diff --git a/components/esp_modem/idf_component.yml b/components/esp_modem/idf_component.yml
index bce3f7785..bdff44e37 100644
--- a/components/esp_modem/idf_component.yml
+++ b/components/esp_modem/idf_component.yml
@@ -1,4 +1,4 @@
-version: "0.1.22"
+version: "0.1.23"
 description: esp modem
 url: https://github.com/espressif/esp-protocols/tree/master/components/esp_modem
 dependencies:
diff --git a/components/esp_modem/include/esp_modem_c_api_types.h b/components/esp_modem/include/esp_modem_c_api_types.h
index 94d8f9b6c..d1989330a 100644
--- a/components/esp_modem/include/esp_modem_c_api_types.h
+++ b/components/esp_modem/include/esp_modem_c_api_types.h
@@ -60,6 +60,23 @@ typedef enum esp_modem_dce_device
     ESP_MODEM_DCE_SIM800,
 } esp_modem_dce_device_t;
 
+/**
+ * @brief Terminal errors
+ */
+typedef enum esp_modem_terminal_error
+{
+    ESP_MODEM_TERMINAL_BUFFER_OVERFLOW,
+    ESP_MODEM_TERMINAL_CHECKSUM_ERROR,
+    ESP_MODEM_TERMINAL_UNEXPECTED_CONTROL_FLOW,
+    ESP_MODEM_TERMINAL_DEVICE_GONE,
+    ESP_MODEM_TERMINAL_UNKNOWN_ERROR,
+} esp_modem_terminal_error_t;
+
+/**
+ * @brief Terminal error callback
+ */
+typedef void (*esp_modem_terminal_error_cbt)(esp_modem_terminal_error_t);
+
 /**
  * @brief Create a generic DCE handle for new modem API
  *
@@ -90,6 +107,15 @@ esp_modem_dce_t *esp_modem_new_dev(esp_modem_dce_device_t module, const esp_mode
  */
 void esp_modem_destroy(esp_modem_dce_t * dce);
 
+/**
+ * @brief Set DTE's error callback
+ * 
+ * @param dce Modem DCE handle
+ * @param[in] err_cb Error callback
+ * @return ESP_OK on success, ESP_FAIL on failure
+ */
+esp_err_t esp_modem_set_error_cb(esp_modem_dce_t * dce, esp_modem_terminal_error_cbt err_cb);
+
 /**
  * @brief Set operation mode for this DCE
  * @param dce Modem DCE handle
diff --git a/components/esp_modem/include/esp_private/c_api_wrapper.hpp b/components/esp_modem/include/esp_private/c_api_wrapper.hpp
new file mode 100644
index 000000000..7cf903c6b
--- /dev/null
+++ b/components/esp_modem/include/esp_private/c_api_wrapper.hpp
@@ -0,0 +1,87 @@
+// Copyright 2022 Espressif Systems (Shanghai) PTE LTD
+//
+// Licensed under the Apache License, Version 2.0 (the "License");
+// you may not use this file except in compliance with the License.
+// You may obtain a copy of the License at
+
+//     http://www.apache.org/licenses/LICENSE-2.0
+//
+// Unless required by applicable law or agreed to in writing, software
+// distributed under the License is distributed on an "AS IS" BASIS,
+// WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+// See the License for the specific language governing permissions and
+// limitations under the License.
+
+/**
+ * @file c_api_wrapper.hpp
+ * @brief Collection of C API wrappers
+ * 
+ * This file is located in include/esp_private because it is not intended for users,
+ * but rather for esp_modem C extension developers.
+ * 
+ * The C extension API must provide a 'factory function' that returns initialized pointer to esp_modem_dce_wrap.
+ * Helper functions provided below, can be used for conversion between C++ enum classes and standard C enums.
+ */
+
+#pragma once
+
+#include "cxx_include/esp_modem_dce_factory.hpp"
+#include "esp_modem_c_api_types.h"
+
+using namespace esp_modem;
+
+struct esp_modem_dce_wrap { // need to mimic the polymorphic dispatch as CPP uses templated dispatch
+    enum class modem_wrap_dte_type { UART, VFS, USB } dte_type;
+    dce_factory::ModemType modem_type;
+    DCE *dce;
+    std::shared_ptr<DTE> dte;
+    esp_modem_dce_wrap() : dce(nullptr), dte(nullptr) {}
+};
+
+inline dce_factory::ModemType convert_modem_enum(esp_modem_dce_device_t module)
+{
+    switch (module) {
+    case ESP_MODEM_DCE_SIM7600:
+        return esp_modem::dce_factory::ModemType::SIM7600;
+    case ESP_MODEM_DCE_SIM7070:
+        return esp_modem::dce_factory::ModemType::SIM7070;
+    case ESP_MODEM_DCE_SIM7000:
+        return esp_modem::dce_factory::ModemType::SIM7000;
+    case ESP_MODEM_DCE_BG96:
+        return esp_modem::dce_factory::ModemType::BG96;
+    case ESP_MODEM_DCE_SIM800:
+        return esp_modem::dce_factory::ModemType::SIM800;
+    default:
+    case ESP_MODEM_DCE_GENETIC:
+        return esp_modem::dce_factory::ModemType::GenericModule;
+    }
+}
+
+inline esp_modem_terminal_error_t convert_terminal_error_enum(terminal_error err)
+{
+    switch (err) {
+    case terminal_error::BUFFER_OVERFLOW:
+        return ESP_MODEM_TERMINAL_BUFFER_OVERFLOW;
+    case terminal_error::CHECKSUM_ERROR:
+        return ESP_MODEM_TERMINAL_CHECKSUM_ERROR;
+    case terminal_error::UNEXPECTED_CONTROL_FLOW:
+        return ESP_MODEM_TERMINAL_UNEXPECTED_CONTROL_FLOW;
+    case terminal_error::DEVICE_GONE:
+        return ESP_MODEM_TERMINAL_DEVICE_GONE;
+    default:
+        return ESP_MODEM_TERMINAL_UNKNOWN_ERROR;
+    }
+}
+
+inline esp_err_t command_response_to_esp_err(command_result res)
+{
+    switch (res) {
+    case command_result::OK:
+        return ESP_OK;
+    case command_result::FAIL:
+        return ESP_FAIL;
+    case command_result::TIMEOUT:
+        return ESP_ERR_TIMEOUT;
+    }
+    return ESP_ERR_INVALID_ARG;
+}
diff --git a/components/esp_modem/src/esp_modem_c_api.cpp b/components/esp_modem/src/esp_modem_c_api.cpp
index 27473fb5d..29a4d1b51 100644
--- a/components/esp_modem/src/esp_modem_c_api.cpp
+++ b/components/esp_modem/src/esp_modem_c_api.cpp
@@ -21,6 +21,7 @@
 #include "esp_modem_c_api_types.h"
 #include "esp_modem_config.h"
 #include "exception_stub.hpp"
+#include "esp_private/c_api_wrapper.hpp"
 #include "cstring"
 
