The disclosed embodiments disclose techniques for performing physical domain error isolation and recovery in a multi-domain system, where the multi-domain system includes two or more processor chips and one or more switch chips that provide connectivity and cache-coherency support for the processor chips, and the processor chips are divided into two or more distinct domains. During operation, one of the switch chips determines a fault in the multi-domain system. The switch chip determines an originating domain that is associated with the fault, and then signals the fault and an identifier for the originating domain to its internal units, some of which perform clearing operations that clear out all traffic for the originating domain without affecting the other domains of the multi-domain system.