diff --git a/hera/preprocessor.py b/hera/preprocessor.py
index 51dfd6a..609a6f0 100644
--- a/hera/preprocessor.py
+++ b/hera/preprocessor.py
@@ -6,7 +6,7 @@
 from lark import Token
 
 from .parser import Op
-from .utils import copy_token, is_symbol, to_u16
+from .utils import copy_token, HERAError, is_symbol, to_u16
 
 
 # Arbitrary value copied over from HERA-C.
@@ -36,7 +36,14 @@ def substitute_label(op, labels):
     if op.name == "SETLO" and is_symbol(op.args[1]):
         d, v = op.args
         name = copy_token("SETLO", op.name)
-        return Op(name, [d, labels[v] & 0xFF])
+        try:
+            label = labels[v]
+        except KeyError:
+            raise HERAError(
+                "undefined symbol `{}`".format(v), line=op.name.line, column=v.column
+            ) from None
+        else:
+            return Op(name, [d, label & 0xFF])
     elif op.name == "SETHI" and is_symbol(op.args[1]):
         d, v = op.args
         name = copy_token("SETHI", op.name)
diff --git a/test/test_preprocessor.py b/test/test_preprocessor.py
index bc4edfd..8ab66b3 100644
--- a/test/test_preprocessor.py
+++ b/test/test_preprocessor.py
@@ -1,3 +1,5 @@
+import pytest
+
 from lark import Token
 
 from hera.parser import Op
@@ -5,16 +7,48 @@
     convert,
     convert_set,
     get_labels,
-    preprocess,
     HERA_DATA_START,
+    preprocess,
+    substitute_label,
 )
-from hera.utils import IntToken
+from hera.utils import HERAError, IntToken
 
 
 def R(s):
     return Token("REGISTER", s)
 
 
+def SYM(s):
+    return Token("SYMBOL", s)
+
+
+def test_substitute_label_with_SETLO():
+    labels = {"N": 10}
+    assert substitute_label(Op(SYM("SETLO"), [R("R1"), SYM("N")]), labels) == Op(
+        "SETLO", ["R1", 10]
+    )
+
+
+def test_substitute_label_with_SETHI():
+    labels = {"N": 10}
+    # 0 is substituted and not 10 because only the high bits are taken.
+    assert substitute_label(Op(SYM("SETHI"), [R("R1"), SYM("N")]), labels) == Op(
+        "SETHI", ["R1", 0]
+    )
+
+
+def test_substitute_label_with_other_op():
+    labels = {"N": 10}
+    assert substitute_label(Op(SYM("INC"), [R("R1"), SYM("N")]), labels) == Op(
+        "INC", ["R1", "N"]
+    )
+
+
+def test_substitute_label_with_undefined_label():
+    with pytest.raises(HERAError):
+        substitute_label(Op(SYM("SETLO"), [R("R1"), SYM("N")]), {})
+
+
 def test_convert_set_with_small_positive():
     assert convert_set("R5", 18) == [Op("SETLO", ["R5", 18])]