diff --git a/x-pack/plugins/fleet/common/types/models/epm.ts b/x-pack/plugins/fleet/common/types/models/epm.ts
index 3bc0d97d64646..eab13fe5819f9 100644
--- a/x-pack/plugins/fleet/common/types/models/epm.ts
+++ b/x-pack/plugins/fleet/common/types/models/epm.ts
@@ -30,7 +30,12 @@ export enum InstallStatus {
   uninstalling = 'uninstalling',
 }
 
-export type InstallType = 'reinstall' | 'reupdate' | 'rollback' | 'update' | 'install';
+export interface DefaultPackagesInstallationError {
+  installType: InstallType;
+  error: Error;
+}
+
+export type InstallType = 'reinstall' | 'reupdate' | 'rollback' | 'update' | 'install' | 'unknown';
 export type InstallSource = 'registry' | 'upload';
 
 export type EpmPackageInstallStatus = 'installed' | 'installing';
diff --git a/x-pack/plugins/fleet/common/types/rest_spec/epm.ts b/x-pack/plugins/fleet/common/types/rest_spec/epm.ts
index 3c7a32265d20a..e5c7ace420c73 100644
--- a/x-pack/plugins/fleet/common/types/rest_spec/epm.ts
+++ b/x-pack/plugins/fleet/common/types/rest_spec/epm.ts
@@ -12,6 +12,7 @@ import type {
   RegistrySearchResult,
   PackageInfo,
   PackageUsageStats,
+  InstallType,
 } from '../models/epm';
 
 export interface GetCategoriesRequest {
@@ -83,8 +84,10 @@ export interface IBulkInstallPackageHTTPError {
 }
 
 export interface InstallResult {
-  assets: AssetReference[];
-  status: 'installed' | 'already_installed';
+  assets?: AssetReference[];
+  status?: 'installed' | 'already_installed';
+  error?: Error;
+  installType: InstallType;
 }
 
 export interface BulkInstallPackageInfo {
diff --git a/x-pack/plugins/fleet/common/types/rest_spec/ingest_setup.ts b/x-pack/plugins/fleet/common/types/rest_spec/ingest_setup.ts
index 2180b66908498..6f64f1c48336d 100644
--- a/x-pack/plugins/fleet/common/types/rest_spec/ingest_setup.ts
+++ b/x-pack/plugins/fleet/common/types/rest_spec/ingest_setup.ts
@@ -5,7 +5,10 @@
  * 2.0.
  */
 
+import type { DefaultPackagesInstallationError } from '../models/epm';
+
 export interface PostIngestSetupResponse {
   isInitialized: boolean;
   preconfigurationError?: { name: string; message: string };
+  nonFatalPackageUpgradeErrors?: DefaultPackagesInstallationError[];
 }
diff --git a/x-pack/plugins/fleet/public/applications/fleet/app.tsx b/x-pack/plugins/fleet/public/applications/fleet/app.tsx
index 5663bd4768d5c..f2eee6228906a 100644
--- a/x-pack/plugins/fleet/public/applications/fleet/app.tsx
+++ b/x-pack/plugins/fleet/public/applications/fleet/app.tsx
@@ -90,6 +90,13 @@ export const WithPermissionsAndSetup: React.FC = memo(({ children }) => {
                 }),
               });
             }
+            if (setupResponse.data.nonFatalPackageUpgradeErrors) {
+              notifications.toasts.addError(setupResponse.data.nonFatalPackageUpgradeErrors, {
+                title: i18n.translate('xpack.fleet.setup.nonFatalPackageErrorsTitle', {
+                  defaultMessage: 'One or more packages could not be successfully upgraded',
+                }),
+              });
+            }
           } catch (err) {
             setInitializationError(err);
           }
diff --git a/x-pack/plugins/fleet/server/routes/epm/handlers.ts b/x-pack/plugins/fleet/server/routes/epm/handlers.ts
index f0d6e68427361..16d583f8a8d1f 100644
--- a/x-pack/plugins/fleet/server/routes/epm/handlers.ts
+++ b/x-pack/plugins/fleet/server/routes/epm/handlers.ts
@@ -226,20 +226,21 @@ export const installPackageFromRegistryHandler: RequestHandler<
   const savedObjectsClient = context.core.savedObjects.client;
   const esClient = context.core.elasticsearch.client.asCurrentUser;
   const { pkgkey } = request.params;
-  try {
-    const res = await installPackage({
-      installSource: 'registry',
-      savedObjectsClient,
-      pkgkey,
-      esClient,
-      force: request.body?.force,
-    });
+
+  const res = await installPackage({
+    installSource: 'registry',
+    savedObjectsClient,
+    pkgkey,
+    esClient,
+    force: request.body?.force,
+  });
+  if (!res.error) {
     const body: InstallPackageResponse = {
-      response: res.assets,
+      response: res.assets || [],
     };
     return response.ok({ body });
-  } catch (e) {
-    return await defaultIngestErrorHandler({ error: e, response });
+  } else {
+    return await defaultIngestErrorHandler({ error: res.error, response });
   }
 };
 
