diff --git a/packages/backend-app-api/package.json b/packages/backend-app-api/package.json
index 0ae48d4e9c..f6c2b9f3b9 100644
--- a/packages/backend-app-api/package.json
+++ b/packages/backend-app-api/package.json
@@ -36,6 +36,7 @@
     "@backstage/backend-common": "^0.15.1-next.1",
     "@backstage/backend-plugin-api": "^0.1.2-next.0",
     "@backstage/backend-tasks": "^0.3.5-next.0",
+    "@backstage/errors": "^1.1.0",
     "@backstage/plugin-permission-node": "^0.6.5-next.1",
     "express": "^4.17.1",
     "express-promise-router": "^4.1.0",
diff --git a/packages/backend-app-api/src/wiring/ServiceRegistry.test.ts b/packages/backend-app-api/src/wiring/ServiceRegistry.test.ts
index 94ec77eea8..c75167ea3b 100644
--- a/packages/backend-app-api/src/wiring/ServiceRegistry.test.ts
+++ b/packages/backend-app-api/src/wiring/ServiceRegistry.test.ts
@@ -237,7 +237,43 @@ describe('ServiceRegistry', () => {
     const factory = registry.get(ref1)!;
 
     await expect(factory('catalog')).rejects.toThrow(
-      "Failed to instantiate service '1' for 'catalog'. The following dependent services are missing: '2'",
+      "Failed to instantiate service '1' for 'catalog' because the following dependent services are missing: '2'",
+    );
+  });
+
+  it('should decorate error messages thrown by the top-level factory function', async () => {
+    const myFactory = createServiceFactory({
+      service: ref1,
+      deps: {},
+      factory() {
+        throw new Error('top-level error');
+      },
+    });
+
+    const registry = new ServiceRegistry([myFactory]);
+    const factory = registry.get(ref1)!;
+
+    await expect(factory('catalog')).rejects.toThrow(
+      "Failed to instantiate service '1' because the top-level factory function threw an error, Error: top-level error",
+    );
+  });
+
+  it('should decorate error messages thrown by the plugin-level factory function', async () => {
+    const myFactory = createServiceFactory({
+      service: ref1,
+      deps: {},
+      async factory() {
+        return pluginId => {
+          throw new Error(`error in plugin ${pluginId}`);
+        };
+      },
+    });
+
+    const registry = new ServiceRegistry([myFactory]);
+    const factory = registry.get(ref1)!;
+
+    await expect(factory('catalog')).rejects.toThrow(
+      "Failed to instantiate service '1' for 'catalog' because the factory function threw an error, Error: error in plugin catalog",
     );
   });
 });
diff --git a/packages/backend-app-api/src/wiring/ServiceRegistry.ts b/packages/backend-app-api/src/wiring/ServiceRegistry.ts
index f8d99bffd8..fc79bad14a 100644
--- a/packages/backend-app-api/src/wiring/ServiceRegistry.ts
+++ b/packages/backend-app-api/src/wiring/ServiceRegistry.ts
@@ -18,6 +18,7 @@ import {
   FactoryFunc,
   ServiceRef,
 } from '@backstage/backend-plugin-api';
+import { stringifyError } from '@backstage/errors';
 
 export class ServiceRegistry {
   readonly #providedFactories: Map<string, ServiceFactory>;
@@ -71,12 +72,22 @@ export class ServiceRegistry {
         if (missingRefs.length) {
           const missing = missingRefs.map(r => `'${r.id}'`).join(', ');
           throw new Error(
-            `Failed to instantiate service '${ref.id}' for '${pluginId}'. The following dependent services are missing: ${missing}`,
+            `Failed to instantiate service '${ref.id}' for '${pluginId}' because the following dependent services are missing: ${missing}`,
           );
         }
 
         implementation = {
-          factoryFunc: factory.factory(factoryDeps),
+          factoryFunc: Promise.resolve()
+            .then(() => factory!.factory(factoryDeps))
+            .catch(error => {
+              throw new Error(
+                `Failed to instantiate service '${
+                  ref.id
+                }' because the top-level factory function threw an error, ${stringifyError(
+                  error,
+                )}`,
+              );
+            }),
           byPlugin: new Map(),
         };
 
@@ -85,7 +96,19 @@ export class ServiceRegistry {
 
       let result = implementation.byPlugin.get(pluginId) as Promise<any>;
       if (!result) {
-        result = implementation.factoryFunc.then(func => func(pluginId));
+        result = implementation.factoryFunc.then(func =>
+          Promise.resolve()
+            .then(() => func(pluginId))
+            .catch(error => {
+              throw new Error(
+                `Failed to instantiate service '${
+                  ref.id
+                }' for '${pluginId}' because the factory function threw an error, ${stringifyError(
+                  error,
+                )}`,
+              );
+            }),
+        );
 
         implementation.byPlugin.set(pluginId, result);
       }
diff --git a/yarn.lock b/yarn.lock
index f0a567bfe3..1313484b21 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -2846,6 +2846,7 @@ __metadata:
     "@backstage/backend-plugin-api": ^0.1.2-next.0
     "@backstage/backend-tasks": ^0.3.5-next.0
     "@backstage/cli": ^0.19.0-next.1
+    "@backstage/errors": ^1.1.0
     "@backstage/plugin-permission-node": ^0.6.5-next.1
     express: ^4.17.1
     express-promise-router: ^4.1.0