diff --git a/stix2/__init__.py b/stix2/__init__.py
index f3dfd20..392e947 100644
--- a/stix2/__init__.py
+++ b/stix2/__init__.py
@@ -95,46 +95,70 @@ EXT_MAP = {
 }
 
 
-def parse(data):
-    """Deserialize a string or file-like object into a STIX object"""
+def parse(data, allow_custom=False):
+    """Deserialize a string or file-like object into a STIX object.
+
+    Args:
+        data: The STIX 2 string to be parsed.
+        allow_custom (bool): Whether to allow custom properties or not. Default: False.
+
+    Returns:
+        An instantiated Python STIX object.
+    """
 
     obj = get_dict(data)
 
     if 'type' not in obj:
-        # TODO parse external references, kill chain phases, and granular markings
-        pass
-    else:
-        try:
-            obj_class = OBJ_MAP[obj['type']]
-        except KeyError:
-            # TODO handle custom objects
-            raise ValueError("Can't parse unknown object type '%s'!" % obj['type'])
-        return obj_class(**obj)
+        raise exceptions.ParseError("Can't parse object with no 'type' property: %s" % str(obj))
 
-    return obj
+    try:
+        obj_class = OBJ_MAP[obj['type']]
+    except KeyError:
+        raise exceptions.ParseError("Can't parse unknown object type '%s'! For custom types, use the CustomObject decorator." % obj['type'])
+    return obj_class(allow_custom=allow_custom, **obj)
 
 
-def parse_observable(data, _valid_refs):
-    """Deserialize a string or file-like object into a STIX Cyber Observable
-    object.
+def parse_observable(data, _valid_refs=[], allow_custom=False):
+    """Deserialize a string or file-like object into a STIX Cyber Observable object.
+
+    Args:
+        data: The STIX 2 string to be parsed.
+        _valid_refs: A list of object references valid for the scope of the object being parsed.
+        allow_custom: Whether to allow custom properties or not. Default: False.
+
+    Returns:
+        An instantiated Python STIX Cyber Observable object.
     """
 
     obj = get_dict(data)
     obj['_valid_refs'] = _valid_refs
 
     if 'type' not in obj:
-        raise ValueError("'type' is a required property!")
+        raise exceptions.ParseError("Can't parse object with no 'type' property: %s" % str(obj))
     try:
         obj_class = OBJ_MAP_OBSERVABLE[obj['type']]
     except KeyError:
-        # TODO handle custom observable objects
-        raise ValueError("Can't parse unknown object type '%s'!" % obj['type'])
+        raise exceptions.ParseError("Can't parse unknown object type '%s'! For custom observables, use the CustomObservable decorator." % obj['type'])
 
     if 'extensions' in obj and obj['type'] in EXT_MAP:
         for name, ext in obj['extensions'].items():
             if name not in EXT_MAP[obj['type']]:
-                raise ValueError("Can't parse Unknown extension type '%s' for object type '%s'!" % (name, obj['type']))
+                raise exceptions.ParseError("Can't parse Unknown extension type '%s' for object type '%s'!" % (name, obj['type']))
             ext_class = EXT_MAP[obj['type']][name]
-            obj['extensions'][name] = ext_class(**obj['extensions'][name])
+            obj['extensions'][name] = ext_class(allow_custom=allow_custom, **obj['extensions'][name])
 
-    return obj_class(**obj)
+    return obj_class(allow_custom=allow_custom, **obj)
+
+
+def _register_type(new_type):
+    """Register a custom STIX Object type.
+    """
+
+    OBJ_MAP[new_type._type] = new_type
+
+
+def _register_observable(new_observable):
+    """Register a custom STIX Cyber Observable type.
+    """
+
+    OBJ_MAP_OBSERVABLE[new_observable._type] = new_observable
diff --git a/stix2/base.py b/stix2/base.py
index c40c9e6..cb17f11 100644
--- a/stix2/base.py
+++ b/stix2/base.py
@@ -83,20 +83,26 @@ class _STIXBase(collections.Mapping):
             # TODO: check selectors
             pass
 
-    def __init__(self, **kwargs):
+    def __init__(self, allow_custom=False, **kwargs):
         cls = self.__class__
 
         # Use the same timestamp for any auto-generated datetimes
         self.__now = get_timestamp()
 
         # Detect any keyword arguments not allowed for a specific type
-        extra_kwargs = list(set(kwargs) - set(cls._properties))
-        if extra_kwargs:
-            raise ExtraPropertiesError(cls, extra_kwargs)
+        custom_props = kwargs.pop('custom_properties', {})
+        if custom_props and not isinstance(custom_props, dict):
+            raise ValueError("'custom_properties' must be a dictionary")
+        if not allow_custom:
+            extra_kwargs = list(set(kwargs) - set(cls._properties))
+            if extra_kwargs:
+                raise ExtraPropertiesError(cls, extra_kwargs)
 
