diff --git a/core/commands/keystore.go b/core/commands/keystore.go
index 0ffd14189..6ce1b5a0d 100644
--- a/core/commands/keystore.go
+++ b/core/commands/keystore.go
@@ -458,7 +458,7 @@ var keyListCmd = &cmds.Command{
 	Run: func(req *cmds.Request, res cmds.ResponseEmitter, env cmds.Environment) error {
 		keyEnc, err := ke.KeyEncoderFromString(req.Options[ke.OptionIPNSBase.Name()].(string))
 		if err != nil {
-			return err
+			return fmt.Errorf("cannot get key encoder: %w", err)
 		}
 
 		api, err := cmdenv.GetApi(env, req)
@@ -468,7 +468,7 @@ var keyListCmd = &cmds.Command{
 
 		keys, err := api.Key().List(req.Context)
 		if err != nil {
-			return err
+			return fmt.Errorf("listing keys failed: %w", err)
 		}
 
 		list := make([]KeyOutput, 0, len(keys))
diff --git a/core/coreapi/key.go b/core/coreapi/key.go
index 784045d26..e779c773f 100644
--- a/core/coreapi/key.go
+++ b/core/coreapi/key.go
@@ -29,7 +29,7 @@ type key struct {
 func newKey(name string, pid peer.ID) (*key, error) {
 	p, err := path.NewPath("/ipns/" + ipns.NameFromPeer(pid).String())
 	if err != nil {
-		return nil, err
+		return nil, fmt.Errorf("cannot create new key: %w", err)
 	}
 	return &key{
 		name:   name,
@@ -121,34 +121,37 @@ func (api *KeyAPI) List(ctx context.Context) ([]coreiface.Key, error) {
 
 	keys, err := api.repo.Keystore().List()
 	if err != nil {
-		return nil, err
+		return nil, fmt.Errorf("cannot list keys in keystore: %w", err)
 	}
 
 	sort.Strings(keys)
 
-	out := make([]coreiface.Key, len(keys)+1)
+	out := make([]coreiface.Key, 1, len(keys)+1)
 	out[0], err = newKey("self", api.identity)
 	if err != nil {
 		return nil, err
 	}
 
-	for n, k := range keys {
+	for _, k := range keys {
 		privKey, err := api.repo.Keystore().Get(k)
 		if err != nil {
-			return nil, err
+			log.Errorf("cannot get key from keystore: %s", err)
+			continue
 		}
 
 		pubKey := privKey.GetPublic()
 
 		pid, err := peer.IDFromPublicKey(pubKey)
 		if err != nil {
-			return nil, err
+			log.Errorf("cannot decode public key: %s", err)
+			continue
 		}
 
-		out[n+1], err = newKey(k, pid)
+		k, err := newKey(k, pid)
 		if err != nil {
 			return nil, err
 		}
+		out = append(out, k)
 	}
 	return out, nil
 }
diff --git a/docs/changelogs/v0.40.md b/docs/changelogs/v0.40.md
index f8284d46c..19f785de8 100644
--- a/docs/changelogs/v0.40.md
+++ b/docs/changelogs/v0.40.md
@@ -12,6 +12,7 @@ This release was brought to you by the [Shipyard](https://ipshipyard.com/) team.
 - [🔦 Highlights](#-highlights)
   - [Routing V1 HTTP API now exposed by default](#routing-v1-http-api-now-exposed-by-default)
   - [Track total size when adding pins](#track-total-size-when-adding-pins)
+  - [Skip bad keys when listing](#skip_bad_keys_when_listing)
   - [📦️ Dependency updates](#-dependency-updates)
 - [📝 Changelog](#-changelog)
 - [👨‍👩‍👧‍👦 Contributors](#-contributors)
@@ -33,6 +34,10 @@ Example output:
 Fetched/Processed 336 nodes (83 MB)
 ```
 
+#### Skip bad keys when listing
+
+Change the `ipfs key list` behavior to log an error and continue listing keys when a key cannot be read from the keystore or decoded.
+
 #### 📦️ Dependency updates
 
 - update `go-libp2p` to [v0.46.0](https://github.com/libp2p/go-libp2p/releases/tag/v0.46.0)