diff --git a/include/osmocom/msc/vlr_sgs.h b/include/osmocom/msc/vlr_sgs.h
index 00d52f7b4..fa9d948a1 100644
--- a/include/osmocom/msc/vlr_sgs.h
+++ b/include/osmocom/msc/vlr_sgs.h
@@ -75,6 +75,7 @@ static inline const char *vlr_sgs_state_counter_name(enum vlr_sgs_state_ctr Ns)
 /* This callback function is called when an SGs location update is complete */
 struct sgs_lu_response {
 	bool accepted;
+	bool error;
 	struct vlr_subscr *vsub;
 };
 typedef void (*vlr_sgs_lu_response_cb_t) (struct sgs_lu_response *response);
diff --git a/src/libmsc/sgs_iface.c b/src/libmsc/sgs_iface.c
index d83a730ef..53ab8534a 100644
--- a/src/libmsc/sgs_iface.c
+++ b/src/libmsc/sgs_iface.c
@@ -376,15 +376,26 @@ static void sgs_tx_loc_upd_resp_cb(struct sgs_lu_response *response)
 	unsigned int new_id_len = 0;
 	uint8_t resp_msg_type;
 
+	/* Determine message type that is sent next (needed for logging) */
 	if (response->accepted)
 		resp_msg_type = SGSAP_MSGT_LOC_UPD_ACK;
+	else if (response->error)
+		resp_msg_type = SGSAP_MSGT_RESET_IND;
 	else
 		resp_msg_type = SGSAP_MSGT_LOC_UPD_REJ;
 
+	/* Determine MME */
 	mme = sgs_mme_ctx_by_vsub(vsub, resp_msg_type);
 	if (!mme)
 		return;
 
+	/* Handle error (HLR failure) */
+	if (response->error) {
+		osmo_fsm_inst_dispatch(mme->fi, SGS_VLRR_E_START_RESET, NULL);
+		return;
+	}
+
+	/* Handle LU accept/reject */
 	if (response->accepted) {
 		if (vsub->tmsi_new != GSM_RESERVED_TMSI) {
 			new_id_len = gsm48_generate_mid_from_tmsi(new_id, vsub->tmsi_new);
@@ -1120,6 +1131,10 @@ static void sgs_vlr_reset_fsm_allstate(struct osmo_fsm_inst *fi, uint32_t event,
 		reset_params.vlr_name_present = true;
 		reset_ind = gsm29118_create_reset_ind(&reset_params);
 		sgs_tx(sgc, reset_ind);
+
+		/* Perform a reset of the SGS FSM of all subscribers that are present in the VLR */
+		vlr_sgs_reset(gsm_network->vlr);
+
 		osmo_fsm_inst_state_chg(fi, SGS_VLRR_ST_WAIT_ACK, sgs->cfg.timer[SGS_STATE_TS11], 11);
 		break;
 	default:
@@ -1187,6 +1202,7 @@ static const struct osmo_fsm_state sgs_vlr_reset_fsm_states[] = {
 static struct osmo_fsm sgs_vlr_reset_fsm = {
 	.name = "SGs-VLR-RESET",
 	.states = sgs_vlr_reset_fsm_states,
+	.num_states = ARRAY_SIZE(sgs_vlr_reset_fsm_states),
 	.allstate_event_mask = S(SGS_VLRR_E_START_RESET),
 	.allstate_action = sgs_vlr_reset_fsm_allstate,
 	.timer_cb = sgs_vlr_reset_fsm_timer_cb,
diff --git a/src/libvlr/vlr.c b/src/libvlr/vlr.c
index b156b430b..2753096e9 100644
--- a/src/libvlr/vlr.c
+++ b/src/libvlr/vlr.c
@@ -854,7 +854,7 @@ static int vlr_subscr_handle_isd_req(struct vlr_subscr *vsub,
 static int vlr_subscr_handle_lu_res(struct vlr_subscr *vsub,
 				    const struct osmo_gsup_message *gsup)
 {
-	struct sgs_lu_response sgs_lu_response;
+	struct sgs_lu_response sgs_lu_response = {0};
 	bool sgs_lu_in_progress = false;
 
