Error while saving a workflow via sharepoint designer: Server-side activities have been updated

While saving a workflow using SharePoint designer on a SharePoint site, I get the following error:

Server-side activities have been updated. You need to restart SharePoint Designer to use the updated version of activities.

Steps to recreate error:

• Login to the WFE server hosting IIS and workflow manager, open SharePoint Designer 2013 and login to a SharePoint site.

• Access the list using SharePoint Designer 2013, in the workflow section, click new workflow.

• In the new workflow dialog, enter workflow details, click save

• Error message is displayed as below:
  Server-side activities have been updated. You need to restart SharePoint Designer to use the updated version of activities.

• After restarting SharePoint Designer, the saved workflow is not seen in the site/workflows or list/workflow section.

Workaround

When the above steps are repeated while accessing the site via SPD from any other box besides the WFE/Workflow manager host server, the error is not encountered and its possible to save/publish workflows.

Notes

• Workflow Manager 1.0 is installed.
• The site has been registered with Workflow manager using Register-SPWorkflowService cmdlet.

Any clue on why is this happening?