         # Remove any keyword arguments whose value is None
         setting_kwargs = {}
-        for prop_name, prop_value in kwargs.items():
+        props = kwargs.copy()
+        props.update(custom_props)
+        for prop_name, prop_value in props.items():
             if prop_value is not None:
                 setting_kwargs[prop_name] = prop_value
 
diff --git a/stix2/exceptions.py b/stix2/exceptions.py
index 3043047..ef47dd0 100644
--- a/stix2/exceptions.py
+++ b/stix2/exceptions.py
@@ -150,3 +150,10 @@ class RevokeError(STIXError, ValueError):
             return "Cannot revoke an already revoked object."
         else:
             return "Cannot create a new version of a revoked object."
+
+
+class ParseError(STIXError, ValueError):
+    """Could not parse object"""
+
+    def __init__(self, msg):
+        super(ParseError, self).__init__(msg)
diff --git a/stix2/observables.py b/stix2/observables.py
index 9c1b368..086dc45 100644
--- a/stix2/observables.py
+++ b/stix2/observables.py
@@ -5,6 +5,8 @@ embedded in Email Message objects, inherit from _STIXBase instead of Observable
 and do not have a '_type' attribute.
 """
 
+import stix2
+
 from .base import _Extension, _Observable, _STIXBase
 from .exceptions import AtLeastOnePropertyError, DependentPropertiesError
 from .properties import (BinaryProperty, BooleanProperty, DictionaryProperty,
@@ -586,3 +588,27 @@ class X509Certificate(_Observable):
         'subject_public_key_exponent': IntegerProperty(),
         'x509_v3_extensions': EmbeddedObjectProperty(type=X509V3ExtenstionsType),
     }
+
+
+def CustomObservable(type='x-custom-observable', properties={}):
+    """Custom STIX Cyber Observable type decorator
+
+    """
+
+    def custom_builder(cls):
+
+        class _Custom(cls, _Observable):
+            _type = type
+            _properties = {
+                'type': TypeProperty(_type),
+            }
+            _properties.update(properties)
+
+            def __init__(self, **kwargs):
+                _Observable.__init__(self, **kwargs)
+                cls.__init__(self, **kwargs)
+
+        stix2._register_observable(_Custom)
+        return _Custom
+
+    return custom_builder
diff --git a/stix2/sdo.py b/stix2/sdo.py
index 73bb34d..1ec3b21 100644
--- a/stix2/sdo.py
+++ b/stix2/sdo.py
@@ -1,5 +1,7 @@
 """STIX 2.0 Domain Objects"""
 
