diff --git a/Lib/test/test_exceptions.py b/Lib/test/test_exceptions.py
index 339801e..f50a246 100644
--- a/Lib/test/test_exceptions.py
+++ b/Lib/test/test_exceptions.py
@@ -953,6 +953,148 @@ def __del__(self):
             pass
         self.assertEqual(e, (None, None, None))
 
+    def test_raise_does_not_create_context_chain_cycle(self):
+        class A(Exception):
+            pass
+        class B(Exception):
+            pass
+        class C(Exception):
+            pass
+
+        # Create a context chain:
+        # C -> B -> A
+        # Then raise A in context of C.
+        try:
+            try:
+                raise A
+            except A as a_:
+                a = a_
+                try:
+                    raise B
+                except B as b_:
+                    b = b_
+                    try:
+                        raise C
+                    except C as c_:
+                        c = c_
+                        self.assertIsInstance(a, A)
+                        self.assertIsInstance(b, B)
+                        self.assertIsInstance(c, C)
+                        self.assertIsNone(a.__context__)
+                        self.assertIs(b.__context__, a)
+                        self.assertIs(c.__context__, b)
+                        raise a
+        except A as e:
+            exc = e
+
+        # Expect A -> C -> B, without cycle
+        self.assertIs(exc, a)
+        self.assertIs(a.__context__, c)
+        self.assertIs(c.__context__, b)
+        self.assertIsNone(b.__context__)
+
+    def test_no_hang_on_context_chain_cycle1(self):
+        # See issue 25782. Cycle in context chain.
+
+        def cycle():
+            try:
+                raise ValueError(1)
+            except ValueError as ex:
+                ex.__context__ = ex
+                raise TypeError(2)
+
+        try:
+            cycle()
+        except Exception as e:
+            exc = e
+
+        self.assertIsInstance(exc, TypeError)
+        self.assertIsInstance(exc.__context__, ValueError)
+        self.assertIs(exc.__context__.__context__, exc.__context__)
+
+    def test_no_hang_on_context_chain_cycle2(self):
+        # See issue 25782. Cycle at head of context chain.
+
+        class A(Exception):
+            pass
+        class B(Exception):
+            pass
+        class C(Exception):
+            pass
+
+        # Context cycle:
+        # +-----------+
+        # V           |
+        # C --> B --> A
+        with self.assertRaises(C) as cm:
+            try:
+                raise A()
+            except A as _a:
+                a = _a
+                try:
+                    raise B()
+                except B as _b:
+                    b = _b
+                    try:
+                        raise C()
+                    except C as _c:
+                        c = _c
+                        a.__context__ = c
+                        raise c
+
+        self.assertIs(cm.exception, c)
+        # Verify the expected context chain cycle
+        self.assertIs(c.__context__, b)
+        self.assertIs(b.__context__, a)
+        self.assertIs(a.__context__, c)
+
+    def test_no_hang_on_context_chain_cycle3(self):
+        # See issue 25782. Longer context chain with cycle.
+
+        class A(Exception):
+            pass
+        class B(Exception):
+            pass
+        class C(Exception):
+            pass
+        class D(Exception):
+            pass
+        class E(Exception):
+            pass
+
+        # Context cycle:
+        #             +-----------+
+        #             V           |
+        # E --> D --> C --> B --> A
+        with self.assertRaises(E) as cm:
+            try:
+                raise A()
+            except A as _a:
+                a = _a
+                try:
+                    raise B()
+                except B as _b:
+                    b = _b
+                    try:
+                        raise C()
+                    except C as _c:
+                        c = _c
+                        a.__context__ = c
+                        try:
+                            raise D()
+                        except D as _d:
+                            d = _d
+                            e = E()
+                            raise e
+
+        self.assertIs(cm.exception, e)
+        # Verify the expected context chain cycle
+        self.assertIs(e.__context__, d)
+        self.assertIs(d.__context__, c)
+        self.assertIs(c.__context__, b)
+        self.assertIs(b.__context__, a)
+        self.assertIs(a.__context__, c)
+
     def test_unicode_change_attributes(self):
         # See issue 7309. This was a crasher.
 
diff --git a/Misc/NEWS.d/next/Core and Builtins/2021-08-07-21-39-19.bpo-25782.B22lMx.rst b/Misc/NEWS.d/next/Core and Builtins/2021-08-07-21-39-19.bpo-25782.B22lMx.rst
new file mode 100644
index 0000000..1c52059
--- /dev/null
+++ b/Misc/NEWS.d/next/Core and Builtins/2021-08-07-21-39-19.bpo-25782.B22lMx.rst
@@ -0,0 +1 @@
+Fix bug where ``PyErr_SetObject`` hangs when the current exception has a cycle in its context chain.
\ No newline at end of file
diff --git a/Python/errors.c b/Python/errors.c
index d4b9db1..9944c3a 100644
--- a/Python/errors.c
+++ b/Python/errors.c
@@ -148,12 +148,16 @@ _PyErr_SetObject(PyThreadState *tstate, PyObject *exception, PyObject *value)
             value = fixed_value;
         }
 
-        /* Avoid reference cycles through the context chain.
+        /* Avoid creating new reference cycles through the
+           context chain, while taking care not to hang on
+           pre-existing ones.
            This is O(chain length) but context chains are
            usually very short. Sensitive readers may try
            to inline the call to PyException_GetContext. */
         if (exc_value != value) {
             PyObject *o = exc_value, *context;
+            PyObject *slow_o = o;  /* Floyd's cycle detection algo */
+            int slow_update_toggle = 0;
             while ((context = PyException_GetContext(o))) {
                 Py_DECREF(context);
                 if (context == value) {
@@ -161,6 +165,16 @@ _PyErr_SetObject(PyThreadState *tstate, PyObject *exception, PyObject *value)
                     break;
                 }
                 o = context;
+                if (o == slow_o) {
+                    /* pre-existing cycle - all exceptions on the
+                       path were visited and checked.  */
+                    break;
+                }
+                if (slow_update_toggle) {
+                    slow_o = PyException_GetContext(slow_o);
+                    Py_DECREF(slow_o);
+                }
+                slow_update_toggle = !slow_update_toggle;
             }
             PyException_SetContext(value, exc_value);
         }