@@ -292,20 +293,21 @@ export const installPackageByUploadHandler: RequestHandler<
   const esClient = context.core.elasticsearch.client.asCurrentUser;
   const contentType = request.headers['content-type'] as string; // from types it could also be string[] or undefined but this is checked later
   const archiveBuffer = Buffer.from(request.body);
-  try {
-    const res = await installPackage({
-      installSource: 'upload',
-      savedObjectsClient,
-      esClient,
-      archiveBuffer,
-      contentType,
-    });
+
+  const res = await installPackage({
+    installSource: 'upload',
+    savedObjectsClient,
+    esClient,
+    archiveBuffer,
+    contentType,
+  });
+  if (!res.error) {
     const body: InstallPackageResponse = {
-      response: res.assets,
+      response: res.assets || [],
     };
     return response.ok({ body });
-  } catch (error) {
-    return defaultIngestErrorHandler({ error, response });
+  } else {
+    return defaultIngestErrorHandler({ error: res.error, response });
   }
 };
 
diff --git a/x-pack/plugins/fleet/server/routes/setup/handlers.test.ts b/x-pack/plugins/fleet/server/routes/setup/handlers.test.ts
index 2cf9bbc3b91e3..fd32d699ae45e 100644
--- a/x-pack/plugins/fleet/server/routes/setup/handlers.test.ts
+++ b/x-pack/plugins/fleet/server/routes/setup/handlers.test.ts
@@ -46,7 +46,11 @@ describe('FleetSetupHandler', () => {
 
   it('POST /setup succeeds w/200 and body of resolved value', async () => {
     mockSetupIngestManager.mockImplementation(() =>
-      Promise.resolve({ isInitialized: true, preconfigurationError: undefined })
+      Promise.resolve({
+        isInitialized: true,
+        preconfigurationError: undefined,
+        nonFatalPackageUpgradeErrors: [],
+      })
     );
     await fleetSetupHandler(context, request, response);
 
diff --git a/x-pack/plugins/fleet/server/routes/setup/handlers.ts b/x-pack/plugins/fleet/server/routes/setup/handlers.ts
index b6aa9e29de9ee..a6d7acccfb4fe 100644
--- a/x-pack/plugins/fleet/server/routes/setup/handlers.ts
+++ b/x-pack/plugins/fleet/server/routes/setup/handlers.ts
@@ -46,8 +46,14 @@ export const fleetSetupHandler: RequestHandler = async (context, request, respon
   try {
     const soClient = context.core.savedObjects.client;
     const esClient = context.core.elasticsearch.client.asCurrentUser;
-    const body: PostIngestSetupResponse = { isInitialized: true };
-    await setupIngestManager(soClient, esClient);
+    const setupStatus = await setupIngestManager(soClient, esClient);
+    const body: PostIngestSetupResponse = {
+      isInitialized: true,
+    };
+
+    if (setupStatus.nonFatalPackageUpgradeErrors.length > 0) {
+      body.nonFatalPackageUpgradeErrors = setupStatus.nonFatalPackageUpgradeErrors;
+    }
 
     return response.ok({
       body,
diff --git a/x-pack/plugins/fleet/server/services/epm/packages/bulk_install_packages.ts b/x-pack/plugins/fleet/server/services/epm/packages/bulk_install_packages.ts
index 7323263d4a70f..2c5b072aa3979 100644
--- a/x-pack/plugins/fleet/server/services/epm/packages/bulk_install_packages.ts
+++ b/x-pack/plugins/fleet/server/services/epm/packages/bulk_install_packages.ts
@@ -32,22 +32,31 @@ export async function bulkInstallPackages({
   );
 
   logger.debug(`kicking off bulk install of ${packagesToInstall.join(', ')} from registry`);
-  const installResults = await Promise.allSettled(
+  const bulkInstallResults = await Promise.allSettled(
     latestPackagesResults.map(async (result, index) => {
       const packageName = packagesToInstall[index];
       if (result.status === 'fulfilled') {
         const latestPackage = result.value;
-        return {
-          name: packageName,
-          version: latestPackage.version,
-          result: await installPackage({
-            savedObjectsClient,
-            esClient,
-            pkgkey: Registry.pkgToPkgKey(latestPackage),
-            installSource,
-            skipPostInstall: true,
-          }),
-        };
+        const installResult = await installPackage({
+          savedObjectsClient,
+          esClient,
+          pkgkey: Registry.pkgToPkgKey(latestPackage),
+          installSource,
+          skipPostInstall: true,
+        });
+        if (installResult.error) {
+          return {
+            name: packageName,
+            error: installResult.error,
+            installType: installResult.installType,
+          };
+        } else {
+          return {
+            name: packageName,
+            version: latestPackage.version,
+            result: installResult,
+          };
+        }
       }
       return { name: packageName, error: result.reason };
     })
@@ -56,18 +65,31 @@ export async function bulkInstallPackages({
   // only install index patterns if we completed install for any package-version for the
   // first time, aka fresh installs or upgrades
   if (
-    installResults.find(
-      (result) => result.status === 'fulfilled' && result.value.result?.status === 'installed'
+    bulkInstallResults.find(
+      (result) =>
+        result.status === 'fulfilled' &&
+        !result.value.result?.error &&
+        result.value.result?.status === 'installed'
     )
   ) {
     await installIndexPatterns({ savedObjectsClient, esClient, installSource });
   }
 
