diff --git a/arch/powerpc/kvm/book3s_hv_ras.c b/arch/powerpc/kvm/book3s_hv_ras.c
index 768a9f977c00..3a5c568b1e89 100644
--- a/arch/powerpc/kvm/book3s_hv_ras.c
+++ b/arch/powerpc/kvm/book3s_hv_ras.c
@@ -113,10 +113,8 @@ static long kvmppc_realmode_mc_power7(struct kvm_vcpu *vcpu)
 	 * We assume that if the condition is recovered then linux host
 	 * will have generated an error log event that we will pick
 	 * up and log later.
-	 * Don't release mce event now. In case if condition is not
-	 * recovered we do guest exit and go back to linux host machine
-	 * check handler. Hence we need make sure that current mce event
-	 * is available for linux host to consume.
+	 * Don't release mce event now. We will queue up the event so that
+	 * we can log the MCE event info on host console.
 	 */
 	if (!get_mce_event(&mce_evt, MCE_EVENT_DONTRELEASE))
 		goto out;
@@ -128,11 +126,12 @@ static long kvmppc_realmode_mc_power7(struct kvm_vcpu *vcpu)
 
 out:
 	/*
-	 * If we have handled the error, then release the mce event because
-	 * we will be delivering machine check to guest.
+	 * We are now going enter guest either through machine check
+	 * interrupt (for unhandled errors) or will continue from
+	 * current HSRR0 (for handled errors) in guest. Hence
+	 * queue up the event so that we can log it from host console later.
 	 */
-	if (handled)
-		release_mce_event();
+	machine_check_queue_event();
 
 	return handled;
 }
diff --git a/arch/powerpc/kvm/book3s_hv_rmhandlers.S b/arch/powerpc/kvm/book3s_hv_rmhandlers.S
index 77356fd25ccc..868347ef09fd 100644
--- a/arch/powerpc/kvm/book3s_hv_rmhandlers.S
+++ b/arch/powerpc/kvm/book3s_hv_rmhandlers.S
@@ -2257,15 +2257,28 @@ machine_check_realmode:
 	mr	r3, r9		/* get vcpu pointer */
 	bl	kvmppc_realmode_machine_check
 	nop
-	cmpdi	r3, 0		/* continue exiting from guest? */
+	cmpdi	r3, 0		/* Did we handle MCE ? */
 	ld	r9, HSTATE_KVM_VCPU(r13)
 	li	r12, BOOK3S_INTERRUPT_MACHINE_CHECK
-	beq	mc_cont
+	/*
+	 * Deliver unhandled/fatal (e.g. UE) MCE errors to guest through
+	 * machine check interrupt (set HSRR0 to 0x200). And for handled
+	 * errors (no-fatal), just go back to guest execution with current
+	 * HSRR0 instead of exiting guest. This new approach will inject
+	 * machine check to guest for fatal error causing guest to crash.
+	 *
+	 * The old code used to return to host for unhandled errors which
+	 * was causing guest to hang with soft lockups inside guest and
+	 * makes it difficult to recover guest instance.
+	 */
+	ld	r10, VCPU_PC(r9)
+	ld	r11, VCPU_MSR(r9)
+	bne	2f	/* Continue guest execution. */
 	/* If not, deliver a machine check.  SRR0/1 are already set */
 	li	r10, BOOK3S_INTERRUPT_MACHINE_CHECK
 	ld	r11, VCPU_MSR(r9)
 	bl	kvmppc_msr_interrupt
-	b	fast_interrupt_c_return
+2:	b	fast_interrupt_c_return
 
 /*
  * Check the reason we woke from nap, and take appropriate action.