diff --git a/packages/ember-routing/lib/system/router.js b/packages/ember-routing/lib/system/router.js
index 85b91a470fc..b340931196f 100644
--- a/packages/ember-routing/lib/system/router.js
+++ b/packages/ember-routing/lib/system/router.js
@@ -18,8 +18,10 @@ import {
   stashParamNames,
   calculateCacheKey
 } from 'ember-routing/utils';
+import { guidFor } from 'ember-metal/utils';
 import RouterState from './router_state';
 import { getOwner } from 'container/owner';
+import dictionary from 'ember-metal/dictionary';
 
 /**
 @module ember
@@ -33,6 +35,7 @@ function K() { return this; }
 
 var slice = [].slice;
 
+
 /**
   The `Ember.Router` class manages the application state and URLs. Refer to
   the [routing guide](http://emberjs.com/guides/routing/) for documentation.
@@ -111,6 +114,7 @@ var EmberRouter = EmberObject.extend(Evented, {
     this._activeViews = {};
     this._qpCache = new EmptyObject();
     this._resetQueuedQueryParameterChanges();
+    this._handledErrors = dictionary(null);
   },
 
   /*
@@ -299,8 +303,7 @@ var EmberRouter = EmberObject.extend(Evented, {
 
   _doURLTransition(routerJsMethod, url) {
     var transition = this.router[routerJsMethod](url || '/');
-    didBeginTransition(transition, this);
-    return transition;
+    return didBeginTransition(transition, this);
   },
 
   transitionTo(...args) {
@@ -724,6 +727,20 @@ var EmberRouter = EmberObject.extend(Evented, {
       run.cancel(this._slowTransitionTimer);
     }
     this._slowTransitionTimer = null;
+  },
+
+  // These three helper functions are used to ensure errors aren't
+  // re-raised if they're handled in a route's error action.
+  _markErrorAsHandled(errorGuid) {
+    this._handledErrors[errorGuid] = true;
+  },
+
+  _isErrorHandled(errorGuid) {
+    return this._handledErrors[errorGuid];
+  },
+
+  _clearHandledError(errorGuid) {
+    delete this._handledErrors[errorGuid];
   }
 });
 
@@ -884,6 +901,11 @@ export function triggerEvent(handlerInfos, ignoreFailure, args) {
       if (handler.actions[name].apply(handler, args) === true) {
         eventWasHandled = true;
       } else {
+        // Should only hit here if a non-bubbling error action is triggered on a route.
+        if (name === 'error') {
+          var errorId = guidFor(args[0]);
+          handler.router._markErrorAsHandled(errorId);
+        }
         return;
       }
     }
@@ -1047,6 +1069,16 @@ function didBeginTransition(transition, router) {
     router.set('currentState', routerState);
   }
   router.set('targetState', routerState);
+
+  return transition.catch(function(error) {
+    var errorId = guidFor(error);
+
+    if (router._isErrorHandled(errorId)) {
+      router._clearHandledError(errorId);
+    } else {
+      throw error;
+    }
+  });
 }
 
 function resemblesURL(str) {
diff --git a/packages/ember/tests/routing/basic_test.js b/packages/ember/tests/routing/basic_test.js
index dfea8b0ce48..7d3154729cc 100644
--- a/packages/ember/tests/routing/basic_test.js
+++ b/packages/ember/tests/routing/basic_test.js
@@ -1022,6 +1022,7 @@ QUnit.test('The Special page returning an error invokes SpecialRoute\'s error ha
     actions: {
       error(reason) {
         equal(reason, 'Setup error', 'SpecialRoute#error received the error thrown from setup');
+        return true;
       }
     }
   });
@@ -1059,6 +1060,7 @@ function testOverridableErrorHandler(handlersName) {
   attrs[handlersName] = {
     error(reason) {
       equal(reason, 'Setup error', 'error was correctly passed to custom ApplicationRoute handler');
+      return true;
     }
   };
 
diff --git a/packages/ember/tests/routing/substates_test.js b/packages/ember/tests/routing/substates_test.js
index ea2e820911b..be840739877 100644
--- a/packages/ember/tests/routing/substates_test.js
+++ b/packages/ember/tests/routing/substates_test.js
@@ -415,6 +415,280 @@ QUnit.test('Default error event moves into nested route', function() {
   equal(appController.get('currentPath'), 'grandma.error', 'Initial route fully loaded');
 });
 
