diff --git a/CHANGELOG.md b/CHANGELOG.md
index 0a3f291221..85eddac7ac 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,6 +2,8 @@
 
 # UNRELEASED
 
+### chore: improve error message when trying to use the local replica when it is not running
+
 ### Frontend canister
 
 Allow setting permissions lists in init arguments just like in upgrade arguments.
diff --git a/e2e/tests-dfx/error_context.bash b/e2e/tests-dfx/error_context.bash
index 622116ae47..a09aaf365d 100644
--- a/e2e/tests-dfx/error_context.bash
+++ b/e2e/tests-dfx/error_context.bash
@@ -211,3 +211,13 @@ teardown() {
   assert_contains "it did not contain a function that dfx was looking for"
   assert_contains "dfx identity set-wallet <PRINCIPAL> --identity <IDENTITY>"
 }
+
+@test "Local replica not running has nice error messages" {
+  dfx_new
+  assert_command_fail dfx ping local
+  assert_contains "You are trying to connect to the local replica but dfx cannot connect to it."
+  assert_command_fail dfx deploy
+  assert_contains "You are trying to connect to the local replica but dfx cannot connect to it."
+  assert_command_fail dfx canister call um5iw-rqaaa-aaaaq-qaaba-cai some_method
+  assert_contains "You are trying to connect to the local replica but dfx cannot connect to it."
+}
diff --git a/src/dfx/src/lib/diagnosis.rs b/src/dfx/src/lib/diagnosis.rs
index eb121f14ab..1eaa1b6f2c 100644
--- a/src/dfx/src/lib/diagnosis.rs
+++ b/src/dfx/src/lib/diagnosis.rs
@@ -1,5 +1,6 @@
 use crate::lib::error_code;
 use anyhow::Error as AnyhowError;
+use dfx_core::error::root_key::FetchRootKeyError;
 use ic_agent::agent::{RejectCode, RejectResponse};
 use ic_agent::AgentError;
 use ic_asset::error::{GatherAssetDescriptorsError, SyncError, UploadContentError};
@@ -55,6 +56,10 @@ pub fn diagnose(err: &AnyhowError) -> Diagnosis {
         }
     }
 
+    if local_replica_not_running(err) {
+        return diagnose_local_replica_not_running();
+    }
+
     if let Some(sync_error) = err.downcast_ref::<SyncError>() {
         if duplicate_asset_key_dist_and_src(sync_error) {
             return diagnose_duplicate_asset_key_dist_and_src();
@@ -64,6 +69,32 @@ pub fn diagnose(err: &AnyhowError) -> Diagnosis {
     NULL_DIAGNOSIS
 }
 
+fn local_replica_not_running(err: &AnyhowError) -> bool {
+    let maybe_agent_error = {
+        if let Some(FetchRootKeyError::AgentError(agent_error)) =
+            err.downcast_ref::<FetchRootKeyError>()
+        {
+            Some(agent_error)
+        } else {
+            err.downcast_ref::<AgentError>()
+        }
+    };
+    if let Some(AgentError::TransportError(transport_error)) = maybe_agent_error {
+        transport_error.is_connect()
+            && transport_error
+                .url()
+                .and_then(|url| url.host())
+                .map(|host| match host {
+                    url::Host::Domain(domain) => domain == "localhost",
+                    url::Host::Ipv4(ipv4_addr) => ipv4_addr.is_loopback(),
+                    url::Host::Ipv6(ipv6_addr) => ipv6_addr.is_loopback(),
+                })
+                .unwrap_or(false)
+    } else {
+        false
+    }
+}
+
 fn not_a_controller(err: &AgentError) -> bool {
     // Newer replicas include the error code in the reject response.
     if matches!(
@@ -119,6 +150,17 @@ The most common way this error is solved is by running 'dfx canister update-sett
     )
 }
 
+fn diagnose_local_replica_not_running() -> Diagnosis {
+    let error_explanation =
+        "You are trying to connect to the local replica but dfx cannot connect to it.";
+    let action_suggestion =
+        "Target a different network or run 'dfx start' to start the local replica.";
+    (
+        Some(error_explanation.to_string()),
+        Some(action_suggestion.to_string()),
+    )
+}
+
 fn subnet_not_authorized() -> Diagnosis {
     let action_suggestion = "If you are connecting to a node directly instead of a boundary node, try using --provisional-create-canister-effective-canister-id with a canister id in the subnet's canister range. First non-root subnet: 5v3p4-iyaaa-aaaaa-qaaaa-cai, second non-root subnet: jrlun-jiaaa-aaaab-aaaaa-cai";
     (None, Some(action_suggestion.to_string()))