diff --git a/nova/compute/manager.py b/nova/compute/manager.py
index dbb7226d90c..cdb6b1660f6 100644
--- a/nova/compute/manager.py
+++ b/nova/compute/manager.py
@@ -1992,7 +1992,8 @@ def _build_and_run_instance(self, context, instance, image, injected_files,
                 exception.ImageUnacceptable,
                 exception.InvalidDiskInfo,
                 exception.InvalidDiskFormat,
-                exception.SignatureVerificationError) as e:
+                exception.SignatureVerificationError,
+                exception.VolumeEncryptionNotSupported) as e:
             self._notify_about_instance_usage(context, instance,
                     'create.error', fault=e)
             compute_utils.notify_about_instance_action(
diff --git a/nova/tests/unit/compute/test_compute_mgr.py b/nova/tests/unit/compute/test_compute_mgr.py
index 8c20c0c6e2d..2ea4a129036 100644
--- a/nova/tests/unit/compute/test_compute_mgr.py
+++ b/nova/tests/unit/compute/test_compute_mgr.py
@@ -4060,6 +4060,10 @@ def test_build_and_run_signature_verification_error(self):
         self._test_build_and_run_spawn_exceptions(
             exception.SignatureVerificationError(reason=""))
 
+    def test_build_and_run_volume_encryption_not_supported(self):
+        self._test_build_and_run_spawn_exceptions(
+            exception.VolumeEncryptionNotSupported(reason=""))
+
     def _test_build_and_run_spawn_exceptions(self, exc):
         with test.nested(
                 mock.patch.object(self.compute.driver, 'spawn',