-  return installResults.map((result, index) => {
+  return bulkInstallResults.map((result, index) => {
     const packageName = packagesToInstall[index];
-    return result.status === 'fulfilled'
-      ? result.value
-      : { name: packageName, error: result.reason };
+    if (result.status === 'fulfilled') {
+      if (result.value && result.value.error) {
+        return {
+          name: packageName,
+          error: result.value.error,
+          installType: result.value.installType,
+        };
+      } else {
+        return result.value;
+      }
+    } else {
+      return { name: packageName, error: result.reason };
+    }
   });
 }
 
diff --git a/x-pack/plugins/fleet/server/services/epm/packages/ensure_installed_default_packages.test.ts b/x-pack/plugins/fleet/server/services/epm/packages/ensure_installed_default_packages.test.ts
index fa2ea9e2209ed..f8c91e55fbbb6 100644
--- a/x-pack/plugins/fleet/server/services/epm/packages/ensure_installed_default_packages.test.ts
+++ b/x-pack/plugins/fleet/server/services/epm/packages/ensure_installed_default_packages.test.ts
@@ -77,7 +77,7 @@ describe('ensureInstalledDefaultPackages', () => {
       return [
         {
           name: mockInstallation.attributes.name,
-          result: { assets: [], status: 'installed' },
+          result: { assets: [], status: 'installed', installType: 'install' },
           version: '',
           statusCode: 200,
         },
@@ -95,13 +95,13 @@ describe('ensureInstalledDefaultPackages', () => {
       return [
         {
           name: 'success one',
-          result: { assets: [], status: 'installed' },
+          result: { assets: [], status: 'installed', installType: 'install' },
           version: '',
           statusCode: 200,
         },
         {
           name: 'success two',
-          result: { assets: [], status: 'installed' },
+          result: { assets: [], status: 'installed', installType: 'install' },
           version: '',
           statusCode: 200,
         },
@@ -111,7 +111,7 @@ describe('ensureInstalledDefaultPackages', () => {
         },
         {
           name: 'success three',
-          result: { assets: [], status: 'installed' },
+          result: { assets: [], status: 'installed', installType: 'install' },
           version: '',
           statusCode: 200,
         },
@@ -134,7 +134,7 @@ describe('ensureInstalledDefaultPackages', () => {
       return [
         {
           name: 'undefined package',
-          result: { assets: [], status: 'installed' },
+          result: { assets: [], status: 'installed', installType: 'install' },
           version: '',
           statusCode: 200,
         },
diff --git a/x-pack/plugins/fleet/server/services/epm/packages/install.ts b/x-pack/plugins/fleet/server/services/epm/packages/install.ts
index 4373251a969bc..ec1cc322475b0 100644
--- a/x-pack/plugins/fleet/server/services/epm/packages/install.ts
+++ b/x-pack/plugins/fleet/server/services/epm/packages/install.ts
@@ -12,7 +12,12 @@ import type { ElasticsearchClient, SavedObject, SavedObjectsClientContract } fro
 import { generateESIndexPatterns } from '../elasticsearch/template/template';
 
 import { defaultPackages } from '../../../../common';
-import type { BulkInstallPackageInfo, InstallablePackage, InstallSource } from '../../../../common';
+import type {
+  BulkInstallPackageInfo,
+  InstallablePackage,
+  InstallSource,
+  DefaultPackagesInstallationError,
+} from '../../../../common';
 import {
   IngestManagerError,
   PackageOperationNotSupportedError,
@@ -45,11 +50,17 @@ import { removeInstallation } from './remove';
 import { getPackageSavedObjects } from './get';
 import { _installPackage } from './_install_package';
 
+export interface DefaultPackagesInstallationResult {
+  installations: Installation[];
+  nonFatalPackageUpgradeErrors: DefaultPackagesInstallationError[];
+}
+
 export async function ensureInstalledDefaultPackages(
   savedObjectsClient: SavedObjectsClientContract,
   esClient: ElasticsearchClient
-): Promise<Installation[]> {
+): Promise<DefaultPackagesInstallationResult> {
   const installations = [];
+  const nonFatalPackageUpgradeErrors = [];
   const bulkResponse = await bulkInstallPackages({
     savedObjectsClient,
     packagesToInstall: Object.values(defaultPackages),
@@ -58,19 +69,27 @@ export async function ensureInstalledDefaultPackages(
 
