diff --git a/spec/unit/interactive-auth.spec.ts b/spec/unit/interactive-auth.spec.ts
index ea11fc4c900..bd3c8e653bf 100644
--- a/spec/unit/interactive-auth.spec.ts
+++ b/spec/unit/interactive-auth.spec.ts
@@ -375,7 +375,7 @@ describe("InteractiveAuth", () => {
         await expect(ia.attemptAuth.bind(ia)).rejects.toThrow(new Error("No appropriate authentication flow found"));
     });
 
-    it("should handle unexpected error types without data propery set", async () => {
+    it("should handle unexpected error types without data property set", async () => {
         const doRequest = jest.fn();
         const stateUpdated = jest.fn();
         const requestEmailToken = jest.fn();
@@ -559,4 +559,40 @@ describe("InteractiveAuth", () => {
         ia.chooseStage();
         expect(ia.getChosenFlow()?.stages).toEqual([AuthType.Password]);
     });
+
+    it("should fire stateUpdated callback if with error when encountered", async () => {
+        const doRequest = jest.fn();
+        const stateUpdated = jest.fn();
+
+        const ia = new InteractiveAuth({
+            matrixClient: getFakeClient(),
+            doRequest: doRequest,
+            stateUpdated: stateUpdated,
+            requestEmailToken: jest.fn(),
+            authData: {
+                session: "sessionId",
+                flows: [{ stages: [AuthType.Password] }],
+                params: {
+                    [AuthType.Password]: { param: "aa" },
+                },
+            },
+        });
+
+        // first we expect a call here
+        stateUpdated.mockImplementation((stage) => {
+            expect(stage).toEqual(AuthType.Password);
+            ia.submitAuthDict({
+                type: AuthType.Password,
+            });
+        });
+
+        // .. which should trigger a call here
+        doRequest.mockRejectedValue(new MatrixError({ errcode: "M_UNKNOWN", error: "This is an error" }));
+
+        await Promise.allSettled([ia.attemptAuth()]);
+        expect(stateUpdated).toHaveBeenCalledWith("m.login.password", {
+            errcode: "M_UNKNOWN",
+            error: "This is an error",
+        });
+    });
 });
diff --git a/src/interactive-auth.ts b/src/interactive-auth.ts
index 0a75ab5232f..3617ce1765f 100644
--- a/src/interactive-auth.ts
+++ b/src/interactive-auth.ts
@@ -264,8 +264,8 @@ export class InteractiveAuth<T> {
     private readonly requestEmailTokenCallback: IOpts<T>["requestEmailToken"];
     private readonly supportedStages?: Set<string>;
 
-    // The current latest data received from the server during the user interactive auth flow.
-    private data: IAuthData;
+    // The current latest data or error received from the server during the user interactive auth flow.
+    private data: IAuthData & MatrixError["data"];
     private emailSid?: string;
     private requestingEmailToken = false;
     private attemptAuthDeferred: IDeferred<T> | null = null;
@@ -549,7 +549,7 @@ export class InteractiveAuth<T> {
                 matrixError.data.session = (this.data as IAuthData).session;
             }
             if (matrixError) {
-                this.data = matrixError.data as IAuthData;
+                this.data = matrixError.data;
             }
             try {
                 this.startNextAuthStage();
@@ -602,6 +602,14 @@ export class InteractiveAuth<T> {
             return;
         }
 
+        if (this.data?.errcode || this.data?.error) {
+            this.stateUpdatedCallback(nextStage, {
+                errcode: this.data?.errcode || "",
+                error: this.data?.error || "",
+            });
+            return;
+        }
+
         this.stateUpdatedCallback(nextStage, nextStage === EMAIL_STAGE_TYPE ? { emailSid: this.emailSid } : {});
     }