diff --git a/src/Compiler.ts b/src/Compiler.ts
index 6b382d200..0659ea527 100644
--- a/src/Compiler.ts
+++ b/src/Compiler.ts
@@ -43,10 +43,34 @@ export function watchWithOptions(fileNames: string[], options: CompilerOptions):
         host = ts.createWatchCompilerHost(fileNames, options, ts.sys, ts.createSemanticDiagnosticsBuilderProgram);
     }
 
+    let fullRecompile = true;
     host.afterProgramCreate = program => {
         const transpiler = new LuaTranspiler(program.getProgram());
+        let status = transpiler.reportErrors();
+
+        if (status === 0) {
+            if (fullRecompile) {
+                status = transpiler.emitFilesAndReportErrors();
+            } else {
+                while (true) {
+                    const currentFile = program.getSemanticDiagnosticsOfNextAffectedFile();
+                    if (!currentFile) { break; }
+
+                    if ("fileName" in currentFile.affected) { // test if currentFile.affected is `ts.SourceFile`
+                      const fileStatus = transpiler.emitSourceFile(currentFile.affected);
+                      status |= fileStatus;
+                    } else {
+                        for (const sourceFile of currentFile.affected.getSourceFiles()) {
+                            const fileStatus = transpiler.emitSourceFile(sourceFile);
+                            status |= fileStatus;
+                        }
+                    }
+                }
+            }
+            // do a full recompile after transpiler error.
+            fullRecompile = status !== 0;
+        }
 
-        const status = transpiler.emitFilesAndReportErrors();
         const errorDiagnostic: ts.Diagnostic = {
             category: undefined,
             code: 6194,
diff --git a/src/LuaTranspiler.ts b/src/LuaTranspiler.ts
index a4a4416a2..dc96e9801 100644
--- a/src/LuaTranspiler.ts
+++ b/src/LuaTranspiler.ts
@@ -38,7 +38,7 @@ export class LuaTranspiler {
         return options;
     }
 
-    private reportErrors(): number {
+    public reportErrors(): number {
         // Get all diagnostics, ignore unsupported extension
         const diagnostics = ts.getPreEmitDiagnostics(this.program).filter(diag => diag.code !== 6054);
         diagnostics.forEach(diag => this.reportDiagnostic(diag));
@@ -65,13 +65,15 @@ export class LuaTranspiler {
     }
 
     public emitFilesAndReportErrors(): number {
-        const error = this.reportErrors();
-        if (error > 0) {
-            return error;
+        let status = this.reportErrors();
+
+        if (status > 0) {
+            return status;
         }
 
         this.program.getSourceFiles().forEach(sourceFile => {
-            this.emitSourceFile(sourceFile);
+            const sourceStatus = this.emitSourceFile(sourceFile);
+            status |= sourceStatus;
         });
 
         // Copy lualib to target dir
@@ -81,10 +83,10 @@ export class LuaTranspiler {
             this.emitLuaLib();
         }
 
-        return 0;
+        return status;
     }
 
-    public emitSourceFile(sourceFile: ts.SourceFile): void {
+    public emitSourceFile(sourceFile: ts.SourceFile): number {
         if (!sourceFile.isDeclarationFile) {
             try {
                 const rootDir = this.options.rootDir;
@@ -119,11 +121,13 @@ export class LuaTranspiler {
                     // Graciously handle transpilation errors
                     console.error("Encountered error parsing file: " + exception.message);
                     console.error(`${sourceFile.fileName} (${1 + pos.line},${pos.character})\n${exception.stack}`);
+                    return 1;
                 } else {
                     throw exception;
                 }
             }
         }
+        return 0;
     }
 
     public transpileSourceFile(sourceFile: ts.SourceFile): string {