   for (const resp of bulkResponse) {
     if (isBulkInstallError(resp)) {
-      throw resp.error;
+      if (resp.installType && (resp.installType === 'update' || resp.installType === 'reupdate')) {
+        nonFatalPackageUpgradeErrors.push({ installType: resp.installType, error: resp.error });
+      } else {
+        throw resp.error;
+      }
     } else {
       installations.push(getInstallation({ savedObjectsClient, pkgName: resp.name }));
     }
   }
 
   const retrievedInstallations = await Promise.all(installations);
-  return retrievedInstallations.map((installation, index) => {
+  const verifiedInstallations = retrievedInstallations.map((installation, index) => {
     if (!installation) {
       throw new Error(`could not get installation ${bulkResponse[index].name}`);
     }
     return installation;
   });
+  return {
+    installations: verifiedInstallations,
+    nonFatalPackageUpgradeErrors,
+  };
 }
 
 async function isPackageVersionOrLaterInstalled(options: {
@@ -181,6 +200,7 @@ export async function handleInstallPackageFailure({
 export interface IBulkInstallPackageError {
   name: string;
   error: Error;
+  installType?: InstallType;
 }
 export type BulkInstallResponse = BulkInstallPackageInfo | IBulkInstallPackageError;
 
@@ -201,54 +221,62 @@ async function installPackageFromRegistry({
   // TODO: change epm API to /packageName/version so we don't need to do this
   const { pkgName, pkgVersion } = Registry.splitPkgKey(pkgkey);
 
-  // get the currently installed package
-  const installedPkg = await getInstallationObject({ savedObjectsClient, pkgName });
-  const installType = getInstallType({ pkgVersion, installedPkg });
-
-  // get latest package version
-  const latestPackage = await Registry.fetchFindLatestPackage(pkgName);
-
-  // let the user install if using the force flag or needing to reinstall or install a previous version due to failed update
-  const installOutOfDateVersionOk =
-    force || ['reinstall', 'reupdate', 'rollback'].includes(installType);
+  // if an error happens during getInstallType, report that we don't know
+  let installType: InstallType = 'unknown';
 
-  // if the requested version is the same as installed version, check if we allow it based on
-  // current installed package status and force flag, if we don't allow it,
-  // just return the asset references from the existing installation
-  if (
-    installedPkg?.attributes.version === pkgVersion &&
-    installedPkg?.attributes.install_status === 'installed'
-  ) {
-    if (!force) {
-      logger.debug(`${pkgkey} is already installed, skipping installation`);
-      return {
-        assets: [
-          ...installedPkg.attributes.installed_es,
-          ...installedPkg.attributes.installed_kibana,
-        ],
-        status: 'already_installed',
-      };
+  try {
+    // get the currently installed package
+    const installedPkg = await getInstallationObject({ savedObjectsClient, pkgName });
+    installType = getInstallType({ pkgVersion, installedPkg });
+
+    // get latest package version
+    const latestPackage = await Registry.fetchFindLatestPackage(pkgName);
+
+    // let the user install if using the force flag or needing to reinstall or install a previous version due to failed update
+    const installOutOfDateVersionOk =
+      force || ['reinstall', 'reupdate', 'rollback'].includes(installType);
+
+    // if the requested version is the same as installed version, check if we allow it based on
+    // current installed package status and force flag, if we don't allow it,
+    // just return the asset references from the existing installation
+    if (
+      installedPkg?.attributes.version === pkgVersion &&
+      installedPkg?.attributes.install_status === 'installed'
+    ) {
+      if (!force) {
+        logger.debug(`${pkgkey} is already installed, skipping installation`);
+        return {
+          assets: [
+            ...installedPkg.attributes.installed_es,
+            ...installedPkg.attributes.installed_kibana,
+          ],
+          status: 'already_installed',
+          installType,
+        };
+      }
     }
-  }
 
-  // if the requested version is out-of-date of the latest package version, check if we allow it
-  // if we don't allow it, return an error
-  if (semverLt(pkgVersion, latestPackage.version)) {
-    if (!installOutOfDateVersionOk) {
-      throw new PackageOutdatedError(`${pkgkey} is out-of-date and cannot be installed or updated`);
+    // if the requested version is out-of-date of the latest package version, check if we allow it
+    // if we don't allow it, return an error
+    if (semverLt(pkgVersion, latestPackage.version)) {
+      if (!installOutOfDateVersionOk) {
+        throw new PackageOutdatedError(
+          `${pkgkey} is out-of-date and cannot be installed or updated`
+        );
+      }
+      logger.debug(
+        `${pkgkey} is out-of-date, installing anyway due to ${
+          force ? 'force flag' : `install type ${installType}`
+        }`
+      );
     }
-    logger.debug(
-      `${pkgkey} is out-of-date, installing anyway due to ${
-        force ? 'force flag' : `install type ${installType}`
-      }`
-    );
-  }
 
-  // get package info
-  const { paths, packageInfo } = await Registry.getRegistryPackage(pkgName, pkgVersion);
+    // get package info
+    const { paths, packageInfo } = await Registry.getRegistryPackage(pkgName, pkgVersion);
 
