diff --git a/Lib/test/test_frame.py b/Lib/test/test_frame.py
index 18ade18d1a1708..b357ce262702a7 100644
--- a/Lib/test/test_frame.py
+++ b/Lib/test/test_frame.py
@@ -18,6 +18,11 @@
 from test import mapping_tests
 
 
+class FailingKeys(dict):
+    def keys(self):
+        raise RuntimeError("keys failed")
+
+
 class ClearTest(unittest.TestCase):
     """
     Tests for frame.clear().
@@ -380,7 +385,12 @@ def test_as_dict(self):
         self.assertEqual(d['x'], 3)
         self.assertEqual(d['z'], 4)
 
-        with self.assertRaises(TypeError):
+        with self.assertRaisesRegex(RuntimeError, "keys failed"):
+            d.update(FailingKeys())
+
+        with self.assertRaisesRegex(
+            TypeError, r"update\(\) argument must be dict or another FrameLocalsProxy"
+        ):
             d.update([1, 2])
 
         self.assertEqual(d.setdefault('x', 5), 3)
@@ -399,6 +409,8 @@ def test_as_number(self):
         self.assertEqual(d['z'], 3)
         d |= {'y': 3}
         self.assertEqual(d['y'], 3)
+        with self.assertRaisesRegex(RuntimeError, "keys failed"):
+            d |= FailingKeys()
         with self.assertRaises(TypeError):
             d |= 3
         with self.assertRaises(TypeError):
diff --git a/Misc/NEWS.d/next/Core_and_Builtins/2026-07-09-12-25-06.gh-issue-153418.taxDqe.rst b/Misc/NEWS.d/next/Core_and_Builtins/2026-07-09-12-25-06.gh-issue-153418.taxDqe.rst
new file mode 100644
index 00000000000000..11c88c2850509b
--- /dev/null
+++ b/Misc/NEWS.d/next/Core_and_Builtins/2026-07-09-12-25-06.gh-issue-153418.taxDqe.rst
@@ -0,0 +1,4 @@
+Fix error handling in the ``FrameLocalsProxy`` returned by
+:attr:`frame.f_locals`. Exceptions raised by the argument of ``update()``
+or ``|=`` are now propagated instead of being replaced with
+:exc:`TypeError` or :exc:`SystemError`, or aborting debug builds.
diff --git a/Objects/frameobject.c b/Objects/frameobject.c
index e7ac59379dcfbc..40b39a83b485c1 100644
--- a/Objects/frameobject.c
+++ b/Objects/frameobject.c
@@ -325,6 +325,8 @@ static int
 framelocalsproxy_merge(PyObject* self, PyObject* other)
 {
     if (!PyDict_Check(other) && !PyFrameLocalsProxy_Check(other)) {
+        PyErr_SetString(PyExc_TypeError,
+                        "update() argument must be dict or another FrameLocalsProxy");
         return -1;
     }
 
@@ -573,7 +575,7 @@ framelocalsproxy_inplace_or(PyObject *self, PyObject *other)
     }
 
     if (framelocalsproxy_merge(self, other) < 0) {
-        Py_RETURN_NOTIMPLEMENTED;
+        return NULL;
     }
 
     return Py_NewRef(self);
@@ -721,7 +723,6 @@ static PyObject*
 framelocalsproxy_update(PyObject *self, PyObject *other)
 {
     if (framelocalsproxy_merge(self, other) < 0) {
-        PyErr_SetString(PyExc_TypeError, "update() argument must be dict or another FrameLocalsProxy");
         return NULL;
     }