diff --git a/tasks/watch.js b/tasks/watch.js
index a768269..3a9946d 100644
--- a/tasks/watch.js
+++ b/tasks/watch.js
@@ -93,7 +93,10 @@ module.exports = function(grunt) {
         });
         // Display stdout/stderr immediately
         spawned[i].stdout.on('data', function(buf) { grunt.log.write(String(buf)); });
-        spawned[i].stderr.on('data', function(buf) { grunt.log.error(String(buf)); });
+        spawned[i].stderr.on('data', function(buf) {
+          buf = grunt.log.uncolor(String(buf));
+          if (!grunt.util._.isBlank(buf)) { grunt.log.error(buf); }
+        });
       }
     }, 250);
 
diff --git a/test/fixtures/multiTargets/Gruntfile.js b/test/fixtures/multiTargets/Gruntfile.js
index 95ac63d..623f014 100644
--- a/test/fixtures/multiTargets/Gruntfile.js
+++ b/test/fixtures/multiTargets/Gruntfile.js
@@ -6,6 +6,7 @@ module.exports = function(grunt) {
       two: { message: 'two has changed' },
       wait: { message: 'I waited 2s', wait: 2000 },
       interrupt: { message: 'I want to be interrupted', wait: 5000 },
+      fail: { fail: 1, message: 'This task should fail' }
     },
     watch: {
       one: {
@@ -24,6 +25,10 @@ module.exports = function(grunt) {
         files: ['lib/interrupt.js'],
         tasks: ['echo:interrupt'],
         options: { interrupt: true }
+      },
+      fail: {
+        files: ['lib/fail.js'],
+        tasks: ['echo:fail']
       }
     }
   });
diff --git a/test/fixtures/multiTargets/lib/fail.js b/test/fixtures/multiTargets/lib/fail.js
new file mode 100644
index 0000000..743a693
--- /dev/null
+++ b/test/fixtures/multiTargets/lib/fail.js
@@ -0,0 +1 @@
+var fail = false;
\ No newline at end of file
diff --git a/test/fixtures/tasks/echo.js b/test/fixtures/tasks/echo.js
index 321be55..dde2c76 100644
--- a/test/fixtures/tasks/echo.js
+++ b/test/fixtures/tasks/echo.js
@@ -11,12 +11,17 @@ module.exports = function(grunt) {
   grunt.registerMultiTask('echo', 'A task that echos a message.', function() {
     var msg = this.data.message || 'I do absolutely nothing.';
     var wait = this.data.wait || 0;
+    var fail = this.data.fail || false;
     var done = this.async();
 
-    // After a given time print a message
+    // After a given time print a message or fail
     setTimeout(function() {
-      grunt.log.writeln(msg);
-      done();
+      if (fail) {
+        grunt.fail.fatal(msg, fail);
+      } else {
+        grunt.log.writeln(msg);
+        done();
+      }
     }, wait);
 
     // Keep the process alive
diff --git a/test/tasks/watch_test.js b/test/tasks/watch_test.js
index 7fd3648..461b48f 100644
--- a/test/tasks/watch_test.js
+++ b/test/tasks/watch_test.js
@@ -169,5 +169,18 @@ exports.watchConfig = {
       test.ok(result.indexOf('has been interrupted') !== -1, 'Task should have been interrupted.');
       test.done();
     });
+  },
+  failingTask: function(test) {
+    test.expect(2);
+    var cwd = path.resolve(fixtures, 'multiTargets');
+    var assertWatch = assertTask('watch', {cwd:cwd});
+    assertWatch(function() {
+      grunt.file.write(path.join(cwd, 'lib', 'fail.js'), 'var fail = false;');
+    }, function(result) {
+      verboseLog(result);
+      test.ok(result.indexOf('<FATAL>') !== -1, 'Task should have been fatal.');
+      test.equal(grunt.util._(result).count('Waiting...'), 2, 'Should have displayed "Wating..." twice');
+      test.done();
+    });
   }
 };