-  // try installing the package, if there was an error, call error handler and rethrow
-  try {
+    // try installing the package, if there was an error, call error handler and rethrow
+    // TODO: without the ts-ignore, TS complains about the type of the value of the returned InstallResult.status
+    // @ts-ignore
     return _installPackage({
       savedObjectsClient,
       esClient,
@@ -257,19 +285,26 @@ async function installPackageFromRegistry({
       packageInfo,
       installType,
       installSource: 'registry',
-    }).then((assets) => {
-      return { assets, status: 'installed' };
-    });
+    })
+      .then((assets) => {
+        return { assets, status: 'installed', installType };
+      })
+      .catch(async (err: Error) => {
+        await handleInstallPackageFailure({
+          savedObjectsClient,
+          error: err,
+          pkgName,
+          pkgVersion,
+          installedPkg,
+          esClient,
+        });
+        return { error: err, installType };
+      });
   } catch (e) {
-    await handleInstallPackageFailure({
-      savedObjectsClient,
+    return {
       error: e,
-      pkgName,
-      pkgVersion,
-      installedPkg,
-      esClient,
-    });
-    throw e;
+      installType,
+    };
   }
 }
 
@@ -286,46 +321,57 @@ async function installPackageByUpload({
   archiveBuffer,
   contentType,
 }: InstallUploadedArchiveParams): Promise<InstallResult> {
-  const { packageInfo } = await parseAndVerifyArchiveEntries(archiveBuffer, contentType);
-
-  const installedPkg = await getInstallationObject({
-    savedObjectsClient,
-    pkgName: packageInfo.name,
-  });
+  // if an error happens during getInstallType, report that we don't know
+  let installType: InstallType = 'unknown';
+  try {
+    const { packageInfo } = await parseAndVerifyArchiveEntries(archiveBuffer, contentType);
 
-  const installType = getInstallType({ pkgVersion: packageInfo.version, installedPkg });
-  if (installType !== 'install') {
-    throw new PackageOperationNotSupportedError(
-      `Package upload only supports fresh installations. Package ${packageInfo.name} is already installed, please uninstall first.`
-    );
-  }
+    const installedPkg = await getInstallationObject({
+      savedObjectsClient,
+      pkgName: packageInfo.name,
+    });
 
-  const installSource = 'upload';
-  const paths = await unpackBufferToCache({
-    name: packageInfo.name,
-    version: packageInfo.version,
-    installSource,
-    archiveBuffer,
-    contentType,
-  });
+    installType = getInstallType({ pkgVersion: packageInfo.version, installedPkg });
+    if (installType !== 'install') {
+      throw new PackageOperationNotSupportedError(
+        `Package upload only supports fresh installations. Package ${packageInfo.name} is already installed, please uninstall first.`
+      );
+    }
 
-  setPackageInfo({
-    name: packageInfo.name,
-    version: packageInfo.version,
-    packageInfo,
-  });
+    const installSource = 'upload';
+    const paths = await unpackBufferToCache({
+      name: packageInfo.name,
+      version: packageInfo.version,
+      installSource,
+      archiveBuffer,
+      contentType,
+    });
 
-  return _installPackage({
-    savedObjectsClient,
-    esClient,
-    installedPkg,
-    paths,
-    packageInfo,
-    installType,
-    installSource,
-  }).then((assets) => {
-    return { assets, status: 'installed' };
-  });
+    setPackageInfo({
+      name: packageInfo.name,
+      version: packageInfo.version,
+      packageInfo,
+    });
+    // TODO: without the ts-ignore, TS complains about the type of the value of the returned InstallResult.status
+    // @ts-ignore
+    return _installPackage({
+      savedObjectsClient,
+      esClient,
+      installedPkg,
+      paths,
+      packageInfo,
+      installType,
+      installSource,
+    })
+      .then((assets) => {
+        return { assets, status: 'installed', installType };
+      })
+      .catch(async (err: Error) => {
+        return { error: err, installType };
+      });
+  } catch (e) {
+    return { error: e, installType };
+  }
 }
 
 export type InstallPackageParams = {
@@ -352,7 +398,7 @@ export async function installPackage(args: InstallPackageParams) {
       esClient,
       force,
     }).then(async (installResult) => {
-      if (skipPostInstall) {
+      if (skipPostInstall || installResult.error) {
         return installResult;
       }
       logger.debug(`install of ${pkgkey} finished, running post-install`);
@@ -374,7 +420,7 @@ export async function installPackage(args: InstallPackageParams) {
       archiveBuffer,
       contentType,
     }).then(async (installResult) => {
-      if (skipPostInstall) {
+      if (skipPostInstall || installResult.error) {
         return installResult;
       }
       logger.debug(`install of uploaded package finished, running post-install`);
diff --git a/x-pack/plugins/fleet/server/services/epm/packages/remove.ts b/x-pack/plugins/fleet/server/services/epm/packages/remove.ts
index de798e822b029..706f1bbbaaf35 100644
--- a/x-pack/plugins/fleet/server/services/epm/packages/remove.ts
+++ b/x-pack/plugins/fleet/server/services/epm/packages/remove.ts
@@ -79,6 +79,7 @@ export async function removeInstallation(options: {
   return installedAssets;
 }
 
