diff --git a/launchdarkly-server-sdk/src/data_source.rs b/launchdarkly-server-sdk/src/data_source.rs
index 47b5c88..aae4f88 100644
--- a/launchdarkly-server-sdk/src/data_source.rs
+++ b/launchdarkly-server-sdk/src/data_source.rs
@@ -142,19 +142,29 @@ impl DataSource for StreamingDataSource {
                                     }
                                 }
                             },
+                            Some(Err(es::Error::Eof)) => {
+                                // Clean end-of-stream from the server;
+                                // routine for streams that rotate connections.
+                                debug!("event stream eof, will reconnect");
+                                continue;
+                            },
                             Some(Err(e)) => {
-                                match e {
-                                    es::Error::Eof => {
-                                        continue;
-                                    }
-                                    _ => {
-                                        error!("unhandled error on event stream: {e:?}");
-                                        break;
-                                    }
-                                }
+                                // Keep polling. The eventsource-client will
+                                // either reconnect on the next poll or end
+                                // the stream (we'll observe that as `None`
+                                // on the next iteration). Breaking here
+                                // would drop this task and leave the data
+                                // source silently dysfunctional.
+                                warn!("error on event stream, will keep polling: {e:?}");
+                                continue;
                             },
                             None => {
-                                error!("unexpected end of event stream");
+                                // The stream is exhausted only when the
+                                // eventsource-client has given up reconnecting.
+                                // Signal initialization failure so the caller
+                                // can observe the permanent failure.
+                                error!("event stream closed permanently");
+                                notify_init.call_once(|| (init_complete)(false));
                                 break;
                             }
                         };
@@ -433,6 +443,115 @@ mod tests {
         mock.assert()
     }
 
+    // When the SSE stream returns a non-Eof error, the streaming data
+    // source should keep polling so the eventsource-client can reconnect.
+    // A naive `break` would drop the spawned task and leave the data
+    // source silently dysfunctional.
+    #[tokio::test(flavor = "multi_thread")]
+    async fn streaming_source_recovers_from_non_eof_stream_error() {
+        let mut server = mockito::Server::new_async().await;
+
+        // Bytes 0xFF 0xFE form an invalid UTF-8 sequence; the eventsource
+        // parser rejects the line as `Error::InvalidLine`, which exercises
+        // the catch-all error arm of the fetch loop.
+        let invalid_body: &[u8] = b"\xff\xfe:bad\n\n";
+        let mock = server
+            .mock("GET", "/all")
+            .with_status(200)
+            .with_body(invalid_body)
+            .expect_at_least(2)
+            .create_async()
+            .await;
+
+        let (shutdown_tx, _) = broadcast::channel::<()>(1);
+        let init_outcome = Arc::new(Mutex::new(None::<bool>));
+
+        let streaming = StreamingDataSource::new(
+            &server.url(),
+            "sdk-key",
+            Duration::from_millis(10),
+            &None,
+            launchdarkly_sdk_transport::HyperTransport::new().expect("Failed to create transport"),
+        )
+        .unwrap();
+
+        let data_store = Arc::new(RwLock::new(InMemoryDataStore::new()));
+
+        let init_outcome_clone = init_outcome.clone();
+        streaming.subscribe(
+            data_store,
+            Arc::new(move |success| {
+                *init_outcome_clone.lock().unwrap() = Some(success);
+            }),
+            shutdown_tx.subscribe(),
+        );
+
+        // Wait long enough for the initial request, the parser error, and
+        // several reconnect attempts (initial_reconnect_delay is 10ms).
+        tokio::time::sleep(Duration::from_millis(500)).await;
+        let _ = shutdown_tx.send(());
+
+        // While the eventsource-client is still actively reconnecting, the
+        // SDK should treat the situation as transient and not signal init
+        // failure. (Permanent failure is exercised by the 401 test.)
+        assert_eq!(
+            *init_outcome.lock().unwrap(),
+            None,
+            "init_complete should not be called while the stream is still retrying"
+        );
+        mock.assert();
+    }
+
+    // An unrecoverable HTTP status (e.g. 401) should stop the streaming
+    // data source from making further requests and signal init failure
+    // to the caller, rather than retrying indefinitely.
+    #[tokio::test(flavor = "multi_thread")]
+    async fn streaming_source_stops_on_unrecoverable_http_status() {
+        let mut server = mockito::Server::new_async().await;
+
+        let mock = server
+            .mock("GET", "/all")
+            .with_status(401)
+            .expect(1)
+            .create_async()
+            .await;
+
+        let (shutdown_tx, _) = broadcast::channel::<()>(1);
+        let init_outcome = Arc::new(Mutex::new(None::<bool>));
+
+        let streaming = StreamingDataSource::new(
+            &server.url(),
+            "sdk-key",
+            Duration::from_millis(10),
+            &None,
+            launchdarkly_sdk_transport::HyperTransport::new().expect("Failed to create transport"),
+        )
+        .unwrap();
+
+        let data_store = Arc::new(RwLock::new(InMemoryDataStore::new()));
+
+        let init_outcome_clone = init_outcome.clone();
+        streaming.subscribe(
+            data_store,
+            Arc::new(move |success| {
+                *init_outcome_clone.lock().unwrap() = Some(success);
+            }),
+            shutdown_tx.subscribe(),
+        );
+
+        // Wait long enough that any reconnect attempts would have happened
+        // (initial_reconnect_delay is 10ms).
+        tokio::time::sleep(Duration::from_millis(500)).await;
+        let _ = shutdown_tx.send(());
+
+        assert_eq!(
+            *init_outcome.lock().unwrap(),
+            Some(false),
+            "expected init_complete(false) on unrecoverable HTTP status"
+        );
+        mock.assert();
+    }
+
     #[test_case(Some("application-id/abc:application-sha/xyz".into()), "application-id/abc:application-sha/xyz")]
     #[test_case(None, Matcher::Missing)]
     #[tokio::test(flavor = "multi_thread")]