,
-            "ServerStreaming",
-            Marshallers.StringMarshaller,
-            Marshallers.StringMarshaller);
-
-        public static readonly Method<string, string> DuplexStreamingMethod = new Method<string, string>(
-            MethodType.DuplexStreaming,
-            ServiceName,
-            "DuplexStreaming",
-            Marshallers.StringMarshaller,
-            Marshallers.StringMarshaller);
-
         readonly string host;
         readonly ServerServiceDefinition serviceDefinition;
 
+        readonly Method<string, string> unaryMethod;
+        readonly Method<string, string> clientStreamingMethod;
+        readonly Method<string, string> serverStreamingMethod;
+        readonly Method<string, string> duplexStreamingMethod;
+
         UnaryServerMethod<string, string> unaryHandler;
         ClientStreamingServerMethod<string, string> clientStreamingHandler;
         ServerStreamingServerMethod<string, string> serverStreamingHandler;
@@ -89,15 +66,44 @@ namespace Grpc.Core.Tests
         Server server;
         Channel channel;
 
-        public MockServiceHelper(string host = null)
+        public MockServiceHelper(string host = null, Marshaller<string> marshaller = null)
         {
             this.host = host ?? "localhost";
+            marshaller = marshaller ?? Marshallers.StringMarshaller;
+
+            unaryMethod = new Method<string, string>(
+                MethodType.Unary,
+                ServiceName,
+                "Unary",
+                marshaller,
+                marshaller);
+
+            clientStreamingMethod = new Method<string, string>(
+                MethodType.ClientStreaming,
+                ServiceName,
+                "ClientStreaming",
+                marshaller,
+                marshaller);
+
+            serverStreamingMethod = new Method<string, string>(
+                MethodType.ServerStreaming,
+                ServiceName,
+                "ServerStreaming",
+                marshaller,
+                marshaller);
+
+            duplexStreamingMethod = new Method<string, string>(
+                MethodType.DuplexStreaming,
+                ServiceName,
+                "DuplexStreaming",
+                marshaller,
+                marshaller);
 
             serviceDefinition = ServerServiceDefinition.CreateBuilder(ServiceName)
-                .AddMethod(UnaryMethod, (request, context) => unaryHandler(request, context))
-                .AddMethod(ClientStreamingMethod, (requestStream, context) => clientStreamingHandler(requestStream, context))
-                .AddMethod(ServerStreamingMethod, (request, responseStream, context) => serverStreamingHandler(request, responseStream, context))
-                .AddMethod(DuplexStreamingMethod, (requestStream, responseStream, context) => duplexStreamingHandler(requestStream, responseStream, context))
+                .AddMethod(unaryMethod, (request, context) => unaryHandler(request, context))
+                .AddMethod(clientStreamingMethod, (requestStream, context) => clientStreamingHandler(requestStream, context))
+                .AddMethod(serverStreamingMethod, (request, responseStream, context) => serverStreamingHandler(request, responseStream, context))
+                .AddMethod(duplexStreamingMethod, (requestStream, responseStream, context) => duplexStreamingHandler(requestStream, responseStream, context))
                 .Build();
 
             var defaultStatus = new Status(StatusCode.Unknown, "Default mock implementation. Please provide your own.");
@@ -155,22 +161,22 @@ namespace Grpc.Core.Tests
 
         public CallInvocationDetails<string, string> CreateUnaryCall(CallOptions options = default(CallOptions))
         {
-            return new CallInvocationDetails<string, string>(channel, UnaryMethod, options);
+            return new CallInvocationDetails<string, string>(channel, unaryMethod, options);
         }
 
         public CallInvocationDetails<string, string> CreateClientStreamingCall(CallOptions options = default(CallOptions))
         {
-            return new CallInvocationDetails<string, string>(channel, ClientStreamingMethod, options);
+            return new CallInvocationDetails<string, string>(channel, clientStreamingMethod, options);
         }
 
