diff --git a/repos/base/include/trace_session/client.h b/repos/base/include/trace_session/client.h
index b8882e7003..9a1a95ec0d 100644
--- a/repos/base/include/trace_session/client.h
+++ b/repos/base/include/trace_session/client.h
@@ -61,6 +61,8 @@ struct Genode::Trace::Session_client : Genode::Rpc_client<Genode::Trace::Session
 
 		/**
 		 * Retrieve subject directory
+		 *
+		 * \throw Out_of_metadata
 		 */
 		size_t subjects(Subject_id *dst, size_t dst_len)
 		{
diff --git a/repos/base/include/trace_session/trace_session.h b/repos/base/include/trace_session/trace_session.h
index 42a4550c6f..a693c3c5f8 100644
--- a/repos/base/include/trace_session/trace_session.h
+++ b/repos/base/include/trace_session/trace_session.h
@@ -131,7 +131,8 @@ struct Genode::Trace::Session : Genode::Session
 	GENODE_RPC_THROW(Rpc_resume, void, resume,
 	                 GENODE_TYPE_LIST(Nonexistent_subject, Source_is_dead),
 	                 Subject_id);
-	GENODE_RPC(Rpc_subjects, size_t, subjects);
+	GENODE_RPC_THROW(Rpc_subjects, size_t, subjects,
+	                 GENODE_TYPE_LIST(Out_of_metadata));
 	GENODE_RPC_THROW(Rpc_subject_info, Subject_info, subject_info,
 	                 GENODE_TYPE_LIST(Nonexistent_subject), Subject_id);
 	GENODE_RPC_THROW(Rpc_buffer, Dataspace_capability, buffer,
diff --git a/repos/base/src/core/trace_session_component.cc b/repos/base/src/core/trace_session_component.cc
index 527980122c..e0e25b7fbb 100644
--- a/repos/base/src/core/trace_session_component.cc
+++ b/repos/base/src/core/trace_session_component.cc
@@ -29,7 +29,14 @@ Dataspace_capability Session_component::dataspace()
 
 size_t Session_component::subjects()
 {
-	_subjects.import_new_sources(_sources);
+	try {
+		_subjects.import_new_sources(_sources);
+
+	} catch (Allocator::Out_of_memory) {
+
+		PWRN("TRACE session ran out of memory");
+		throw Out_of_metadata();
+	}
 
 	return _subjects.subjects((Subject_id *)_argument_buffer.base,
 	                          _argument_buffer.size/sizeof(Subject_id));
@@ -155,7 +162,7 @@ Session_component::Session_component(Allocator &md_alloc, size_t ram_quota,
 	_subjects(_subjects_slab, _ram, _sources),
 	_argument_buffer(_ram, arg_buffer_size)
 {
-	_md_alloc.withdraw(arg_buffer_size);
+	_md_alloc.withdraw(_argument_buffer.size);
 }
 
 
diff --git a/repos/os/src/test/trace/main.cc b/repos/os/src/test/trace/main.cc
index 304f482491..975003c96d 100644
--- a/repos/os/src/test/trace/main.cc
+++ b/repos/os/src/test/trace/main.cc
@@ -16,6 +16,7 @@
 #include <trace_session/connection.h>
 #include <timer_session/connection.h>
 #include <os/config.h>
+#include <base/sleep.h>
 
 static char const *state_name(Genode::Trace::Subject_info::State state)
 {
@@ -117,12 +118,47 @@ class Trace_buffer_monitor
 };
 
 
+static void test_out_of_metadata()
+{
+	printf("test Out_of_metadata exception of Trace::Session::subjects call\n");
+
+	/*
+	 * The call of 'subjects' will prompt core's TRACE service to import those
+	 * threads as trace subjects into the TRACE session. This step should fail
+	 * because we dimensioned the TRACE session with a very low amount of
+	 * session quota. The allocation failure is propagated to the TRACE client
+	 * by the 'Out_of_metadata' exception. The test validates this
+	 * error-handling procedure.
+	 */
+
+	enum { MAX_SUBJECT_IDS = 16 };
+	Genode::Trace::Subject_id subject_ids[MAX_SUBJECT_IDS];
+
+	Genode::Trace::Connection trace(sizeof(subject_ids) + 4096, sizeof(subject_ids), 0);
+
+	try {
+		trace.subjects(subject_ids, MAX_SUBJECT_IDS);
+
+		/* we should never arrive here */
+		struct Unexpectedly_got_no_exception{};
+		throw  Unexpectedly_got_no_exception();
+
+	} catch (Trace::Out_of_metadata) {
+		printf("got Trace::Out_of_metadata exception as expected\n");
+	}
+
+	printf("passed Out_of_metadata test\n");
+}
+
+
 int main(int argc, char **argv)
 {
 	using namespace Genode;
 
 	printf("--- test-trace started ---\n");
 
+	test_out_of_metadata();
+
 	static Genode::Trace::Connection trace(1024*1024, 64*1024, 0);
 
 	static Timer::Connection timer;