diff --git a/.chronus/changes/keep-watch-internal-compiler-error-2024-6-25-21-39-16.md b/.chronus/changes/keep-watch-internal-compiler-error-2024-6-25-21-39-16.md
new file mode 100644
index 0000000000..eb93d0bcd3
--- /dev/null
+++ b/.chronus/changes/keep-watch-internal-compiler-error-2024-6-25-21-39-16.md
@@ -0,0 +1,8 @@
+---
+# Change versionKind to one of: internal, fix, dependencies, feature, deprecation, breaking
+changeKind: fix
+packages:
+  - "@typespec/compiler"
+---
+
+`tsp compile --watch` will not stop when a crash happens during compilation
diff --git a/packages/compiler/src/core/cli/actions/compile/compile.ts b/packages/compiler/src/core/cli/actions/compile/compile.ts
index acd03fadfa..5b634aa64c 100644
--- a/packages/compiler/src/core/cli/actions/compile/compile.ts
+++ b/packages/compiler/src/core/cli/actions/compile/compile.ts
@@ -6,7 +6,11 @@ import { resolvePath } from "../../../path-utils.js";
 import { Program, compile as compileProgram } from "../../../program.js";
 import { CompilerHost, Diagnostic } from "../../../types.js";
 import { CliCompilerHost } from "../../types.js";
-import { handleInternalCompilerError, logDiagnosticCount } from "../../utils.js";
+import {
+  handleInternalCompilerError,
+  logDiagnosticCount,
+  logInternalCompilerError,
+} from "../../utils.js";
 import { CompileCliArgs, getCompilerOptions } from "./args.js";
 import { ProjectWatcher, WatchHost, createWatchHost, createWatcher } from "./watch.js";
 
@@ -77,10 +81,11 @@ function compileWatch(
   path: string,
   compilerOptions: CompilerOptions
 ): Promise<void> {
+  const entrypoint = resolve(path);
   const watchHost: WatchHost = createWatchHost(cliHost);
 
   let compileRequested: boolean = false;
-  let currentCompilePromise: Promise<Program> | undefined = undefined;
+  let currentCompilePromise: Promise<Program | void> | undefined = undefined;
 
   const runCompilePromise = () => {
     // Don't run the compiler if it's already running
@@ -90,9 +95,9 @@ function compileWatch(
       console.clear();
 
       watchHost?.forceJSReload();
-      currentCompilePromise = compileProgram(watchHost, resolve(path), compilerOptions)
-        .then(onCompileFinished)
-        .catch(handleInternalCompilerError);
+      currentCompilePromise = compileProgram(watchHost, entrypoint, compilerOptions)
+        .catch(logInternalCompilerError)
+        .then(onCompileFinished);
     } else {
       compileRequested = true;
     }
@@ -105,10 +110,13 @@ function compileWatch(
   const watcher: ProjectWatcher = createWatcher((_name: string) => {
     scheduleCompile();
   });
+  watcher?.updateWatchedFiles([entrypoint]);
 
-  const onCompileFinished = (program: Program) => {
-    watcher?.updateWatchedFiles([...program.sourceFiles.keys(), ...program.jsSourceFiles.keys()]);
-    logProgramResult(watchHost, program, { showTimestamp: true });
+  const onCompileFinished = (program?: Program | void) => {
+    if (program !== undefined) {
+      watcher?.updateWatchedFiles([...program.sourceFiles.keys(), ...program.jsSourceFiles.keys()]);
+      logProgramResult(watchHost, program, { showTimestamp: true });
+    }
 
     currentCompilePromise = undefined;
     if (compileRequested) {
diff --git a/packages/compiler/src/core/cli/utils.ts b/packages/compiler/src/core/cli/utils.ts
index 089a6f6bab..6ac6326aa3 100644
--- a/packages/compiler/src/core/cli/utils.ts
+++ b/packages/compiler/src/core/cli/utils.ts
@@ -142,17 +142,7 @@ export function logDiagnosticCount(diagnostics: readonly Diagnostic[]) {
   console.log(`\nFound ${[errorText, warningText].filter((x) => x !== undefined).join(", ")}.`);
 }
 
-/**
- * Handle an internal compiler error.
- *
- * NOTE: An expected error, like one thrown for bad input, shouldn't reach
- * here, but be handled somewhere else. If we reach here, it should be
- * considered a bug and therefore we should not suppress the stack trace as
- * that risks losing it in the case of a bug that does not repro easily.
- *
- * @param error error thrown
- */
-export function handleInternalCompilerError(error: unknown): never {
+export function logInternalCompilerError(error: unknown) {
   /* eslint-disable no-console */
   if (error instanceof ExternalError) {
     // ExternalError should already have all the relevant information needed when thrown.
@@ -164,7 +154,19 @@ export function handleInternalCompilerError(error: unknown): never {
     console.error(error);
   }
   /* eslint-enable no-console */
-
+}
+/**
+ * Handle an internal compiler error.
+ *
+ * NOTE: An expected error, like one thrown for bad input, shouldn't reach
+ * here, but be handled somewhere else. If we reach here, it should be
+ * considered a bug and therefore we should not suppress the stack trace as
+ * that risks losing it in the case of a bug that does not repro easily.
+ *
+ * @param error error thrown
+ */
+export function handleInternalCompilerError(error: unknown) {
+  logInternalCompilerError(error);
   process.exit(1);
 }