diff --git a/docs/en_US/release_notes_9_16.rst b/docs/en_US/release_notes_9_16.rst
index 4f0740cdff0..d993120cef6 100644
--- a/docs/en_US/release_notes_9_16.rst
+++ b/docs/en_US/release_notes_9_16.rst
@@ -54,3 +54,4 @@ Bug fixes
   | `Issue #9984 <https://github.com/pgadmin-org/pgadmin4/issues/9984>`_ -  Fix the Docker entrypoint mishandling a quoted PGADMIN_CONFIG_CONFIG_DATABASE_URI, which caused a SQLAlchemy parse error and silently skipped PGADMIN_DEFAULT_EMAIL/PASSWORD setup.
   | `Issue #9987 <https://github.com/pgadmin-org/pgadmin4/issues/9987>`_ -  Fix "AttributeError: 'PgAdmin' object has no attribute 'login_manager'" crash when running setup.py user-management commands (add-user, update-user) from the CLI.
   | `Issue #9988 <https://github.com/pgadmin-org/pgadmin4/issues/9988>`_ -  Provide an actionable error when 'openid' is in OAUTH2_SCOPE but OAUTH2_SERVER_METADATA_URL is not set, instead of a cryptic Authlib failure.
+  | `Issue #10027 <https://github.com/pgadmin-org/pgadmin4/issues/10027>`_ -  Fix the spurious "Crypt key is missing" error and logged traceback in the Query Tool new-connection endpoints after a backend restart, by surfacing it as the standard CRYPTKEY_MISSING response so the client recovers transparently.
diff --git a/web/pgadmin/tools/sqleditor/__init__.py b/web/pgadmin/tools/sqleditor/__init__.py
index c9e26df2f00..e5e583a6d4b 100644
--- a/web/pgadmin/tools/sqleditor/__init__.py
+++ b/web/pgadmin/tools/sqleditor/__init__.py
@@ -2379,6 +2379,8 @@ def _check_server_connection_status(sgid, sid=None):
             }
         )
 
+    except (ConnectionLost, SSHTunnelConnectionLost, CryptKeyMissing):
+        raise
     except Exception as e:
         current_app.logger.exception(e)
         return make_json_response(
@@ -2445,6 +2447,8 @@ def get_new_connection_data(sgid=None, sid=None):
             }
         )
 
+    except (ConnectionLost, SSHTunnelConnectionLost, CryptKeyMissing):
+        raise
     except Exception as e:
         current_app.logger.exception(e)
         return make_json_response(
@@ -2519,6 +2523,8 @@ def get_new_connection_database(sgid, sid=None):
                     }
                 }
             )
+    except (ConnectionLost, SSHTunnelConnectionLost, CryptKeyMissing):
+        raise
     except Exception as e:
         current_app.logger.exception(e)
         return make_json_response(
@@ -2585,6 +2591,8 @@ def get_new_connection_user(sgid, sid=None):
                     }
                 }
             )
+    except (ConnectionLost, SSHTunnelConnectionLost, CryptKeyMissing):
+        raise
     except Exception as e:
         current_app.logger.exception(e)
         return make_json_response(
@@ -2649,6 +2657,8 @@ def get_new_connection_role(sgid, sid=None):
                     }
                 }
             )
+    except (ConnectionLost, SSHTunnelConnectionLost, CryptKeyMissing):
+        raise
     except Exception as e:
         current_app.logger.exception(e)
         return make_json_response(
diff --git a/web/pgadmin/tools/sqleditor/tests/test_new_connection_dialog.py b/web/pgadmin/tools/sqleditor/tests/test_new_connection_dialog.py
index 44b16fc3e49..41300990a33 100644
--- a/web/pgadmin/tools/sqleditor/tests/test_new_connection_dialog.py
+++ b/web/pgadmin/tools/sqleditor/tests/test_new_connection_dialog.py
@@ -6,11 +6,11 @@
 # This software is released under the PostgreSQL Licence
 #
 ##########################################################################
-import json
+from unittest.mock import patch
 from pgadmin.utils.route import BaseTestGenerator
 from regression import parent_node_dict
 from regression.test_setup import config_data
-from regression.python_test_utils import test_utils as utils
+from pgadmin.utils.exception import CryptKeyMissing
 
 
 class TestNewConnectionDialog(BaseTestGenerator):
@@ -19,15 +19,19 @@ class TestNewConnectionDialog(BaseTestGenerator):
         ('New connection dialog',
          dict(
              url="/sqleditor/new_connection_dialog/",
-             is_positive_test=True,
-             mocking_required=False,
-             is_connect_server=False,
-             test_data={},
-             mock_data={},
+             crypt_key_missing=False,
              expected_data={
                  "status_code": 200
              }
          )),
+        ('New connection dialog when the crypt key is missing',
+         dict(
+             url="/sqleditor/new_connection_dialog/",
+             crypt_key_missing=True,
+             expected_data={
+                 "status_code": 503
+             }
+         )),
     ]
 
     def setUp(self):
@@ -43,8 +47,20 @@ def new_connection(self):
         return response
 
     def runTest(self):
-        if self.is_positive_test:
+        if self.crypt_key_missing:
+            # When the crypt key is missing (e.g. the backend was restarted),
+            # the endpoint must surface CryptKeyMissing as a 503
+            # CRYPTKEY_MISSING response so the client can transparently
+            # recover, rather than swallowing it into a generic error and
+            # logging a traceback. See issue #10027.
+            with patch('pgadmin.utils.driver.psycopg3.server_manager.'
+                       'ServerManager.connection',
+                       side_effect=CryptKeyMissing()):
+                response = self.new_connection()
+            self.assertEqual(response.status_code,
+                             self.expected_data['status_code'])
+            self.assertIn('CRYPTKEY_MISSING', response.data.decode('utf-8'))
+        else:
             response = self.new_connection()
-            actual_response_code = response.status_code
-            expected_response_code = self.expected_data['status_code']
-            self.assertEqual(actual_response_code, expected_response_code)
+            self.assertEqual(response.status_code,
+                             self.expected_data['status_code'])