+// TODO: this is very much like deleteKibanaSavedObjectsAssets below
 function deleteKibanaAssets(
   installedObjects: KibanaAssetReference[],
   savedObjectsClient: SavedObjectsClientContract
@@ -136,6 +137,7 @@ async function deleteTemplate(esClient: ElasticsearchClient, name: string): Prom
   }
 }
 
+// TODO: this is very much like deleteKibanaAssets above
 export async function deleteKibanaSavedObjectsAssets(
   savedObjectsClient: SavedObjectsClientContract,
   installedRefs: AssetReference[]
@@ -153,6 +155,9 @@ export async function deleteKibanaSavedObjectsAssets(
   try {
     await Promise.all(deletePromises);
   } catch (err) {
-    logger.warn(err);
+    // in the rollback case, partial installs are likely, so missing assets are not an error
+    if (!savedObjectsClient.errors.isNotFoundError(err)) {
+      logger.error(err);
+    }
   }
 }
diff --git a/x-pack/plugins/fleet/server/services/setup.ts b/x-pack/plugins/fleet/server/services/setup.ts
index c906dc73e6df2..de6876c7f6fda 100644
--- a/x-pack/plugins/fleet/server/services/setup.ts
+++ b/x-pack/plugins/fleet/server/services/setup.ts
@@ -10,7 +10,7 @@ import { i18n } from '@kbn/i18n';
 
 import { DEFAULT_AGENT_POLICIES_PACKAGES, FLEET_SERVER_PACKAGE } from '../../common';
 
-import type { PackagePolicy } from '../../common';
+import type { PackagePolicy, DefaultPackagesInstallationError } from '../../common';
 
 import { SO_SEARCH_LIMIT } from '../constants';
 
@@ -33,6 +33,7 @@ import { awaitIfFleetServerSetupPending } from './fleet_server';
 export interface SetupStatus {
   isInitialized: boolean;
   preconfigurationError: { name: string; message: string } | undefined;
+  nonFatalPackageUpgradeErrors: DefaultPackagesInstallationError[];
 }
 
 export async function setupIngestManager(
@@ -46,7 +47,7 @@ async function createSetupSideEffects(
   soClient: SavedObjectsClientContract,
   esClient: ElasticsearchClient
 ): Promise<SetupStatus> {
-  const [installedPackages, defaultOutput] = await Promise.all([
+  const [defaultPackagesResult, defaultOutput] = await Promise.all([
     // packages installed by default
     ensureInstalledDefaultPackages(soClient, esClient),
     outputService.ensureDefaultOutput(soClient),
@@ -142,7 +143,7 @@ async function createSetupSideEffects(
       );
     }
 
-    for (const installedPackage of installedPackages) {
+    for (const installedPackage of defaultPackagesResult.installations) {
       const packageShouldBeInstalled = DEFAULT_AGENT_POLICIES_PACKAGES.some(
         (packageName) => installedPackage.name === packageName
       );
@@ -172,7 +173,11 @@ async function createSetupSideEffects(
 
   await ensureAgentActionPolicyChangeExists(soClient, esClient);
 
-  return { isInitialized: true, preconfigurationError };
+  return {
+    isInitialized: true,
+    preconfigurationError,
+    nonFatalPackageUpgradeErrors: defaultPackagesResult.nonFatalPackageUpgradeErrors,
+  };
 }
 