         public CallInvocationDetails<string, string> CreateServerStreamingCall(CallOptions options = default(CallOptions))
         {
-            return new CallInvocationDetails<string, string>(channel, ServerStreamingMethod, options);
+            return new CallInvocationDetails<string, string>(channel, serverStreamingMethod, options);
         }
 
         public CallInvocationDetails<string, string> CreateDuplexStreamingCall(CallOptions options = default(CallOptions))
         {
-            return new CallInvocationDetails<string, string>(channel, DuplexStreamingMethod, options);
+            return new CallInvocationDetails<string, string>(channel, duplexStreamingMethod, options);
         }
 
         public string Host
diff --git a/src/csharp/Grpc.Core/Internal/AsyncCall.cs b/src/csharp/Grpc.Core/Internal/AsyncCall.cs
index be5d611a538..e3b00781c62 100644
--- a/src/csharp/Grpc.Core/Internal/AsyncCall.cs
+++ b/src/csharp/Grpc.Core/Internal/AsyncCall.cs
@@ -322,6 +322,11 @@ namespace Grpc.Core.Internal
             details.Channel.RemoveCallReference(this);
         }
 
+        protected override bool IsClient
+        {
+            get { return true; }
+        }
+
         private void Initialize(CompletionQueueSafeHandle cq)
         {
             var call = CreateNativeCall(cq);
@@ -376,9 +381,17 @@ namespace Grpc.Core.Internal
         /// </summary>
         private void HandleUnaryResponse(bool success, ClientSideStatus receivedStatus, byte[] receivedMessage, Metadata responseHeaders)
         {
+            TResponse msg = default(TResponse);
+            var deserializeException = success ? TryDeserialize(receivedMessage, out msg) : null;
+
             lock (myLock)
             {
                 finished = true;
+
+                if (deserializeException != null && receivedStatus.Status.StatusCode == StatusCode.OK)
+                {
+                    receivedStatus = new ClientSideStatus(DeserializeResponseFailureStatus, receivedStatus.Trailers);
+                }
                 finishedStatus = receivedStatus;
 
                 ReleaseResourcesIfPossible();
@@ -394,10 +407,6 @@ namespace Grpc.Core.Internal
                 return;
             }
 
-            // TODO: handle deserialization error
-            TResponse msg;
-            TryDeserialize(receivedMessage, out msg);
-
             unaryResponseTcs.SetResult(msg);
         }
 
diff --git a/src/csharp/Grpc.Core/Internal/AsyncCallBase.cs b/src/csharp/Grpc.Core/Internal/AsyncCallBase.cs
index 4d203946449..3e2c57c9b5b 100644
--- a/src/csharp/Grpc.Core/Internal/AsyncCallBase.cs
+++ b/src/csharp/Grpc.Core/Internal/AsyncCallBase.cs
@@ -33,10 +33,12 @@
 
 using System;
 using System.Diagnostics;
+using System.IO;
 using System.Runtime.CompilerServices;
 using System.Runtime.InteropServices;
 using System.Threading;
 using System.Threading.Tasks;
+
 using Grpc.Core.Internal;
 using Grpc.Core.Logging;
 using Grpc.Core.Utils;
@@ -50,6 +52,7 @@ namespace Grpc.Core.Internal
     internal abstract class AsyncCallBase<TWrite, TRead>
     {
         static readonly ILogger Logger = GrpcEnvironment.Logger.ForType<AsyncCallBase<TWrite, TRead>>();
+        protected static readonly Status DeserializeResponseFailureStatus = new Status(StatusCode.Internal, "Failed to deserialize response message.");
 
         readonly Func<TWrite, byte[]> serializer;
         readonly Func<byte[], TRead> deserializer;
@@ -100,11 +103,10 @@ namespace Grpc.Core.Internal
         /// <summary>
         /// Requests cancelling the call with given status.
         /// </summary>
-        public void CancelWithStatus(Status status)
+        protected void CancelWithStatus(Status status)
         {
             lock (myLock)
             {
-                Preconditions.CheckState(started);
                 cancelRequested = true;
 
                 if (!disposed)
@@ -177,6 +179,11 @@ namespace Grpc.Core.Internal
             return false;
         }
 
