diff --git a/.gitignore b/.gitignore
index df34806e..b2ebc657 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1,3 +1,4 @@
+CLAUDE.local*
 .DS_Store
 npm-debug.log
 
diff --git a/docs/reference/functions/StorageImage.md b/docs/reference/functions/StorageImage.md
index 24370e02..ea871ad4 100644
--- a/docs/reference/functions/StorageImage.md
+++ b/docs/reference/functions/StorageImage.md
@@ -8,7 +8,7 @@
 
 > **StorageImage**(`props`): `Element`
 
-Defined in: [src/storage.tsx:78](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L78)
+Defined in: [src/storage.tsx:79](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L79)
 
 ## Parameters
 
diff --git a/docs/reference/functions/useObservable.md b/docs/reference/functions/useObservable.md
index e0e6db0c..996ab327 100644
--- a/docs/reference/functions/useObservable.md
+++ b/docs/reference/functions/useObservable.md
@@ -8,7 +8,17 @@
 
 > **useObservable**\<`T`\>(`observableId`, `source`, `config?`): [`ObservableStatus`](../type-aliases/ObservableStatus.md)\<`T`\>
 
-Defined in: [src/useObservable.ts:86](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L86)
+Defined in: [src/useObservable.ts:96](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L96)
+
+Subscribe to an Observable and return its current status.
+
+Error handling depends on the suspense mode:
+- Non-suspense mode (default): errors are returned as `{ status: 'error', error }` so the
+  component can handle them locally without needing a React Error Boundary.
+- Suspense mode (`suspense: true`): errors are re-thrown so a React Error Boundary can catch them.
+
+If the observable emits a value and then errors, `data` retains the last emitted value and
+`status` changes to `'error'`. There is no automatic retry path once an error occurs.
 
 ## Type Parameters
 
diff --git a/docs/reference/functions/useStorageDownloadURL.md b/docs/reference/functions/useStorageDownloadURL.md
index 2ab6fb3d..725952be 100644
--- a/docs/reference/functions/useStorageDownloadURL.md
+++ b/docs/reference/functions/useStorageDownloadURL.md
@@ -8,7 +8,7 @@
 
 > **useStorageDownloadURL**\<`T`\>(`ref`, `options?`): [`ObservableStatus`](../type-aliases/ObservableStatus.md)\<`string` \| `T`\>
 
-Defined in: [src/storage.tsx:29](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L29)
+Defined in: [src/storage.tsx:30](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L30)
 
 Subscribe to a storage ref's download URL
 
diff --git a/docs/reference/functions/useStorageTask.md b/docs/reference/functions/useStorageTask.md
index 2d462c71..99e494dc 100644
--- a/docs/reference/functions/useStorageTask.md
+++ b/docs/reference/functions/useStorageTask.md
@@ -8,7 +8,7 @@
 
 > **useStorageTask**\<`T`\>(`task`, `ref`, `options?`): [`ObservableStatus`](../type-aliases/ObservableStatus.md)\<`T` \| `UploadTaskSnapshot`\>
 
-Defined in: [src/storage.tsx:16](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L16)
+Defined in: [src/storage.tsx:17](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L17)
 
 Subscribe to the progress of a storage task
 
diff --git a/docs/reference/interfaces/ObservableStatusError.md b/docs/reference/interfaces/ObservableStatusError.md
index c6293b1d..87977b77 100644
--- a/docs/reference/interfaces/ObservableStatusError.md
+++ b/docs/reference/interfaces/ObservableStatusError.md
@@ -40,7 +40,7 @@ If `initialData` is passed in, the first value of `data` will be the valuea prov
 
 > **error**: `Error`
 
-Defined in: [src/useObservable.ts:75](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L75)
+Defined in: [src/useObservable.ts:74](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L74)
 
 Any error that may have occurred in the underlying observable
 
@@ -82,13 +82,13 @@ If `initialData` is passed in, this will be `true`.
 
 ### isComplete
 
-> **isComplete**: `true`
+> **isComplete**: `boolean`
 
-Defined in: [src/useObservable.ts:74](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L74)
+Defined in: [src/useObservable.ts:50](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L50)
 
 If this is `true`, the hook will be emitting no further items.
 
-#### Overrides
+#### Inherited from
 
 `ObservableStatusBase.isComplete`
 
diff --git a/docs/reference/interfaces/ObservableStatusLoading.md b/docs/reference/interfaces/ObservableStatusLoading.md
index f0bf2fcd..4744410c 100644
--- a/docs/reference/interfaces/ObservableStatusLoading.md
+++ b/docs/reference/interfaces/ObservableStatusLoading.md
@@ -6,7 +6,7 @@
 
 # Interface: ObservableStatusLoading\<T\>
 
-Defined in: [src/useObservable.ts:78](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L78)
+Defined in: [src/useObservable.ts:77](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L77)
 
 ## Extends
 
@@ -24,7 +24,7 @@ Defined in: [src/useObservable.ts:78](https://github.com/FirebaseExtended/reactf
 
 > **data**: `undefined`
 
-Defined in: [src/useObservable.ts:80](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L80)
+Defined in: [src/useObservable.ts:79](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L79)
 
 The most recent value.
 
