diff --git a/headroom/proxy/diagnostic_decode_policy.py b/headroom/proxy/diagnostic_decode_policy.py
new file mode 100644
index 000000000..9dc595601
--- /dev/null
+++ b/headroom/proxy/diagnostic_decode_policy.py
@@ -0,0 +1,17 @@
+"""Lossy byte decoding policy for diagnostics and logs."""
+
+from __future__ import annotations
+
+import codecs
+
+
+def safe_decode_for_logging(raw: bytes, *, max_bytes: int | None = None) -> str:
+    """Decode bytes to a string for log/diagnostic display only.
+
+    Wire/protocol parsers should decode complete protocol frames strictly. This
+    policy is for already-discarded diagnostics where replacement characters are
+    preferable to failing the error-reporting path.
+    """
+    blob = raw[:max_bytes] if max_bytes is not None else raw
+    decoder = codecs.getincrementaldecoder("utf-8")(errors="replace")
+    return decoder.decode(bytes(blob), final=True)
diff --git a/headroom/proxy/helpers.py b/headroom/proxy/helpers.py
index 7a415e882..d050dacca 100644
--- a/headroom/proxy/helpers.py
+++ b/headroom/proxy/helpers.py
@@ -25,6 +25,7 @@ from typing import TYPE_CHECKING, Any, Literal, cast
 from headroom import paths as _paths
 from headroom._subprocess import run
 from headroom.proxy import (
+    diagnostic_decode_policy,
     request_limit_policy,
     sse_byte_buffer_policy,
     wire_debug_format_policy,
@@ -565,16 +566,7 @@ def safe_decode_for_logging(raw: bytes, *, max_bytes: int | None = None) -> str:
 
     Use ``parse_sse_events_from_byte_buffer`` for SSE parsing instead.
     """
-    blob = raw[:max_bytes] if max_bytes is not None else raw
-    # Decode incrementally and represent any invalid bytes as the
-    # Unicode replacement character (�). Implemented via the
-    # `codecs` incremental decoder so we never reach for the
-    # forbidden `errors="ignore"`/`errors="replace"` keyword in the
-    # SSE-bearing modules.
-    import codecs as _codecs
-
-    decoder = _codecs.getincrementaldecoder("utf-8")(errors="replace")
-    return decoder.decode(bytes(blob), final=True)
+    return diagnostic_decode_policy.safe_decode_for_logging(raw, max_bytes=max_bytes)
 
 
 def parse_sse_events_from_byte_buffer(
diff --git a/tests/test_diagnostic_decode_policy.py b/tests/test_diagnostic_decode_policy.py
new file mode 100644
index 000000000..1cded9a44
--- /dev/null
+++ b/tests/test_diagnostic_decode_policy.py
@@ -0,0 +1,20 @@
+from __future__ import annotations
+
+from headroom.proxy.diagnostic_decode_policy import safe_decode_for_logging
+from headroom.proxy.helpers import safe_decode_for_logging as helper_safe_decode_for_logging
+
+
+def test_safe_decode_for_logging_decodes_utf8() -> None:
+    assert safe_decode_for_logging("hello \u2603".encode()) == "hello \u2603"
+
+
+def test_safe_decode_for_logging_replaces_invalid_bytes() -> None:
+    assert safe_decode_for_logging(b"ok\xffdone") == "ok\ufffddone"
+
+
+def test_safe_decode_for_logging_honors_max_bytes_before_decoding() -> None:
+    assert safe_decode_for_logging(b"abcdef", max_bytes=3) == "abc"
+
+
+def test_helpers_safe_decode_delegates_to_policy() -> None:
+    assert helper_safe_decode_for_logging(b"ok\xffdone") == safe_decode_for_logging(b"ok\xffdone")