 #ifndef ESP_MODEM_C_API_STR_MAX
@@ -35,44 +36,6 @@ size_t strlcpy(char *dest, const char *src, size_t len);
 // C API definitions
 using namespace esp_modem;
 
-struct esp_modem_dce_wrap { // need to mimic the polymorphic dispatch as CPP uses templated dispatch
-    enum class modem_wrap_dte_type { UART, } dte_type;
-    dce_factory::ModemType modem_type;
-    DCE *dce;
-};
-
-static inline esp_err_t command_response_to_esp_err(command_result res)
-{
-    switch (res) {
-    case command_result::OK:
-        return ESP_OK;
-    case command_result::FAIL:
-        return ESP_FAIL;
-    case command_result::TIMEOUT:
-        return ESP_ERR_TIMEOUT;
-    }
-    return ESP_ERR_INVALID_ARG;
-}
-
-static inline dce_factory::ModemType convert_modem_enum(esp_modem_dce_device_t module)
-{
-    switch (module) {
-    case ESP_MODEM_DCE_SIM7600:
-        return esp_modem::dce_factory::ModemType::SIM7600;
-    case ESP_MODEM_DCE_SIM7070:
-        return esp_modem::dce_factory::ModemType::SIM7070;
-    case ESP_MODEM_DCE_SIM7000:
-        return esp_modem::dce_factory::ModemType::SIM7000;
-    case ESP_MODEM_DCE_BG96:
-        return esp_modem::dce_factory::ModemType::BG96;
-    case ESP_MODEM_DCE_SIM800:
-        return esp_modem::dce_factory::ModemType::SIM800;
-    default:
-    case ESP_MODEM_DCE_GENETIC:
-        return esp_modem::dce_factory::ModemType::GenericModule;
-    }
-}
-
 extern "C" esp_modem_dce_t *esp_modem_new_dev(esp_modem_dce_device_t module, const esp_modem_dte_config_t *dte_config, const esp_modem_dce_config_t *dce_config, esp_netif_t *netif)
 {
     auto dce_wrap = new (std::nothrow) esp_modem_dce_wrap;
@@ -84,6 +47,7 @@ extern "C" esp_modem_dce_t *esp_modem_new_dev(esp_modem_dce_device_t module, con
         delete dce_wrap;
         return nullptr;
     }
+    dce_wrap->dte = dte;
     dce_factory::Factory f(convert_modem_enum(module));
     dce_wrap->dce = f.build(dce_config, std::move(dte), netif);
     if (dce_wrap->dce == nullptr) {
@@ -108,6 +72,22 @@ extern "C" void esp_modem_destroy(esp_modem_dce_t *dce_wrap)
     }
 }
 
+extern "C" esp_err_t esp_modem_set_error_cb(esp_modem_dce_t * dce_wrap, esp_modem_terminal_error_cbt err_cb)
+{
+    if (dce_wrap == nullptr || dce_wrap->dce == nullptr || dce_wrap->dte == nullptr) {
+        return ESP_ERR_INVALID_ARG;
+    }
+
+    if (err_cb) {
+        dce_wrap->dte->set_error_cb([err_cb](terminal_error err) {
+            err_cb(convert_terminal_error_enum(err));
+        });
+    } else {
+        dce_wrap->dte->set_error_cb(nullptr);
+    }
+    return ESP_OK;
+}
+
 extern "C" esp_err_t esp_modem_sync(esp_modem_dce_t *dce_wrap)
 {
     if (dce_wrap == nullptr || dce_wrap->dce == nullptr) {