A mobile communication system and method for processing an unrecoverable error of a terminal are provided. In the method a Radio Resource Control (RRC) layer receives a downlink reset message from a network, determines whether the RRC layer receives an unrecoverable error report from a Radio Link Control (RLC) layer during a downlink reset; transmits an uplink response message to the network, when the downlink reset is completed; determines whether an unrecoverable error ignore condition is met, when the RRC layer receives the unrecoverable error report; and ignores the unrecoverable error when the unrecoverable error ignore condition is met. The RLC layer then performs data transmission and reception.