 export async function ensureDefaultEnrollmentAPIKeysExists(
diff --git a/x-pack/test/fleet_api_integration/apis/epm/index.js b/x-pack/test/fleet_api_integration/apis/epm/index.js
index 009e1a2dad5f1..445d9706bb9a9 100644
--- a/x-pack/test/fleet_api_integration/apis/epm/index.js
+++ b/x-pack/test/fleet_api_integration/apis/epm/index.js
@@ -24,5 +24,6 @@ export default function loadTests({ loadTestFile }) {
     loadTestFile(require.resolve('./update_assets'));
     loadTestFile(require.resolve('./data_stream'));
     loadTestFile(require.resolve('./package_install_complete'));
+    loadTestFile(require.resolve('./install_error_rollback'));
   });
 }
diff --git a/x-pack/test/fleet_api_integration/apis/epm/install_error_rollback.ts b/x-pack/test/fleet_api_integration/apis/epm/install_error_rollback.ts
new file mode 100644
index 0000000000000..6e2ea3b96aa58
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/epm/install_error_rollback.ts
@@ -0,0 +1,61 @@
+/*
+ * Copyright Elasticsearch B.V. and/or licensed to Elasticsearch B.V. under one
+ * or more contributor license agreements. Licensed under the Elastic License
+ * 2.0; you may not use this file except in compliance with the Elastic License
+ * 2.0.
+ */
+
+import expect from '@kbn/expect';
+import { FtrProviderContext } from '../../../api_integration/ftr_provider_context';
+import { skipIfNoDockerRegistry } from '../../helpers';
+
+export default function (providerContext: FtrProviderContext) {
+  const { getService } = providerContext;
+  const supertest = getService('supertest');
+  const esArchiver = getService('esArchiver');
+  const goodPackage = 'error_handling-0.1.0';
+  const badPackage = 'error_handling-0.2.0';
+
+  const installPackage = async (pkgkey: string) => {
+    await supertest
+      .post(`/api/fleet/epm/packages/${pkgkey}`)
+      .set('kbn-xsrf', 'xxxx')
+      .send({ force: true });
+  };
+
+  const getPackageInfo = async (pkgkey: string) => {
+    return await supertest.get(`/api/fleet/epm/packages/${pkgkey}`).set('kbn-xsrf', 'xxxx');
+  };
+
+  describe('package installation error handling and rollback', async () => {
+    skipIfNoDockerRegistry(providerContext);
+    beforeEach(async () => {
+      await esArchiver.load('empty_kibana');
+    });
+    afterEach(async () => {
+      await esArchiver.unload('empty_kibana');
+    });
+
+    it('on a fresh install, it should uninstall a broken package during rollback', async function () {
+      await supertest
+        .post(`/api/fleet/epm/packages/${badPackage}`)
+        .set('kbn-xsrf', 'xxxx')
+        .expect(422); // the broken package contains a broken visualization triggering a 422 from Kibana
+
+      const pkgInfoResponse = await getPackageInfo(badPackage);
+      expect(JSON.parse(pkgInfoResponse.text).response.status).to.be('not_installed');
+    });
+
+    it('on an upgrade, it should fall back to the previous good version during rollback', async function () {
+      await installPackage(goodPackage);
+      await supertest
+        .post(`/api/fleet/epm/packages/${badPackage}`)
+        .set('kbn-xsrf', 'xxxx')
+        .expect(422); // the broken package contains a broken visualization triggering a 422 from Kibana
+
+      const goodPkgInfoResponse = await getPackageInfo(goodPackage);
+      expect(JSON.parse(goodPkgInfoResponse.text).response.status).to.be('installed');
+      expect(JSON.parse(goodPkgInfoResponse.text).response.version).to.be('0.1.0');
+    });
+  });
+}
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/docs/README.md b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/docs/README.md
new file mode 100644
index 0000000000000..260499f4b0078
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/docs/README.md
@@ -0,0 +1,3 @@
+This package should install without errors.
+
+Version 0.2.0 of this package should fail during installation. We need this good version to test rollback.
\ No newline at end of file
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/kibana/visualization/sample_visualization.json b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/kibana/visualization/sample_visualization.json
new file mode 100644
index 0000000000000..01afe600853ef
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/kibana/visualization/sample_visualization.json
@@ -0,0 +1,14 @@
+{
+  "attributes": {
+    "description": "sample visualization",
+    "title": "sample vis title",
+    "uiStateJSON": "{}",
+    "version": 1,
