diff --git a/openbsc/src/bsc_init.c b/openbsc/src/bsc_init.c
index f343662..fccdb0c 100644
--- a/openbsc/src/bsc_init.c
+++ b/openbsc/src/bsc_init.c
@@ -31,6 +31,7 @@
 #include <openbsc/system_information.h>
 #include <openbsc/paging.h>
 #include <openbsc/signal.h>
+#include <openbsc/chan_alloc.h>
 #include <osmocore/talloc.h>
 
 /* global pointer to the gsm network data structure */
@@ -899,6 +900,8 @@
 
 void input_event(int event, enum e1inp_sign_type type, struct gsm_bts_trx *trx)
 {
+	int ts_no, lchan_no;
+
 	switch (event) {
 	case EVT_E1_TEI_UP:
 		switch (type) {
@@ -913,8 +916,30 @@
 		}
 		break;
 	case EVT_E1_TEI_DN:
-		LOGP(DMI, LOGL_NOTICE, "Lost some E1 TEI link\n");
-		/* FIXME: deal with TEI or L1 link loss */
+		LOGP(DMI, LOGL_ERROR, "Lost some E1 TEI link: %d %p\n", type, trx);
+
+		/*
+		 * free all allocated channels. change the nm_state so the
+		 * trx and trx_ts becomes unusable and chan_alloc.c can not
+		 * allocate from it.
+		 */
+		for (ts_no = 0; ts_no < ARRAY_SIZE(trx->ts); ++ts_no) {
+			struct gsm_bts_trx_ts *ts = &trx->ts[ts_no];
+
+			for (lchan_no = 0; lchan_no < ARRAY_SIZE(ts->lchan); ++lchan_no) {
+				if (ts->lchan[lchan_no].state != GSM_LCHAN_NONE)
+					lchan_free(&ts->lchan[lchan_no]);
+				lchan_reset(&ts->lchan[lchan_no]);
+			}
+
+			ts->nm_state.operational = 0;
+			ts->nm_state.availability = 0;
+		}
+
+		trx->nm_state.operational = 0;
+		trx->nm_state.availability = 0;
+		trx->bb_transc.nm_state.operational = 0;
+		trx->bb_transc.nm_state.availability = 0;
 		break;
 	default:
 		break;
diff --git a/openbsc/src/chan_alloc.c b/openbsc/src/chan_alloc.c
index 118deca..107abdc 100644
--- a/openbsc/src/chan_alloc.c
+++ b/openbsc/src/chan_alloc.c
@@ -330,6 +330,20 @@
 	 * channel using it */
 }
 
+/*
+ * There was an error with the TRX and we need to forget
+ * any state so that a lchan can be allocated again after
+ * the trx is fully usable.
+ */
+void lchan_reset(struct gsm_lchan *lchan)
+{
+	bsc_del_timer(&lchan->T3101);
+
+	lchan->type = GSM_LCHAN_NONE;
+	lchan->state = LCHAN_S_NONE;
+}
+
+
 /* Consider releasing the channel now */
 int lchan_auto_release(struct gsm_lchan *lchan)
 {