 	if (vsub->sgs_fsm->state == SGS_UE_ST_LA_UPD_PRES)
@@ -885,7 +885,7 @@ static int vlr_subscr_handle_lu_res(struct vlr_subscr *vsub,
 static int vlr_subscr_handle_lu_err(struct vlr_subscr *vsub,
 				    const struct osmo_gsup_message *gsup)
 {
-	struct sgs_lu_response sgs_lu_response;
+	struct sgs_lu_response sgs_lu_response = {0};
 	bool sgs_lu_in_progress = false;
 
 	if (vsub->sgs_fsm->state == SGS_UE_ST_LA_UPD_PRES)
diff --git a/src/libvlr/vlr_sgs_fsm.c b/src/libvlr/vlr_sgs_fsm.c
index 13639ca3c..49ad09a59 100644
--- a/src/libvlr/vlr_sgs_fsm.c
+++ b/src/libvlr/vlr_sgs_fsm.c
@@ -48,24 +48,6 @@ static const struct value_string sgs_ue_fsm_event_names[] = {
 	{0, NULL}
 };
 
-/* Initiate location update and change to SGS_UE_ST_LA_UPD_PRES state */
-static void perform_lu(struct osmo_fsm_inst *fi)
-{
-	struct vlr_subscr *vsub = fi->priv;
-	int rc;
-	osmo_fsm_inst_state_chg(fi, SGS_UE_ST_LA_UPD_PRES, 0, 0);
-	vsub->ms_not_reachable_flag = false;
-
-	/* Note: At the moment we allocate a new TMSI on each LU. */
-	rc = vlr_subscr_alloc_tmsi(vsub);
-	if (rc != 0)
-		LOGPFSML(fi, LOGL_ERROR, "(sub %s) VLR LU tmsi allocation failed\n", vlr_subscr_name(vsub));
-
-	rc = vlr_subscr_req_lu(vsub);
-	if (rc != 0)
-		LOGPFSML(fi, LOGL_ERROR, "(sub %s) HLR LU request failed\n", vlr_subscr_name(vsub));
-}
-
 /* Send the SGs Association to NULL state immediately */
 static void to_null(struct osmo_fsm_inst *fi)
 {
@@ -86,6 +68,37 @@ static void to_null(struct osmo_fsm_inst *fi)
 		osmo_timer_del(&vsub->sgs.Ts5);
 }
 
+/* Initiate location update and change to SGS_UE_ST_LA_UPD_PRES state */
+static void perform_lu(struct osmo_fsm_inst *fi)
+{
+	struct vlr_subscr *vsub = fi->priv;
+	struct sgs_lu_response sgs_lu_response = {0};
+	int rc;
+
+	/* Note: At the moment we allocate a new TMSI on each LU. */
+	rc = vlr_subscr_alloc_tmsi(vsub);
+	if (rc != 0) {
+		LOGPFSML(fi, LOGL_ERROR, "(sub %s) VLR LU tmsi allocation failed\n", vlr_subscr_name(vsub));
+		goto error;
+	}
+
+	rc = vlr_subscr_req_lu(vsub);
+	if (rc != 0) {
+		LOGPFSML(fi, LOGL_ERROR, "(sub %s) HLR LU request failed\n", vlr_subscr_name(vsub));
+		goto error;
+	}
+
+	osmo_fsm_inst_state_chg(fi, SGS_UE_ST_LA_UPD_PRES, 0, 0);
+	vsub->ms_not_reachable_flag = false;
+	return;
+
+error:
+	to_null(fi);
+	sgs_lu_response.error = true;
+	sgs_lu_response.vsub = vsub;
+	vsub->sgs.response_cb(&sgs_lu_response);
+}
+
 /* Respawn a pending paging (Timer is reset and a new paging request is sent) */
 static void respawn_paging(struct vlr_subscr *vsub)
 {