diff --git a/pkg/controller/service/BUILD b/pkg/controller/service/BUILD
index 15b4804a20531..9c6daacb8076f 100644
--- a/pkg/controller/service/BUILD
+++ b/pkg/controller/service/BUILD
@@ -46,10 +46,13 @@ go_test(
         "//pkg/cloudprovider/providers/fake:go_default_library",
         "//pkg/controller:go_default_library",
         "//staging/src/k8s.io/api/core/v1:go_default_library",
+        "//staging/src/k8s.io/apimachinery/pkg/api/errors:go_default_library",
         "//staging/src/k8s.io/apimachinery/pkg/apis/meta/v1:go_default_library",
+        "//staging/src/k8s.io/apimachinery/pkg/runtime:go_default_library",
         "//staging/src/k8s.io/apimachinery/pkg/types:go_default_library",
         "//staging/src/k8s.io/client-go/informers:go_default_library",
         "//staging/src/k8s.io/client-go/kubernetes/fake:go_default_library",
+        "//staging/src/k8s.io/client-go/testing:go_default_library",
         "//staging/src/k8s.io/client-go/tools/record:go_default_library",
     ],
 )
diff --git a/pkg/controller/service/service_controller.go b/pkg/controller/service/service_controller.go
index 21d56029e9282..7681958e2326f 100644
--- a/pkg/controller/service/service_controller.go
+++ b/pkg/controller/service/service_controller.go
@@ -319,6 +319,10 @@ func (s *ServiceController) createLoadBalancerIfNeeded(key string, service *v1.S
 		service.Status.LoadBalancer = *newState
 
 		if err := s.persistUpdate(service); err != nil {
+			// TODO: This logic needs to be revisited. We might want to retry on all the errors, not just conflicts.
+			if errors.IsConflict(err) {
+				return fmt.Errorf("not persisting update to service '%s/%s' that has been changed since we received it: %v", service.Namespace, service.Name, err)
+			}
 			runtime.HandleError(fmt.Errorf("failed to persist service %q updated status to apiserver, even after retries. Giving up: %v", key, err))
 			return nil
 		}
@@ -347,8 +351,7 @@ func (s *ServiceController) persistUpdate(service *v1.Service) error {
 		// TODO: Try to resolve the conflict if the change was unrelated to load
 		// balancer status. For now, just pass it up the stack.
 		if errors.IsConflict(err) {
-			return fmt.Errorf("not persisting update to service '%s/%s' that has been changed since we received it: %v",
-				service.Namespace, service.Name, err)
+			return err
 		}
 		glog.Warningf("Failed to persist updated LoadBalancerStatus to service '%s/%s' after creating its load balancer: %v",
 			service.Namespace, service.Name, err)
diff --git a/pkg/controller/service/service_controller_test.go b/pkg/controller/service/service_controller_test.go
index 962fe62b1b223..bbc4d24aae8c2 100644
--- a/pkg/controller/service/service_controller_test.go
+++ b/pkg/controller/service/service_controller_test.go
@@ -17,15 +17,20 @@ limitations under the License.
 package service
 
 import (
+	"errors"
 	"fmt"
 	"reflect"
+	"strings"
 	"testing"
 
 	"k8s.io/api/core/v1"
+	apierrors "k8s.io/apimachinery/pkg/api/errors"
 	metav1 "k8s.io/apimachinery/pkg/apis/meta/v1"
+	"k8s.io/apimachinery/pkg/runtime"
 	"k8s.io/apimachinery/pkg/types"
 	"k8s.io/client-go/informers"
 	"k8s.io/client-go/kubernetes/fake"
+	core "k8s.io/client-go/testing"
 	"k8s.io/client-go/tools/record"
 	"k8s.io/kubernetes/pkg/api/testapi"
 	fakecloud "k8s.io/kubernetes/pkg/cloudprovider/providers/fake"
@@ -323,7 +328,6 @@ func TestGetNodeConditionPredicate(t *testing.T) {
 // TODO(a-robinson): Add tests for update/sync/delete.
 
 func TestProcessServiceUpdate(t *testing.T) {
-
 	var controller *ServiceController
 
 	//A pair of old and new loadbalancer IP address
@@ -411,6 +415,38 @@ func TestProcessServiceUpdate(t *testing.T) {
 
 }
 
+// TestConflictWhenProcessServiceUpdate tests if processServiceUpdate will
+// retry creating the load balancer if the update operation returns a conflict
+// error.
+func TestConflictWhenProcessServiceUpdate(t *testing.T) {
+	svcName := "conflict-lb"
+	svc := newService(svcName, types.UID("123"), v1.ServiceTypeLoadBalancer)
+	controller, _, client := newController()
+	client.PrependReactor("update", "services", func(action core.Action) (bool, runtime.Object, error) {
+		update := action.(core.UpdateAction)
+		return true, update.GetObject(), apierrors.NewConflict(action.GetResource().GroupResource(), svcName, errors.New("Object changed"))
+	})
+
+	svcCache := controller.cache.getOrCreate(svcName)
+	if err := controller.processServiceUpdate(svcCache, svc, svcName); err == nil {
+		t.Fatalf("controller.processServiceUpdate() = nil, want error")
+	}
+
+	retryMsg := "Error creating load balancer (will retry)"
+	if gotEvent := func() bool {
+		events := controller.eventRecorder.(*record.FakeRecorder).Events
+		for len(events) > 0 {
+			e := <-events
+			if strings.Contains(e, retryMsg) {
+				return true
+			}
+		}
+		return false
+	}(); !gotEvent {
+		t.Errorf("controller.processServiceUpdate() = can't find retry creating lb event, want event contains %q", retryMsg)
+	}
+}
+
 func TestSyncService(t *testing.T) {
 
 	var controller *ServiceController