+    "visState": "{\"aggs\":[{\"enabled\":true,\"id\":\"1\",\"params\":{},\"schema\":\"metric\",\"type\":\"count\"},{\"enabled\":true,\"id\":\"2\",\"params\":{\"extended_bounds\":{},\"field\":\"@timestamp\",\"interval\":\"auto\",\"min_doc_count\":1},\"schema\":\"segment\",\"type\":\"date_histogram\"},{\"enabled\":true,\"id\":\"3\",\"params\":{\"customLabel\":\"Log Level\",\"field\":\"log.level\",\"order\":\"desc\",\"orderBy\":\"1\",\"size\":5},\"schema\":\"group\",\"type\":\"terms\"}],\"params\":{\"addLegend\":true,\"addTimeMarker\":false,\"addTooltip\":true,\"categoryAxes\":[{\"id\":\"CategoryAxis-1\",\"labels\":{\"show\":true,\"truncate\":100},\"position\":\"bottom\",\"scale\":{\"type\":\"linear\"},\"show\":true,\"style\":{},\"title\":{\"text\":\"@timestamp per day\"},\"type\":\"category\"}],\"grid\":{\"categoryLines\":false,\"style\":{\"color\":\"#eee\"}},\"legendPosition\":\"right\",\"seriesParams\":[{\"data\":{\"id\":\"1\",\"label\":\"Count\"},\"drawLinesBetweenPoints\":true,\"mode\":\"stacked\",\"show\":\"true\",\"showCircles\":true,\"type\":\"histogram\",\"valueAxis\":\"ValueAxis-1\"}],\"times\":[],\"type\":\"histogram\",\"valueAxes\":[{\"id\":\"ValueAxis-1\",\"labels\":{\"filter\":false,\"rotate\":0,\"show\":true,\"truncate\":100},\"name\":\"LeftAxis-1\",\"position\":\"left\",\"scale\":{\"mode\":\"normal\",\"type\":\"linear\"},\"show\":true,\"style\":{},\"title\":{\"text\":\"Count\"},\"type\":\"value\"}]},\"title\":\"Log levels over time [Logs Kafka] ECS\",\"type\":\"histogram\"}"
+  },
+  "id": "sample_visualization",
+  "type": "visualization",
+  "migrationVersion": {
+    "visualization": "7.7.0"
+  }
+}
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/manifest.yml
new file mode 100644
index 0000000000000..bba1a6a4c347d
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.1.0/manifest.yml
@@ -0,0 +1,20 @@
+format_version: 1.0.0
+name: error_handling 
+title: Error handling
+description: tests error handling and rollback 
+version: 0.1.0
+categories: []
+release: beta
+type: integration
+license: basic
+
+requirement:
+  elasticsearch:
+    versions: '>7.7.0'
+  kibana:
+    versions: '>7.7.0'
+
+icons:
+  - src: '/img/logo_overrides_64_color.svg'
+    size: '16x16'
+    type: 'image/svg+xml'
\ No newline at end of file
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/docs/README.md b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/docs/README.md
new file mode 100644
index 0000000000000..c348f801b1780
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/docs/README.md
@@ -0,0 +1,5 @@
+This package should fail during installation.
+
+Version 0.1.0 of this package should install without errors, and be rolled back to without errors.
+
+This package contains one Kibana visualization that requires a non-existent version of Kibana in order to trigger an error during installation.
\ No newline at end of file
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/kibana/visualization/sample_visualization.json b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/kibana/visualization/sample_visualization.json
new file mode 100644
index 0000000000000..0a4867cfe1c11
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/kibana/visualization/sample_visualization.json
@@ -0,0 +1,14 @@
+{
+  "attributes": {
+    "description": "sample visualization",
+    "title": "sample vis title",
+    "uiStateJSON": "{}",
+    "version": 1,
+    "visState": "{\"aggs\":[{\"enabled\":true,\"id\":\"1\",\"params\":{},\"schema\":\"metric\",\"type\":\"count\"},{\"enabled\":true,\"id\":\"2\",\"params\":{\"extended_bounds\":{},\"field\":\"@timestamp\",\"interval\":\"auto\",\"min_doc_count\":1},\"schema\":\"segment\",\"type\":\"date_histogram\"},{\"enabled\":true,\"id\":\"3\",\"params\":{\"customLabel\":\"Log Level\",\"field\":\"log.level\",\"order\":\"desc\",\"orderBy\":\"1\",\"size\":5},\"schema\":\"group\",\"type\":\"terms\"}],\"params\":{\"addLegend\":true,\"addTimeMarker\":false,\"addTooltip\":true,\"categoryAxes\":[{\"id\":\"CategoryAxis-1\",\"labels\":{\"show\":true,\"truncate\":100},\"position\":\"bottom\",\"scale\":{\"type\":\"linear\"},\"show\":true,\"style\":{},\"title\":{\"text\":\"@timestamp per day\"},\"type\":\"category\"}],\"grid\":{\"categoryLines\":false,\"style\":{\"color\":\"#eee\"}},\"legendPosition\":\"right\",\"seriesParams\":[{\"data\":{\"id\":\"1\",\"label\":\"Count\"},\"drawLinesBetweenPoints\":true,\"mode\":\"stacked\",\"show\":\"true\",\"showCircles\":true,\"type\":\"histogram\",\"valueAxis\":\"ValueAxis-1\"}],\"times\":[],\"type\":\"histogram\",\"valueAxes\":[{\"id\":\"ValueAxis-1\",\"labels\":{\"filter\":false,\"rotate\":0,\"show\":true,\"truncate\":100},\"name\":\"LeftAxis-1\",\"position\":\"left\",\"scale\":{\"mode\":\"normal\",\"type\":\"linear\"},\"show\":true,\"style\":{},\"title\":{\"text\":\"Count\"},\"type\":\"value\"}]},\"title\":\"Log levels over time [Logs Kafka] ECS\",\"type\":\"histogram\"}"
+  },
+  "id": "sample_visualization",
+  "type": "visualization",
+  "migrationVersion": {
+    "visualization": "12.7.0"
+  }
+}
\ No newline at end of file
diff --git a/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/manifest.yml b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/manifest.yml
new file mode 100644
index 0000000000000..2eb6a41a77ede
--- /dev/null
+++ b/x-pack/test/fleet_api_integration/apis/fixtures/test_packages/error_handling/0.2.0/manifest.yml
@@ -0,0 +1,19 @@
+format_version: 1.0.0
+name: error_handling 
+title: Error handling
+description: tests error handling and rollback 
+version: 0.2.0
+categories: []
+release: beta
+type: integration
+license: basic
+
+requirement:
+  elasticsearch:
+    versions: '>7.7.0'
+  kibana:
+    versions: '>7.7.0'
+
+icons:
+  - src: '/img/logo_overrides_64_color.svg'
+    size: '16x16'
\ No newline at end of file