@@ -68,7 +68,7 @@ Promise that resolves after first emit from observable
 
 > **hasEmitted**: `false`
 
-Defined in: [src/useObservable.ts:81](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L81)
+Defined in: [src/useObservable.ts:80](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L80)
 
 Indicates whether the hook has emitted a value at some point
 
@@ -98,7 +98,7 @@ If this is `true`, the hook will be emitting no further items.
 
 > **status**: `"loading"`
 
-Defined in: [src/useObservable.ts:79](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L79)
+Defined in: [src/useObservable.ts:78](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L78)
 
 The loading status.
 
diff --git a/docs/reference/type-aliases/ObservableStatus.md b/docs/reference/type-aliases/ObservableStatus.md
index bbf0276d..013ad25b 100644
--- a/docs/reference/type-aliases/ObservableStatus.md
+++ b/docs/reference/type-aliases/ObservableStatus.md
@@ -8,7 +8,7 @@
 
 > **ObservableStatus**\<`T`\> = [`ObservableStatusLoading`](../interfaces/ObservableStatusLoading.md)\<`T`\> \| [`ObservableStatusError`](../interfaces/ObservableStatusError.md)\<`T`\> \| [`ObservableStatusSuccess`](../interfaces/ObservableStatusSuccess.md)\<`T`\>
 
-Defined in: [src/useObservable.ts:84](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L84)
+Defined in: [src/useObservable.ts:83](https://github.com/FirebaseExtended/reactfire/blob/main/src/useObservable.ts#L83)
 
 ## Type Parameters
 
diff --git a/docs/reference/type-aliases/StorageImageProps.md b/docs/reference/type-aliases/StorageImageProps.md
index b75fa337..f1206d9b 100644
--- a/docs/reference/type-aliases/StorageImageProps.md
+++ b/docs/reference/type-aliases/StorageImageProps.md
@@ -8,7 +8,7 @@
 
 > **StorageImageProps** = `object`
 
-Defined in: [src/storage.tsx:36](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L36)
+Defined in: [src/storage.tsx:37](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L37)
 
 ## Properties
 
@@ -16,7 +16,7 @@ Defined in: [src/storage.tsx:36](https://github.com/FirebaseExtended/reactfire/b
 
 > `optional` **placeHolder?**: `React.ReactNode`
 
-Defined in: [src/storage.tsx:40](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L40)
+Defined in: [src/storage.tsx:41](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L41)
 
 ***
 
@@ -24,7 +24,7 @@ Defined in: [src/storage.tsx:40](https://github.com/FirebaseExtended/reactfire/b
 
 > `optional` **storage?**: `FirebaseStorage`
 
-Defined in: [src/storage.tsx:38](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L38)
+Defined in: [src/storage.tsx:39](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L39)
 
 ***
 
@@ -32,7 +32,7 @@ Defined in: [src/storage.tsx:38](https://github.com/FirebaseExtended/reactfire/b
 
 > **storagePath**: `string`
 
-Defined in: [src/storage.tsx:37](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L37)
+Defined in: [src/storage.tsx:38](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L38)
 
 ***
 
@@ -40,4 +40,4 @@ Defined in: [src/storage.tsx:37](https://github.com/FirebaseExtended/reactfire/b
 
 > `optional` **suspense?**: `boolean`
 
-Defined in: [src/storage.tsx:39](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L39)
+Defined in: [src/storage.tsx:40](https://github.com/FirebaseExtended/reactfire/blob/main/src/storage.tsx#L40)
diff --git a/docs/upgrade-guide.md b/docs/upgrade-guide.md
index b5277dd9..9aa85b8b 100644
--- a/docs/upgrade-guide.md
+++ b/docs/upgrade-guide.md
@@ -1,3 +1,27 @@
+# Upgrade from ReactFire v4.2 to v4.3
+
+ReactFire v4.3.0 changes how errors are surfaced in non-suspense mode (the default).
+
+## Error handling behavior change
+
+Previously, errors from any reactfire hook were thrown unconditionally, making `status: 'error'` unreachable in practice. In v4.3.0, error handling depends on the mode:
+
+- **Non-suspense mode** (default, or `suspense: false`): errors are returned via `status: 'error'` so components can handle them locally.
+- **Suspense mode** (`suspense: true`): errors are re-thrown so a React Error Boundary can catch them. No change from prior behavior.
+
+**If you rely on a React Error Boundary to catch Firebase errors in non-suspense mode**, you must add an explicit re-throw in your component:
+
+```tsx
+const { status, error } = useStorageDownloadURL(ref);
+if (status === 'error') throw error; // re-throw to reach your Error Boundary
+```
+
+**If you already check `status` before using `data`**, no change is needed.
+
+Note: once an observable errors there is no automatic retry. The errored observable remains in the global cache under its `observableId`, so unmounting and remounting the same component rejoins the same errored state. Today the only workaround is to change the `observableId`. A proper retry mechanism is tracked as a follow-up issue.
+
+---
+
 # Upgrade from ReactFire v3 to v4
 
