diff --git a/synapse/rest/client/transactions.py b/synapse/rest/client/transactions.py
index fceca2edeb..20fa6678ef 100644
--- a/synapse/rest/client/transactions.py
+++ b/synapse/rest/client/transactions.py
@@ -19,6 +19,7 @@ import logging
 
 from synapse.api.auth import get_access_token_from_request
 from synapse.util.async import ObservableDeferred
+from synapse.util.logcontext import make_deferred_yieldable, run_in_background
 
 logger = logging.getLogger(__name__)
 
@@ -80,27 +81,26 @@ class HttpTransactionCache(object):
         Returns:
             Deferred which resolves to a tuple of (response_code, response_dict).
         """
-        try:
-            return self.transactions[txn_key][0].observe()
-        except (KeyError, IndexError):
-            pass  # execute the function instead.
+        if txn_key in self.transactions:
+            observable = self.transactions[txn_key][0]
+        else:
+            # execute the function instead.
+            deferred = run_in_background(fn, *args, **kwargs)
 
-        deferred = fn(*args, **kwargs)
+            observable = ObservableDeferred(deferred)
+            self.transactions[txn_key] = (observable, self.clock.time_msec())
 
-        # if the request fails with a Twisted failure, remove it
-        # from the transaction map. This is done to ensure that we don't
-        # cache transient errors like rate-limiting errors, etc.
-        def remove_from_map(err):
-            self.transactions.pop(txn_key, None)
-            return err
-        deferred.addErrback(remove_from_map)
+            # if the request fails with an exception, remove it
+            # from the transaction map. This is done to ensure that we don't
+            # cache transient errors like rate-limiting errors, etc.
+            def remove_from_map(err):
+                self.transactions.pop(txn_key, None)
+                # we deliberately do not propagate the error any further, as we
+                # expect the observers to have reported it.
 
-        # We don't add any other errbacks to the raw deferred, so we ask
-        # ObservableDeferred to swallow the error. This is fine as the error will
-        # still be reported to the observers.
-        observable = ObservableDeferred(deferred, consumeErrors=True)
-        self.transactions[txn_key] = (observable, self.clock.time_msec())
-        return observable.observe()
+            deferred.addErrback(remove_from_map)
+
+        return make_deferred_yieldable(observable.observe())
 
     def _cleanup(self):
         now = self.clock.time_msec()
diff --git a/tests/rest/client/test_transactions.py b/tests/rest/client/test_transactions.py
index d7cea30260..b5bc2fa255 100644
--- a/tests/rest/client/test_transactions.py
+++ b/tests/rest/client/test_transactions.py
@@ -2,6 +2,9 @@ from synapse.rest.client.transactions import HttpTransactionCache
 from synapse.rest.client.transactions import CLEANUP_PERIOD_MS
 from twisted.internet import defer
 from mock import Mock, call
+
+from synapse.util import async
+from synapse.util.logcontext import LoggingContext
 from tests import unittest
 from tests.utils import MockClock
 
@@ -39,6 +42,78 @@ class HttpTransactionCacheTestCase(unittest.TestCase):
         # expect only a single call to do the work
         cb.assert_called_once_with("some_arg", keyword="arg", changing_args=0)
 
+    @defer.inlineCallbacks
+    def test_logcontexts_with_async_result(self):
+        @defer.inlineCallbacks
+        def cb():
+            yield async.sleep(0)
+            defer.returnValue("yay")
+
+        @defer.inlineCallbacks
+        def test():
+            with LoggingContext("c") as c1:
+                res = yield self.cache.fetch_or_execute(self.mock_key, cb)
+                self.assertIs(LoggingContext.current_context(), c1)
+                self.assertEqual(res, "yay")
+
+        # run the test twice in parallel
+        d = defer.gatherResults([test(), test()])
+        self.assertIs(LoggingContext.current_context(), LoggingContext.sentinel)
+        yield d
+        self.assertIs(LoggingContext.current_context(), LoggingContext.sentinel)
+
+    @defer.inlineCallbacks
+    def test_does_not_cache_exceptions(self):
+        """Checks that, if the callback throws an exception, it is called again
+        for the next request.
+        """
+        called = [False]
+
+        def cb():
+            if called[0]:
+                # return a valid result the second time
+                return defer.succeed(self.mock_http_response)
+
+            called[0] = True
+            raise Exception("boo")
+
+        with LoggingContext("test") as test_context:
+            try:
+                yield self.cache.fetch_or_execute(self.mock_key, cb)
+            except Exception as e:
+                self.assertEqual(e.message, "boo")
+            self.assertIs(LoggingContext.current_context(), test_context)
+
+            res = yield self.cache.fetch_or_execute(self.mock_key, cb)
+            self.assertEqual(res, self.mock_http_response)
+            self.assertIs(LoggingContext.current_context(), test_context)
+
+    @defer.inlineCallbacks
+    def test_does_not_cache_failures(self):
+        """Checks that, if the callback returns a failure, it is called again
+        for the next request.
+        """
+        called = [False]
+
+        def cb():
+            if called[0]:
+                # return a valid result the second time
+                return defer.succeed(self.mock_http_response)
+
+            called[0] = True
+            return defer.fail(Exception("boo"))
+
+        with LoggingContext("test") as test_context:
+            try:
+                yield self.cache.fetch_or_execute(self.mock_key, cb)
+            except Exception as e:
+                self.assertEqual(e.message, "boo")
+            self.assertIs(LoggingContext.current_context(), test_context)
+
+            res = yield self.cache.fetch_or_execute(self.mock_key, cb)
+            self.assertEqual(res, self.mock_http_response)
+            self.assertIs(LoggingContext.current_context(), test_context)
+
     @defer.inlineCallbacks
     def test_cleans_up(self):
         cb = Mock(