+import stix2
+
 from .base import _STIXBase
 from .common import COMMON_PROPERTIES
 from .other import KillChainPhase
@@ -190,3 +192,51 @@ class Vulnerability(_STIXBase):
         'name': StringProperty(required=True),
         'description': StringProperty(),
     })
+
+
+def CustomObject(type='x-custom-type', properties={}):
+    """Custom STIX Object type decorator
+
+    Example 1:
+
+    @CustomObject('x-type-name', {
+        'property1': StringProperty(required=True),
+        'property2': IntegerProperty(),
+    })
+    class MyNewObjectType():
+        pass
+
+    Supply an __init__() function to add any special validations to the custom
+    type. Don't call super().__init() though - doing so will cause an error.
+
+    Example 2:
+
+    @CustomObject('x-type-name', {
+        'property1': StringProperty(required=True),
+        'property2': IntegerProperty(),
+    })
+    class MyNewObjectType():
+        def __init__(self, property2=None, **kwargs):
+            if property2 and property2 < 10:
+                raise ValueError("'property2' is too small.")
+    """
+
+    def custom_builder(cls):
+
+        class _Custom(cls, _STIXBase):
+            _type = type
+            _properties = COMMON_PROPERTIES.copy()
+            _properties.update({
+                'id': IDProperty(_type),
+                'type': TypeProperty(_type),
+            })
+            _properties.update(properties)
+
+            def __init__(self, **kwargs):
+                _STIXBase.__init__(self, **kwargs)
+                cls.__init__(self, **kwargs)
+
+        stix2._register_type(_Custom)
+        return _Custom
+
+    return custom_builder
diff --git a/stix2/test/test_custom.py b/stix2/test/test_custom.py
new file mode 100644
index 0000000..1a816bd
--- /dev/null
+++ b/stix2/test/test_custom.py
@@ -0,0 +1,168 @@
+import pytest
+
+import stix2
+
+
+def test_identity_custom_property():
+    with pytest.raises(ValueError):
+        stix2.Identity(
+            id="identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
+            created="2015-12-21T19:59:11Z",
+            modified="2015-12-21T19:59:11Z",
+            name="John Smith",
+            identity_class="individual",
+            custom_properties="foobar",
+        )
+
+    identity = stix2.Identity(
+        id="identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
+        created="2015-12-21T19:59:11Z",
+        modified="2015-12-21T19:59:11Z",
+        name="John Smith",
+        identity_class="individual",
+        custom_properties={
+            "foo": "bar",
+        },
+    )
+
+    assert identity.foo == "bar"
+
+
+def test_identity_custom_property_invalid():
+    with pytest.raises(stix2.exceptions.ExtraPropertiesError):
+        stix2.Identity(
+            id="identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
+            created="2015-12-21T19:59:11Z",
+            modified="2015-12-21T19:59:11Z",
+            name="John Smith",
+            identity_class="individual",
+            x_foo="bar",
+        )
+
+
+def test_identity_custom_property_allowed():
+    identity = stix2.Identity(
+        id="identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
+        created="2015-12-21T19:59:11Z",
+        modified="2015-12-21T19:59:11Z",
+        name="John Smith",
+        identity_class="individual",
+        x_foo="bar",
+        allow_custom=True,
+    )
+    assert identity.x_foo == "bar"
+
+
+@pytest.mark.parametrize("data", [
+    """{
+        "type": "identity",
+        "id": "identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
+        "created": "2015-12-21T19:59:11Z",
+        "modified": "2015-12-21T19:59:11Z",
+        "name": "John Smith",
+        "identity_class": "individual",
+        "foo": "bar"
+    }""",
+])
+def test_parse_identity_custom_property(data):
+    with pytest.raises(stix2.exceptions.ExtraPropertiesError):
+        identity = stix2.parse(data)
+
+    identity = stix2.parse(data, allow_custom=True)
+    assert identity.foo == "bar"
+
+
+@stix2.sdo.CustomObject('x-new-type', {
+    'property1': stix2.properties.StringProperty(required=True),
+    'property2': stix2.properties.IntegerProperty(),
+})
+class NewType():
+    def __init__(self, property2=None, **kwargs):
+        if property2 and property2 < 10:
+            raise ValueError("'property2' is too small.")
+
+
+def test_custom_object_type():
+    nt = NewType(property1='something')
+    assert nt.property1 == 'something'
+
+    with pytest.raises(stix2.exceptions.MissingPropertiesError):
+        NewType(property2=42)
+
+    with pytest.raises(ValueError):
+        NewType(property1='something', property2=4)
+
+
+def test_parse_custom_object_type():
+    nt_string = """{
+        "type": "x-new-type",
+        "created": "2015-12-21T19:59:11Z",
+        "property1": "something"
+    }"""
+
+    nt = stix2.parse(nt_string)
+    assert nt.property1 == 'something'
+
+
+@stix2.observables.CustomObservable('x-new-observable', {
+    'property1': stix2.properties.StringProperty(required=True),
+    'property2': stix2.properties.IntegerProperty(),
+})
+class NewObservable():
+    def __init__(self, property2=None, **kwargs):
+        if property2 and property2 < 10:
+            raise ValueError("'property2' is too small.")
+
+
+def test_custom_observable_object():
+    no = NewObservable(property1='something')
+    assert no.property1 == 'something'
+
+    with pytest.raises(stix2.exceptions.MissingPropertiesError):
+        NewObservable(property2=42)
+
+    with pytest.raises(ValueError):
+        NewObservable(property1='something', property2=4)
+
+
+def test_parse_custom_observable_object():
+    nt_string = """{
+        "type": "x-new-observable",
+        "property1": "something"
+    }"""
+
+    nt = stix2.parse_observable(nt_string)
+    assert nt.property1 == 'something'
+
+
+def test_observable_custom_property():
+    with pytest.raises(ValueError):
+        NewObservable(
+            property1='something',
+            custom_properties="foobar",
+        )
+
+    no = NewObservable(
+        property1='something',
+        custom_properties={
+            "foo": "bar",
+        },
+    )
+    assert no.foo == "bar"
+
+
+def test_observable_custom_property_invalid():
+    with pytest.raises(stix2.exceptions.ExtraPropertiesError):
+        NewObservable(
+            property1='something',
+            x_foo="bar",
+        )
+
+
+def test_observable_custom_property_allowed():
+    no = NewObservable(
+        property1='something',
+        x_foo="bar",
+        allow_custom=True,
+    )
+    assert no.x_foo == "bar"
diff --git a/stix2/test/test_identity.py b/stix2/test/test_identity.py
index 3952d25..b2c166c 100644
--- a/stix2/test/test_identity.py
+++ b/stix2/test/test_identity.py
@@ -19,7 +19,7 @@ EXPECTED = """{
 
 
 def test_identity_example():
-    report = stix2.Identity(
+    identity = stix2.Identity(
         id="identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
         created="2015-12-21T19:59:11Z",
         modified="2015-12-21T19:59:11Z",
@@ -27,7 +27,7 @@ def test_identity_example():
         identity_class="individual",
     )
 
-    assert str(report) == EXPECTED
+    assert str(identity) == EXPECTED
 
 
 @pytest.mark.parametrize("data", [
@@ -50,4 +50,16 @@ def test_parse_identity(data):
     assert identity.modified == dt.datetime(2015, 12, 21, 19, 59, 11, tzinfo=pytz.utc)
     assert identity.name == "John Smith"
 
+
+def test_parse_no_type():
+    with pytest.raises(stix2.exceptions.ParseError):
+        stix2.parse("""
+        {
+            "id": "identity--311b2d2d-f010-5473-83ec-1edf84858f4c",
+            "created": "2015-12-21T19:59:11Z",
+            "modified": "2015-12-21T19:59:11Z",
+            "name": "John Smith",
+            "identity_class": "individual"
+        }""")
+
 # TODO: Add other examples