diff --git a/IPython/core/debugger.py b/IPython/core/debugger.py
index d7b22a3..5992b8e 100644
--- a/IPython/core/debugger.py
+++ b/IPython/core/debugger.py
@@ -64,7 +64,7 @@ def BdbQuit_excepthook(et,ev,tb):
     else:
         BdbQuit_excepthook.excepthook_ori(et,ev,tb)
 
-def BdbQuit_IPython_excepthook(self,et,ev,tb):
+def BdbQuit_IPython_excepthook(self,et,ev,tb,tb_offset=None):
     print 'Exiting Debugger.'
 
 
diff --git a/IPython/core/interactiveshell.py b/IPython/core/interactiveshell.py
index ad8ebab..0a52cca 100644
--- a/IPython/core/interactiveshell.py
+++ b/IPython/core/interactiveshell.py
@@ -1478,16 +1478,30 @@ class InteractiveShell(SingletonConfigurable, Magic):
         assert type(exc_tuple)==type(()) , \
                "The custom exceptions must be given AS A TUPLE."
 
-        def dummy_handler(self,etype,value,tb):
+        def dummy_handler(self,etype,value,tb,tb_offset=None):
             print '*** Simple custom exception handler ***'
             print 'Exception type :',etype
             print 'Exception value:',value
             print 'Traceback      :',tb
             #print 'Source code    :','\n'.join(self.buffer)
 
-        if handler is None: handler = dummy_handler
-
-        self.CustomTB = types.MethodType(handler,self)
+        if handler is None:
+            wrapped = dummy_handler
+        else:
+            def wrapped(self,etype,value,tb,tb_offset=None):
+                try:
+                    return handler(self,etype,value,tb,tb_offset=tb_offset)
+                except:
+                    # clear custom handler immediately
+                    self.set_custom_exc((), None)
+                    print >> io.stderr, "Custom TB Handler failed, unregistering"
+                    # show the exception in handler first
+                    stb = self.InteractiveTB.structured_traceback(*sys.exc_info())
+                    print >> io.stdout, self.InteractiveTB.stb2text(stb)
+                    print >> io.stdout, "The original exception:"
+                    self.showtraceback((etype,value,tb), tb_offset=tb_offset)
+
+        self.CustomTB = types.MethodType(wrapped,self)
         self.custom_exceptions = exc_tuple
 
     def excepthook(self, etype, value, tb):
diff --git a/IPython/core/tests/test_interactiveshell.py b/IPython/core/tests/test_interactiveshell.py
index 1ed515a..9e7b848 100644
--- a/IPython/core/tests/test_interactiveshell.py
+++ b/IPython/core/tests/test_interactiveshell.py
@@ -146,3 +146,21 @@ class InteractiveShellTestCase(unittest.TestCase):
         finally:
             # Reset compiler flags so we don't mess up other tests.
             ip.compile.reset_compiler_flags()
+
+    def test_bad_custom_tb(self):
+        """Check that InteractiveShell is protected from bad custom exception handlers"""
+        ip = get_ipython()
+        from IPython.utils import io
+        save_stderr = io.stderr
+        try:
+            # capture stderr
+            io.stderr = StringIO()
+            ip.set_custom_exc((IOError,),lambda etype,value,tb: None)
+            self.assertEquals(ip.custom_exceptions, (IOError,))
+            ip.run_cell(u'raise IOError("foo")')
+            self.assertEquals(ip.custom_exceptions, ())
+            self.assertTrue("Custom TB Handler failed" in io.stderr.getvalue())
+        finally:
+            io.stderr = save_stderr
+
+