diff --git a/src/Lifecycle.js b/src/Lifecycle.js
index e899ec6ad8..e891ab5984 100644
--- a/src/Lifecycle.js
+++ b/src/Lifecycle.js
@@ -1,5 +1,6 @@
 /*
 Copyright 2015, 2016 OpenMarket Ltd
+Copyright 2017 Vector Creations Ltd
 
 Licensed under the Apache License, Version 2.0 (the "License");
 you may not use this file except in compliance with the License.
@@ -24,6 +25,8 @@ import Presence from './Presence';
 import dis from './dispatcher';
 import DMRoomMap from './utils/DMRoomMap';
 import RtsClient from './RtsClient';
+import Modal from './Modal';
+import sdk from './index';
 
 /**
  * Called at startup, to attempt to build a logged-in Matrix session. It tries
@@ -109,16 +112,17 @@ export function loadSession(opts) {
         return q();
     }
 
-    if (_restoreFromLocalStorage()) {
-        return q();
-    }
+    return _restoreFromLocalStorage().then((success) => {
+        if (success) {
+            return;
+        }
 
-    if (enableGuest) {
-        return _registerAsGuest(guestHsUrl, guestIsUrl, defaultDeviceDisplayName);
-    }
+        if (enableGuest) {
+            return _registerAsGuest(guestHsUrl, guestIsUrl, defaultDeviceDisplayName);
+        }
 
-    // fall back to login screen
-    return q();
+        // fall back to login screen
+    });
 }
 
 function _loginWithToken(queryParams, defaultDeviceDisplayName) {
@@ -178,10 +182,11 @@ function _registerAsGuest(hsUrl, isUrl, defaultDeviceDisplayName) {
     });
 }
 
-// returns true if a session is found in localstorage
+// returns a promise which resolves to true if a session is found in
+// localstorage
 function _restoreFromLocalStorage() {
     if (!localStorage) {
-        return false;
+        return q(false);
     }
     const hs_url = localStorage.getItem("mx_hs_url");
     const is_url = localStorage.getItem("mx_is_url") || 'https://matrix.org';
@@ -208,28 +213,55 @@ function _restoreFromLocalStorage() {
                 identityServerUrl: is_url,
                 guest: is_guest,
             });
-            return true;
+            return q(true);
         } catch (e) {
-            console.log("Unable to restore session", e);
-
-            var msg = e.message;
-            if (msg == "OLM.BAD_LEGACY_ACCOUNT_PICKLE") {
-                msg = "You need to log back in to generate end-to-end encryption keys "
-                    + "for this device and submit the public key to your homeserver. "
-                    + "This is a once off; sorry for the inconvenience.";
-            }
-
-            // don't leak things into the new session
-            _clearLocalStorage();
-
-            throw new Error("Unable to restore previous session: " + msg);
+            return _handleRestoreFailure(e);
         }
     } else {
         console.log("No previous session found.");
-        return false;
+        return q(false);
     }
 }
 
