diff --git a/pkg/tcpip/stack/nic.go b/pkg/tcpip/stack/nic.go
index 53abf29..4afe7b7 100644
--- a/pkg/tcpip/stack/nic.go
+++ b/pkg/tcpip/stack/nic.go
@@ -984,7 +984,7 @@
 
 // DeliverNetworkPacket finds the appropriate network protocol endpoint and
 // hands the packet over for further processing. This function is called when
-// the NIC receives a packet from the physical interface.
+// the NIC receives a packet from the link endpoint.
 // Note that the ownership of the slice backing vv is retained by the caller.
 // This rule applies only to the slice itself, not to the items of the slice;
 // the ownership of the items is not retained by the caller.
@@ -1029,6 +1029,14 @@
 
 	src, dst := netProto.ParseAddresses(pkt.Data.First())
 
+	if n.stack.handleLocal && !n.isLoopback() && n.getRef(protocol, src) != nil {
+		// The source address is one of our own, so we never should have gotten a
+		// packet like this unless handleLocal is false. Loopback also calls this
+		// function even though the packets didn't come from the physical interface
+		// so don't drop those.
+		n.stack.stats.IP.InvalidSourceAddressesReceived.Increment()
+		return
+	}
 	if ref := n.getRef(protocol, dst); ref != nil {
 		handlePacket(protocol, dst, src, linkEP.LinkAddress(), remote, ref, pkt)
 		return
@@ -1041,7 +1049,7 @@
 	if n.stack.Forwarding() {
 		r, err := n.stack.FindRoute(0, "", dst, protocol, false /* multicastLoop */)
 		if err != nil {
-			n.stack.stats.IP.InvalidAddressesReceived.Increment()
+			n.stack.stats.IP.InvalidDestinationAddressesReceived.Increment()
 			return
 		}
 		defer r.Release()
@@ -1079,7 +1087,7 @@
 
 	// If a packet socket handled the packet, don't treat it as invalid.
 	if len(packetEPs) == 0 {
-		n.stack.stats.IP.InvalidAddressesReceived.Increment()
+		n.stack.stats.IP.InvalidDestinationAddressesReceived.Increment()
 	}
 }
 
diff --git a/pkg/tcpip/tcpip.go b/pkg/tcpip/tcpip.go
index b7813cb..6243762 100644
--- a/pkg/tcpip/tcpip.go
+++ b/pkg/tcpip/tcpip.go
@@ -903,9 +903,13 @@
 	// link layer in nic.DeliverNetworkPacket.
 	PacketsReceived *StatCounter
 
-	// InvalidAddressesReceived is the total number of IP packets received
-	// with an unknown or invalid destination address.
-	InvalidAddressesReceived *StatCounter
+	// InvalidDestinationAddressesReceived is the total number of IP packets
+	// received with an unknown or invalid destination address.
+	InvalidDestinationAddressesReceived *StatCounter
+
+	// InvalidSourceAddressesReceived is the total number of IP packets received
+	// with a source address that should never have been received on the wire.
+	InvalidSourceAddressesReceived *StatCounter
 
 	// PacketsDelivered is the total number of incoming IP packets that
 	// are successfully delivered to the transport layer via HandlePacket.
diff --git a/pkg/tcpip/transport/udp/udp_test.go b/pkg/tcpip/transport/udp/udp_test.go
index ee9d105..51bb611 100644
--- a/pkg/tcpip/transport/udp/udp_test.go
+++ b/pkg/tcpip/transport/udp/udp_test.go
@@ -274,11 +274,16 @@
 
 func newDualTestContext(t *testing.T, mtu uint32) *testContext {
 	t.Helper()
-
-	s := stack.New(stack.Options{
+	return newDualTestContextWithOptions(t, mtu, stack.Options{
 		NetworkProtocols:   []stack.NetworkProtocol{ipv4.NewProtocol(), ipv6.NewProtocol()},
 		TransportProtocols: []stack.TransportProtocol{udp.NewProtocol()},
 	})
+}
+
+func newDualTestContextWithOptions(t *testing.T, mtu uint32, options stack.Options) *testContext {
+	t.Helper()
+
+	s := stack.New(options)
 	ep := channel.New(256, mtu, "")
 	wep := stack.LinkEndpoint(ep)
 
@@ -763,6 +768,49 @@
 	testRead(c, unicastV6)
 }
 
+// TestV4ReadSelfSource checks that packets coming from a local IP address are
+// correctly dropped when handleLocal is true and not otherwise.
+func TestV4ReadSelfSource(t *testing.T) {
+	for _, tt := range []struct {
+		name              string
+		handleLocal       bool
+		wantErr           *tcpip.Error
+		wantInvalidSource uint64
+	}{
+		{"HandleLocal", false, nil, 0},
+		{"NoHandleLocal", true, tcpip.ErrWouldBlock, 1},
+	} {
+		t.Run(tt.name, func(t *testing.T) {
+			c := newDualTestContextWithOptions(t, defaultMTU, stack.Options{
+				NetworkProtocols:   []stack.NetworkProtocol{ipv4.NewProtocol(), ipv6.NewProtocol()},
+				TransportProtocols: []stack.TransportProtocol{udp.NewProtocol()},
+				HandleLocal:        tt.handleLocal,
+			})
+			defer c.cleanup()
+
+			c.createEndpointForFlow(unicastV4)
+
+			if err := c.ep.Bind(tcpip.FullAddress{Port: stackPort}); err != nil {
+				t.Fatalf("Bind failed: %s", err)
+			}
+
+			payload := newPayload()
+			h := unicastV4.header4Tuple(incoming)
+			h.srcAddr = h.dstAddr
+
+			c.injectV4Packet(payload, &h, true /* valid */)
+
+			if got := c.s.Stats().IP.InvalidSourceAddressesReceived.Value(); got != tt.wantInvalidSource {
+				t.Errorf("c.s.Stats().IP.InvalidSourceAddressesReceived got %d, want %d", got, tt.wantInvalidSource)
+			}
+
+			if _, _, err := c.ep.Read(nil); err != tt.wantErr {
+				t.Errorf("c.ep.Read() got error %v, want %v", err, tt.wantErr)
+			}
+		})
+	}
+}
+
 func TestV4ReadOnV4(t *testing.T) {
 	c := newDualTestContext(t, defaultMTU)
 	defer c.cleanup()