diff --git a/aws_lambda_powertools/event_handler/api_gateway.py b/aws_lambda_powertools/event_handler/api_gateway.py
index 0c738354fd4..e6d1af01dfc 100644
--- a/aws_lambda_powertools/event_handler/api_gateway.py
+++ b/aws_lambda_powertools/event_handler/api_gateway.py
@@ -656,7 +656,10 @@ def _lookup_exception_handler(self, exp_type: Type) -> Optional[Callable]:
     def _call_exception_handler(self, exp: Exception, route: Route) -> Optional[ResponseBuilder]:
         handler = self._lookup_exception_handler(type(exp))
         if handler:
-            return ResponseBuilder(handler(exp), route)
+            try:
+                return ResponseBuilder(handler(exp), route)
+            except ServiceError as service_error:
+                exp = service_error
 
         if isinstance(exp, ServiceError):
             return ResponseBuilder(
diff --git a/tests/functional/event_handler/test_api_gateway.py b/tests/functional/event_handler/test_api_gateway.py
index 3738cd11456..1ca28f869cf 100644
--- a/tests/functional/event_handler/test_api_gateway.py
+++ b/tests/functional/event_handler/test_api_gateway.py
@@ -1217,6 +1217,29 @@ def handle_not_found(_) -> Response:
     assert result["statusCode"] == 404
 
 
+def test_exception_handler_raises_service_error(json_dump):
+    # GIVEN an exception handler raises a ServiceError (BadRequestError)
+    app = ApiGatewayResolver()
+
+    @app.exception_handler(ValueError)
+    def client_error(ex: ValueError):
+        raise BadRequestError("Bad request")
+
+    @app.get("/my/path")
+    def get_lambda() -> Response:
+        raise ValueError("foo")
+
+    # WHEN calling the event handler
+    # AND a ValueError is raised
+    result = app(LOAD_GW_EVENT, {})
+
+    # THEN call the exception_handler
+    assert result["statusCode"] == 400
+    assert result["headers"]["Content-Type"] == content_types.APPLICATION_JSON
+    expected = {"statusCode": 400, "message": "Bad request"}
+    assert result["body"] == json_dump(expected)
+
+
 def test_event_source_compatibility():
     # GIVEN
     app = APIGatewayHttpResolver()