diff --git a/synapse/handlers/federation.py b/synapse/handlers/federation.py
index 46ce3699d..5503d9ae8 100644
--- a/synapse/handlers/federation.py
+++ b/synapse/handlers/federation.py
@@ -900,8 +900,10 @@ class FederationHandler(BaseHandler):
             event.event_id, event.signatures,
         )
 
+        outlier = event.internal_metadata.is_outlier()
+
         context = yield self.state_handler.compute_event_context(
-            event, old_state=state
+            event, old_state=state, outlier=outlier,
         )
 
         if not auth_events:
@@ -912,7 +914,7 @@ class FederationHandler(BaseHandler):
             event.event_id, auth_events,
         )
 
-        is_new_state = not event.internal_metadata.is_outlier()
+        is_new_state = not outlier
 
         # This is a hack to fix some old rooms where the initial join event
         # didn't reference the create event in its auth events.
diff --git a/synapse/state.py b/synapse/state.py
index 9dddb77d5..c1ce46d1b 100644
--- a/synapse/state.py
+++ b/synapse/state.py
@@ -106,7 +106,7 @@ class StateHandler(object):
         defer.returnValue(state)
 
     @defer.inlineCallbacks
-    def compute_event_context(self, event, old_state=None):
+    def compute_event_context(self, event, old_state=None, outlier=False):
         """ Fills out the context with the `current state` of the graph. The
         `current state` here is defined to be the state of the event graph
         just before the event - i.e. it never includes `event`
@@ -119,9 +119,20 @@ class StateHandler(object):
         Returns:
             an EventContext
         """
+        yield run_on_reactor()
+
         context = EventContext()
 
-        yield run_on_reactor()
+        if outlier:
+            if old_state:
+                context.current_state = {
+                    (s.type, s.state_key): s for s in old_state
+                }
+            else:
+                context.current_state = {}
+            context.prev_state_events = []
+            context.state_group = None
+            defer.returnValue(context)
 
         if old_state:
             context.current_state = {
diff --git a/tests/handlers/test_federation.py b/tests/handlers/test_federation.py
index f3821242b..d392c2301 100644
--- a/tests/handlers/test_federation.py
+++ b/tests/handlers/test_federation.py
@@ -100,7 +100,7 @@ class FederationTestCase(unittest.TestCase):
             return defer.succeed({})
         self.datastore.have_events.side_effect = have_events
 
-        def annotate(ev, old_state=None):
+        def annotate(ev, old_state=None, outlier=False):
             context = Mock()
             context.current_state = {}
             context.auth_events = {}
@@ -120,7 +120,7 @@ class FederationTestCase(unittest.TestCase):
         )
 
         self.state_handler.compute_event_context.assert_called_once_with(
-            ANY, old_state=None,
+            ANY, old_state=None, outlier=False
         )
 
         self.auth.check.assert_called_once_with(ANY, auth_events={})