 As announced in [Discussion 402](https://github.com/FirebaseExtended/reactfire/discussions/402), ReactFire v4 contains breaking changes. This guide details how to upgrade from v3 to v4.
diff --git a/docs/use.md b/docs/use.md
index 5686a368..404cc625 100644
--- a/docs/use.md
+++ b/docs/use.md
@@ -426,12 +426,16 @@ function CatImage() {
   const storage = useStorage();
   const catRef = ref(storage, 'cats/newspaper');
 
-  const { status, data: imageURL } = useStorageDownloadURL(catRef);
+  const { status, data: imageURL, error } = useStorageDownloadURL(catRef);
 
   if (status === 'loading') {
     return <span>loading...</span>;
   }
 
+  if (status === 'error') {
+    return <span>Error: {error.message}</span>;
+  }
+
   return <img src={imageURL} alt="cat reading the newspaper" />;
 }
 ```
diff --git a/package.json b/package.json
index ec5a2f00..01f7698c 100644
--- a/package.json
+++ b/package.json
@@ -1,5 +1,5 @@
 {
-  "version": "4.2.3",
+  "version": "4.3.0",
   "license": "MIT",
   "type": "module",
   "main": "dist/index.umd.cjs",
diff --git a/src/storage.tsx b/src/storage.tsx
index 5a0299da..ea4e483f 100644
--- a/src/storage.tsx
+++ b/src/storage.tsx
@@ -1,5 +1,6 @@
 import * as React from 'react';
 import { getDownloadURL, fromTask } from 'rxfire/storage';
+import { defer } from 'rxjs';
 import { ReactFireOptions, useObservable, ObservableStatus, useStorage } from './';
 import { useSuspenseEnabledFromConfigAndContext } from './firebaseApp';
 import { ref } from 'firebase/storage';
@@ -28,7 +29,7 @@ export function useStorageTask<T = unknown>(task: UploadTask, ref: StorageRefere
  */
 export function useStorageDownloadURL<T = string>(ref: StorageReference, options?: ReactFireOptions<T>): ObservableStatus<string | T> {
   const observableId = `storage:downloadUrl:${ref.toString()}`;
-  const observable$ = getDownloadURL(ref);
+  const observable$ = defer(() => getDownloadURL(ref));
 
   return useObservable(observableId, observable$, options);
 }
diff --git a/src/useObservable.ts b/src/useObservable.ts
index fe05be5d..f98a2e1b 100644
--- a/src/useObservable.ts
+++ b/src/useObservable.ts
@@ -71,7 +71,6 @@ export interface ObservableStatusSuccess<T> extends ObservableStatusBase<T> {
 
 export interface ObservableStatusError<T> extends ObservableStatusBase<T> {
   status: 'error';
-  isComplete: true;
   error: Error;
 }
 
@@ -83,6 +82,17 @@ export interface ObservableStatusLoading<T> extends ObservableStatusBase<T> {
 
 export type ObservableStatus<T> = ObservableStatusLoading<T> | ObservableStatusError<T> | ObservableStatusSuccess<T>;
 
+/**
+ * Subscribe to an Observable and return its current status.
+ *
+ * Error handling depends on the suspense mode:
+ * - Non-suspense mode (default): errors are returned as `{ status: 'error', error }` so the
+ *   component can handle them locally without needing a React Error Boundary.
+ * - Suspense mode (`suspense: true`): errors are re-thrown so a React Error Boundary can catch them.
+ *
+ * If the observable emits a value and then errors, `data` retains the last emitted value and
+ * `status` changes to `'error'`. There is no automatic retry path once an error occurs.
+ */
 export function useObservable<T = unknown>(observableId: string, source: Observable<T>, config: ReactFireOptions = {}): ObservableStatus<T> {
   if (!observableId) {
     throw new Error('cannot call useObservable without an observableId');
@@ -105,9 +115,8 @@ export function useObservable<T = unknown>(observableId: string, source: Observa
         next: () => {
           onStoreChange();
         },
-        error: (e) => {
+        error: () => {
           onStoreChange();
-          throw e;
         },
         complete: () => {
           onStoreChange();
@@ -145,9 +154,9 @@ export function useObservable<T = unknown>(observableId: string, source: Observa
     } as ObservableStatus<T>;
   }
 
-  // throw an error if there is an error
-  // TODO(jhuleatt) this is the current, tested-for, behavior. But do we actually want it?
-  if (update.error) {
+  // In suspense mode, throw errors so React Error Boundaries can catch them.
+  // In non-suspense mode, surface errors via status so consumers can handle them locally.
+  if (suspenseEnabled && update.error) {
     throw update.error;
   }
 
diff --git a/test/storage.test.tsx b/test/storage.test.tsx
index bfea2297..ee331529 100644
