diff --git a/internal/p2p/channel.go b/internal/p2p/channel.go
index d3d7d104f..d6763543a 100644
--- a/internal/p2p/channel.go
+++ b/internal/p2p/channel.go
@@ -46,6 +46,7 @@ type Wrapper interface {
 type PeerError struct {
 	NodeID types.NodeID
 	Err    error
+	Fatal  bool
 }
 
 func (pe PeerError) Error() string { return fmt.Sprintf("peer=%q: %s", pe.NodeID, pe.Err.Error()) }
diff --git a/internal/p2p/peermanager.go b/internal/p2p/peermanager.go
index 165b00e61..7391de4ea 100644
--- a/internal/p2p/peermanager.go
+++ b/internal/p2p/peermanager.go
@@ -430,6 +430,13 @@ func (m *PeerManager) PeerRatio() float64 {
 	return float64(m.store.Size()) / float64(m.options.MaxPeers)
 }
 
+func (m *PeerManager) HasMaxPeerCapacity() bool {
+	m.mtx.Lock()
+	defer m.mtx.Unlock()
+
+	return len(m.connected) >= int(m.options.MaxConnected)
+}
+
 // DialNext finds an appropriate peer address to dial, and marks it as dialing.
 // If no peer is found, or all connection slots are full, it blocks until one
 // becomes available. The caller must call Dialed() or DialFailed() for the
diff --git a/internal/p2p/router.go b/internal/p2p/router.go
index a9a01f3c7..267d55a96 100644
--- a/internal/p2p/router.go
+++ b/internal/p2p/router.go
@@ -396,9 +396,21 @@ func (r *Router) routeChannel(
 				return
 			}
 
-			r.logger.Error("peer error, evicting", "peer", peerError.NodeID, "err", peerError.Err)
+			shouldEvict := peerError.Fatal || r.peerManager.HasMaxPeerCapacity()
+			r.logger.Error("peer error",
+				"peer", peerError.NodeID,
+				"err", peerError.Err,
+				"evicting", shouldEvict,
+			)
+			if shouldEvict {
+				r.peerManager.Errored(peerError.NodeID, peerError.Err)
+			} else {
+				r.peerManager.processPeerEvent(ctx, PeerUpdate{
+					NodeID: peerError.NodeID,
+					Status: PeerStatusBad,
+				})
+			}
 
-			r.peerManager.Errored(peerError.NodeID, peerError.Err)
 		case <-ctx.Done():
 			return
 		}