diff --git a/ld_openfeature/provider.py b/ld_openfeature/provider.py
index 5865b98..fa3d421 100644
--- a/ld_openfeature/provider.py
+++ b/ld_openfeature/provider.py
@@ -41,7 +41,10 @@ def __handle_data_source_status(self, status: DataSourceStatus):
         elif state == DataSourceState.OFF:
             error_message = self.__get_message(status,
                                                "the provider has encountered a permanent error or has been shutdown")
-            self.emit_provider_error(ProviderEventDetails(error_code=ErrorCode.PROVIDER_FATAL,
+            # This is not reported as a fatal error. A fatal provider prevents the OpenFeature client
+            # from evaluating flags at all, but the LaunchDarkly client can keep evaluating the flag
+            # data it already has.
+            self.emit_provider_error(ProviderEventDetails(error_code=ErrorCode.GENERAL,
                                                           message=error_message))
         elif state == DataSourceState.INTERRUPTED:
             error_message = self.__get_message(status, "encountered an unknown error")
diff --git a/tests/test_data_sources.py b/tests/test_data_sources.py
index 2b24cea..2440083 100644
--- a/tests/test_data_sources.py
+++ b/tests/test_data_sources.py
@@ -74,6 +74,40 @@ def initialized(self):
         return False
 
 
+class InitializedThenFailingDataSource(UpdateProcessor):
+    def __init__(self, config: Config, store, ready: threading.Event):
+        self._data_source_update_sink: Optional[DataSourceUpdateSink] = config.data_source_update_sink
+        self._ready = ready
+
+    def start(self):
+        self._ready.set()
+        self._data_source_update_sink.init(
+            {FEATURES: {"cached-boolean": TestData().data_source().flag("cached-boolean").on(True)._build(1)}})
+        self._data_source_update_sink.update_status(DataSourceState.VALID, None)
+
+        def data_source_failure():
+            self._data_source_update_sink.update_status(
+                DataSourceState.OFF,
+                DataSourceErrorInfo(
+                    DataSourceErrorKind.ERROR_RESPONSE,
+                    401,
+                    time.time(),
+                    str("Bad things")
+                )
+            )
+
+        threading.Timer(0.1, data_source_failure).start()
+
+    def stop(self):
+        pass
+
+    def is_alive(self):
+        return False
+
+    def initialized(self):
+        return True
+
+
 class StaleDataSource(UpdateProcessor):
     def __init__(self, config: Config, store, ready: threading.Event):
         self._data_source_update_sink: Optional[DataSourceUpdateSink] = config.data_source_update_sink
diff --git a/tests/test_provider.py b/tests/test_provider.py
index c0e1d5c..f4496f2 100644
--- a/tests/test_provider.py
+++ b/tests/test_provider.py
@@ -11,10 +11,11 @@
 from openfeature.event import ProviderEvent, EventDetails
 from openfeature.exception import ErrorCode
 from openfeature.flag_evaluation import Reason
+from openfeature.provider import ProviderStatus
 from openfeature import api
 
 from ld_openfeature import LaunchDarklyProvider, Config
-from tests.test_data_sources import FailingDataSource, StaleDataSource, UpdatingDataSource, DelayedFailingDataSource
+from tests.test_data_sources import FailingDataSource, InitializedThenFailingDataSource, StaleDataSource, UpdatingDataSource, DelayedFailingDataSource
 
 
 @pytest.fixture
@@ -232,6 +233,28 @@ def handle_status(details: EventDetails):
     api.shutdown()
 
 
+def test_evaluations_continue_after_the_data_source_permanently_fails():
+    thread_event = threading.Event()
+
+    def handle_status(details: EventDetails):
+        if details.provider_name == 'launchdarkly-openfeature-server':
+            thread_event.set()
+
+    api.add_handler(ProviderEvent.PROVIDER_ERROR, handle_status)
+
+    provider = LaunchDarklyProvider(
+        Config("", update_processor_class=InitializedThenFailingDataSource, send_events=False))
+    api.set_provider(provider)
+    client = api.get_client()
+
+    assert thread_event.wait(timeout=5)
+
+    assert client.get_provider_status() == ProviderStatus.ERROR
+    assert client.get_boolean_value("cached-boolean", False, EvaluationContext('user-key')) is True
+
+    api.shutdown()
+
+
 def test_provider_emits_stale_event():
     thread_event = threading.Event()