+        protected abstract bool IsClient
+        {
+            get;
+        }
+
         private void ReleaseResources()
         {
             if (call != null)
@@ -224,33 +231,31 @@ namespace Grpc.Core.Internal
             return serializer(msg);
         }
 
-        protected bool TrySerialize(TWrite msg, out byte[] payload)
+        protected Exception TrySerialize(TWrite msg, out byte[] payload)
         {
             try
             {
                 payload = serializer(msg);
-                return true;
+                return null;
             }
             catch (Exception e)
             {
-                Logger.Error(e, "Exception occured while trying to serialize message");
                 payload = null;
-                return false;
+                return e;
             }
         }
 
-        protected bool TryDeserialize(byte[] payload, out TRead msg)
+        protected Exception TryDeserialize(byte[] payload, out TRead msg)
         {
             try
             {
                 msg = deserializer(payload);
-                return true;
+                return null;
             } 
             catch (Exception e)
             {
-                Logger.Error(e, "Exception occured while trying to deserialize message.");
                 msg = default(TRead);
-                return false;
+                return e;
             }
         }
 
@@ -319,6 +324,9 @@ namespace Grpc.Core.Internal
         /// </summary>
         protected void HandleReadFinished(bool success, byte[] receivedMessage)
         {
+            TRead msg = default(TRead);
+            var deserializeException = (success && receivedMessage != null) ? TryDeserialize(receivedMessage, out msg) : null;
+
             AsyncCompletionDelegate<TRead> origCompletionDelegate = null;
             lock (myLock)
             {
@@ -331,23 +339,23 @@ namespace Grpc.Core.Internal
                     readingDone = true;
                 }
 
+                if (deserializeException != null && IsClient)
+                {
+                    readingDone = true;
+                    CancelWithStatus(DeserializeResponseFailureStatus);
+                }
+
                 ReleaseResourcesIfPossible();
             }
 
-            // TODO: handle the case when error occured...
+            // TODO: handle the case when success==false
 
-            if (receivedMessage != null)
-            {
-                // TODO: handle deserialization error
-                TRead msg;
-                TryDeserialize(receivedMessage, out msg);
-
-                FireCompletion(origCompletionDelegate, msg, null);
-            }
-            else
+            if (deserializeException != null && !IsClient)
             {
-                FireCompletion(origCompletionDelegate, default(TRead), null);
+                FireCompletion(origCompletionDelegate, default(TRead), new IOException("Failed to deserialize request message.", deserializeException));
+                return;
             }
+            FireCompletion(origCompletionDelegate, msg, null);
         }
     }
 }
\ No newline at end of file
diff --git a/src/csharp/Grpc.Core/Internal/AsyncCallServer.cs b/src/csharp/Grpc.Core/Internal/AsyncCallServer.cs
index 5c47251030e..46ca4593493 100644
--- a/src/csharp/Grpc.Core/Internal/AsyncCallServer.cs
+++ b/src/csharp/Grpc.Core/Internal/AsyncCallServer.cs
@@ -169,6 +169,11 @@ namespace Grpc.Core.Internal
             }
         }
 