+function _handleRestoreFailure(e) {
+    console.log("Unable to restore session", e);
+
+    let msg = e.message;
+    if (msg == "OLM.BAD_LEGACY_ACCOUNT_PICKLE") {
+        msg = "You need to log back in to generate end-to-end encryption keys "
+            + "for this device and submit the public key to your homeserver. "
+            + "This is a once off; sorry for the inconvenience.";
+
+        _clearLocalStorage();
+
+        return q.reject(new Error(
+            "Unable to restore previous session: " + msg,
+        ));
+    }
+
+    const def = q.defer();
+    const SessionRestoreErrorDialog =
+          sdk.getComponent('views.dialogs.SessionRestoreErrorDialog');
+
+    Modal.createDialog(SessionRestoreErrorDialog, {
+        error: msg,
+        onFinished: (success) => {
+            def.resolve(success);
+        },
+    });
+
+    return def.promise.then((success) => {
+        if (success) {
+            // user clicked continue.
+            _clearLocalStorage();
+            return false;
+        }
+
+        // try, try again
+        return _restoreFromLocalStorage();
+    });
+}
+
 let rtsClient = null;
 export function initRtsClient(url) {
     rtsClient = new RtsClient(url);
diff --git a/src/component-index.js b/src/component-index.js
index 62d26d4ce7..c705150e12 100644
--- a/src/component-index.js
+++ b/src/component-index.js
@@ -89,6 +89,8 @@ import views$dialogs$NeedToRegisterDialog from './components/views/dialogs/NeedT
 views$dialogs$NeedToRegisterDialog && (module.exports.components['views.dialogs.NeedToRegisterDialog'] = views$dialogs$NeedToRegisterDialog);
 import views$dialogs$QuestionDialog from './components/views/dialogs/QuestionDialog';
 views$dialogs$QuestionDialog && (module.exports.components['views.dialogs.QuestionDialog'] = views$dialogs$QuestionDialog);
+import views$dialogs$SessionRestoreErrorDialog from './components/views/dialogs/SessionRestoreErrorDialog';
+views$dialogs$SessionRestoreErrorDialog && (module.exports.components['views.dialogs.SessionRestoreErrorDialog'] = views$dialogs$SessionRestoreErrorDialog);
 import views$dialogs$SetDisplayNameDialog from './components/views/dialogs/SetDisplayNameDialog';
 views$dialogs$SetDisplayNameDialog && (module.exports.components['views.dialogs.SetDisplayNameDialog'] = views$dialogs$SetDisplayNameDialog);
 import views$dialogs$TextInputDialog from './components/views/dialogs/TextInputDialog';
diff --git a/src/components/views/dialogs/SessionRestoreErrorDialog.js b/src/components/views/dialogs/SessionRestoreErrorDialog.js
new file mode 100644
index 0000000000..358bbf1fec
--- /dev/null
+++ b/src/components/views/dialogs/SessionRestoreErrorDialog.js
@@ -0,0 +1,74 @@
+/*
+Copyright 2017 Vector Creations Ltd
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+import React from 'react';
+import sdk from '../../../index';
+import SdkConfig from '../../../SdkConfig';
+import Modal from '../../../Modal';
+
+
+export default React.createClass({
+    displayName: 'SessionRestoreErrorDialog',
+
+    propTypes: {
+        error: React.PropTypes.string.isRequired,
+        onFinished: React.PropTypes.func.isRequired,
+    },
+
+    _sendBugReport: function() {
+        const BugReportDialog = sdk.getComponent("dialogs.BugReportDialog");
+        Modal.createDialog(BugReportDialog, {});
+    },
+
+    _continueClicked: function() {
+        this.props.onFinished(true);
+    },
+
+    render: function() {
+        const BaseDialog = sdk.getComponent('views.dialogs.BaseDialog');
+        let bugreport;
+
+        if (SdkConfig.get().bug_report_endpoint_url) {
+            bugreport = (
+                <p>Otherwise, <a onClick={this._sendBugReport} href='#'>
+                   click here</a> to send a bug report.
+                </p>
+            );
+        }
+
+        return (
+            <BaseDialog className="mx_ErrorDialog" onFinished={this.props.onFinished}
+                    title='Unable to restore session'>
+                <div className="mx_Dialog_content">
+                    <p>We encountered an error trying to restore your previous session. If
+                    you continue, you will need to log in again, and encrypted chat
+                    history will be unreadable.</p>
+
+                    <p>If you have previously used a more recent version of Riot, your session
+                    may be incompatible with this version. Close this window and return
+                    to the more recent version.</p>
+
+                    {bugreport}
+                </div>
+                <div className="mx_Dialog_buttons">
+                    <button className="mx_Dialog_primary" onClick={this._continueClicked}>
+                        Continue anyway
+                    </button>
+                </div>
+            </BaseDialog>
+        );
+    },
+});