--- a/test/storage.test.tsx
+++ b/test/storage.test.tsx
@@ -58,6 +58,13 @@ describe('Storage', () => {
   });
 
   describe('useStorageDownloadURL', () => {
+    it('surfaces storage/object-not-found as status: error for a nonexistent file', async () => {
+      const missingRef = ref(storage, `nonexistent/${randomString()}.txt`);
+      const { result } = renderHook(() => useStorageDownloadURL(missingRef), { wrapper: Provider });
+      await waitFor(() => expect(result.current.status).toEqual('error'));
+      expect((result.current.error as any)?.code).toEqual('storage/object-not-found');
+    });
+
     it('returns the same value as getDownloadURL', async () => {
       const someBytes = Uint8Array.from(Buffer.from(new ArrayBuffer(500_000)));
       const testFileRef = ref(storage, `${randomString()}/${randomString()}.txt`);
diff --git a/test/useObservable.test.tsx b/test/useObservable.test.tsx
index f16d327a..b841e428 100644
--- a/test/useObservable.test.tsx
+++ b/test/useObservable.test.tsx
@@ -2,7 +2,9 @@ import '@testing-library/jest-dom/extend-expect';
 import { act, cleanup, render, renderHook, waitFor } from '@testing-library/react';
 import * as React from 'react';
 import { of, Subject, BehaviorSubject, throwError } from 'rxjs';
-import { useObservable } from '../src/index';
+import { useObservable, FirebaseAppProvider } from '../src/index';
+import { initializeApp } from 'firebase/app';
+import { baseConfig } from './appConfig';
 
 describe('useObservable', () => {
   afterEach(cleanup);
@@ -124,10 +126,46 @@ describe('useObservable', () => {
 
       act(() => observable$.next('val'));
       expect(result.current.isComplete).toEqual(false);
-      
+
       act(() => observable$.complete());
       await waitFor(() => expect(result.current.isComplete).toEqual(true));
     });
+
+    it('surfaces errors via status in non-suspense mode', async () => {
+      const error = new Error('I am an error');
+      const observable$ = throwError(error);
+
+      const { result } = renderHook(() => useObservable('test-error-non-suspense', observable$, { suspense: false }));
+
+      await waitFor(() => expect(result.current.status).toEqual('error'));
+      expect(result.current.error).toEqual(error);
+    });
+
+    it('surfaces errors via status when no suspense option is provided', async () => {
+      const error = new Error('default mode error');
+      const observable$ = throwError(error);
+
+      const { result } = renderHook(() => useObservable('test-error-default-mode', observable$));
+
+      await waitFor(() => expect(result.current.status).toEqual('error'));
+      expect(result.current.error).toEqual(error);
+    });
+
+    it('retains last emitted data when observable errors after emitting', async () => {
+      const subject$ = new Subject<string>();
+      const error = new Error('late error');
+
+      const { result } = renderHook(() => useObservable('test-late-error', subject$, { suspense: false }));
+
+      act(() => subject$.next('good value'));
+      await waitFor(() => expect(result.current.status).toEqual('success'));
+      expect(result.current.data).toEqual('good value');
+
+      act(() => subject$.error(error));
+      await waitFor(() => expect(result.current.status).toEqual('error'));
+      expect(result.current.error).toEqual(error);
+      expect(result.current.data).toEqual('good value');
+    });
   });
 
   describe('Suspense Mode', () => {
@@ -328,5 +366,23 @@ describe('useObservable', () => {
       // if useObservable doesn't re-emit, the value here will still be "Jeff"
       expect(refreshedComp).toHaveTextContent('James');
     });
+    it('throws an error via FirebaseAppProvider suspense context path', () => {
+      const spy = vi.spyOn(console, 'error');
+      spy.mockImplementation(() => {});
+
+      const app = initializeApp(baseConfig, 'suspense-context-test');
+      const error = new Error('context-path error');
+      const observable$ = throwError(error);
+
+      const wrapper = ({ children }: { children: React.ReactNode }) => (
+        <FirebaseAppProvider firebaseApp={app} suspense={true}>
+          {children}
+        </FirebaseAppProvider>
+      );
+
+      expect(() => renderHook(() => useObservable('test-context-suspense-error', observable$), { wrapper })).toThrow(error);
+
+      spy.mockRestore();
+    });
   });
 });