+        protected override bool IsClient
+        {
+            get { return false; }
+        }
+
         protected override void CheckReadingAllowed()
         {
             base.CheckReadingAllowed();
diff --git a/src/csharp/Grpc.Core/Marshaller.cs b/src/csharp/Grpc.Core/Marshaller.cs
index f38cb0863ff..3493d2d38f0 100644
--- a/src/csharp/Grpc.Core/Marshaller.cs
+++ b/src/csharp/Grpc.Core/Marshaller.cs
@@ -39,7 +39,7 @@ namespace Grpc.Core
     /// <summary>
     /// Encapsulates the logic for serializing and deserializing messages.
     /// </summary>
-    public struct Marshaller<T>
+    public class Marshaller<T>
     {
         readonly Func<T, byte[]> serializer;
         readonly Func<byte[], T> deserializer;
diff --git a/src/csharp/Grpc.Examples.Tests/MathClientServerTests.cs b/src/csharp/Grpc.Examples.Tests/MathClientServerTests.cs
index d8547758d24..e2975b5da93 100644
--- a/src/csharp/Grpc.Examples.Tests/MathClientServerTests.cs
+++ b/src/csharp/Grpc.Examples.Tests/MathClientServerTests.cs
@@ -162,7 +162,7 @@ namespace Math.Tests
         {
             using (var call = client.Sum())
             {
-                var numbers = new List<long> { 10, 20, 30 }.ConvertAll(n => new Num{ Num_ = n });
+                var numbers = new List<long> { 10, 20, 30 }.ConvertAll(n => new Num { Num_ = n });
 
                 await call.RequestStream.WriteAllAsync(numbers);
                 var result = await call.ResponseAsync;
diff --git a/src/csharp/Grpc.HealthCheck.Tests/HealthClientServerTest.cs b/src/csharp/Grpc.HealthCheck.Tests/HealthClientServerTest.cs
index 95f742cc99d..6c3a53bec05 100644
--- a/src/csharp/Grpc.HealthCheck.Tests/HealthClientServerTest.cs
+++ b/src/csharp/Grpc.HealthCheck.Tests/HealthClientServerTest.cs
@@ -88,7 +88,7 @@ namespace Grpc.HealthCheck.Tests
         [Test]
         public void ServiceDoesntExist()
         {
-            Assert.Throws(Is.TypeOf(typeof(RpcException)).And.Property("Status").Property("StatusCode").EqualTo(StatusCode.NotFound), () => client.Check(new HealthCheckRequest{ Host = "", Service = "nonexistent.service" }));
+            Assert.Throws(Is.TypeOf(typeof(RpcException)).And.Property("Status").Property("StatusCode").EqualTo(StatusCode.NotFound), () => client.Check(new HealthCheckRequest { Host = "", Service = "nonexistent.service" }));
         }
 
         // TODO(jtattermusch): add test with timeout once timeouts are supported
diff --git a/src/csharp/Grpc.HealthCheck.Tests/HealthServiceImplTest.cs b/src/csharp/Grpc.HealthCheck.Tests/HealthServiceImplTest.cs
index 8de8645cd18..2097c0dc8cf 100644
--- a/src/csharp/Grpc.HealthCheck.Tests/HealthServiceImplTest.cs
+++ b/src/csharp/Grpc.HealthCheck.Tests/HealthServiceImplTest.cs
@@ -101,7 +101,7 @@ namespace Grpc.HealthCheck.Tests
 
         private static HealthCheckResponse.Types.ServingStatus GetStatusHelper(HealthServiceImpl impl, string host, string service)
         {
-            return impl.Check(new HealthCheckRequest{ Host = host, Service = service}, null).Result.Status;
+            return impl.Check(new HealthCheckRequest { Host = host, Service = service }, null).Result.Status;
         }
     }
 }
diff --git a/src/csharp/Grpc.IntegrationTesting/InteropClient.cs b/src/csharp/Grpc.IntegrationTesting/InteropClient.cs
index ed51af19421..8343e54122c 100644
--- a/src/csharp/Grpc.IntegrationTesting/InteropClient.cs
+++ b/src/csharp/Grpc.IntegrationTesting/InteropClient.cs
@@ -37,13 +37,12 @@ using System.Text.RegularExpressions;
 using System.Threading;
 using System.Threading.Tasks;
 
+using Google.Apis.Auth.OAuth2;
+using Google.Protobuf;
 using Grpc.Auth;
 using Grpc.Core;
 using Grpc.Core.Utils;
 using Grpc.Testing;
-using Google.Protobuf;
-using Google.Apis.Auth.OAuth2;
-
 using NUnit.Framework;
 
 namespace Grpc.IntegrationTesting