+QUnit.test('Error events that aren\'t bubbled don\t throw application assertions', function() {
+  expect(2);
+
+  templates['grandma'] = 'GRANDMA {{outlet}}';
+
+  Router.map(function() {
+    this.route('grandma', function() {
+      this.route('mom', { resetNamespace: true }, function() {
+        this.route('sally');
+      });
+    });
+  });
+
+  App.ApplicationController = Ember.Controller.extend();
+
+  App.MomSallyRoute = Ember.Route.extend({
+    model() {
+      step(1, 'MomSallyRoute#model');
+
+      return Ember.RSVP.reject({
+        msg: 'did it broke?'
+      });
+    },
+    actions: {
+      error(err) {
+        equal(err.msg, 'did it broke?');
+        return false;
+      }
+    }
+  });
+
+  bootApplication('/grandma/mom/sally');
+});
+
+QUnit.test('Non-bubbled errors that re-throw aren\'t swallowed', function() {
+  expect(2);
+
+  templates['grandma'] = 'GRANDMA {{outlet}}';
+
+  Router.map(function() {
+    this.route('grandma', function() {
+      this.route('mom', { resetNamespace: true }, function() {
+        this.route('sally');
+      });
+    });
+  });
+
+  App.ApplicationController = Ember.Controller.extend();
+
+  App.MomSallyRoute = Ember.Route.extend({
+    model() {
+      step(1, 'MomSallyRoute#model');
+
+      return Ember.RSVP.reject({
+        msg: 'did it broke?'
+      });
+    },
+    actions: {
+      error(err) {
+        // returns undefined which is falsey
+        throw err;
+      }
+    }
+  });
+
+  throws(function() {
+    bootApplication('/grandma/mom/sally');
+  }, function(err) { return err.msg === 'did it broke?';});
+});
+
+QUnit.test('Handled errors that re-throw aren\'t swallowed', function() {
+  expect(4);
+
+  var handledError;
+
+  templates['grandma'] = 'GRANDMA {{outlet}}';
+
+  Router.map(function() {
+    this.route('grandma', function() {
+      this.route('mom', { resetNamespace: true }, function() {
+        this.route('sally');
+        this.route('this-route-throws');
+      });
+    });
+  });
+
+  App.ApplicationController = Ember.Controller.extend();
+
+  App.MomSallyRoute = Ember.Route.extend({
+    model() {
+      step(1, 'MomSallyRoute#model');
+
+      return Ember.RSVP.reject({
+        msg: 'did it broke?'
+      });
+    },
+    actions: {
+      error(err) {
+        step(2, 'MomSallyRoute#error');
+
+        handledError = err;
+
+        this.transitionTo('mom.this-route-throws');
+
+        // Marks error as handled
+        return false;
+      }
+    }
+  });
+
+  App.MomThisRouteThrowsRoute = Ember.Route.extend({
+    model() {
+      step(3, 'MomThisRouteThrows#model');
+
+      throw handledError;
+    }
+  });
+
+  throws(function() {
+    bootApplication('/grandma/mom/sally');
+  }, function(err) { return err.msg === 'did it broke?'; });
+});
+
+QUnit.test('Handled errors that bubble can be handled at a higher level', function() {
+  expect(4);
+
+  var handledError;
+
+  templates['grandma'] = 'GRANDMA {{outlet}}';
+
+  Router.map(function() {
+    this.route('grandma', function() {
+      this.route('mom', { resetNamespace: true }, function() {
+        this.route('sally');
+      });
+    });
+  });
+
+  App.ApplicationController = Ember.Controller.extend();
+
+  App.MomRoute = Ember.Route.extend({
+    actions: {
+      error(err) {
+        step(3, 'MomRoute#error');
+
+        equal(err, handledError, 'error handled and rebubbled is handleable at heigher route');
+      }
+    }
+  });
+
+  App.MomSallyRoute = Ember.Route.extend({
+    model() {
+      step(1, 'MomSallyRoute#model');
+
+      return Ember.RSVP.reject({
+        msg: 'did it broke?'
+      });
+    },
+
+    actions: {
+      error(err) {
+        step(2, 'MomSallyRoute#error');
+
+        handledError = err;
+
+        return true;
+      }
+    }
+  });
+
+  bootApplication('/grandma/mom/sally');
+});
+
+QUnit.test('errors that are bubbled are thrown at a higher level if not handled', function() {
+  expect(3);
+
+  var handledError;
+
+  templates['grandma'] = 'GRANDMA {{outlet}}';
+
+  Router.map(function() {
+    this.route('grandma', function() {
+      this.route('mom', { resetNamespace: true }, function() {
+        this.route('sally');
+      });
+    });
+  });
+
+  App.ApplicationController = Ember.Controller.extend();
+
+  App.MomSallyRoute = Ember.Route.extend({
+    model() {
+      step(1, 'MomSallyRoute#model');
+
+      return Ember.RSVP.reject({
+        msg: 'did it broke?'
+      });
+    },
+
+    actions: {
+      error(err) {
+        step(2, 'MomSallyRoute#error');
+
+        handledError = err;
+
+        return true;
+      }
+    }
+  });
+
+  throws(
+    function() {
+      bootApplication('/grandma/mom/sally');
+    },
+    function(err) {
+      return err.msg === 'did it broke?';
+    },
+    'Correct error was thrown'
+  );
+});
+
+QUnit.test('Handled errors that are thrown through rejection aren\'t swallowed', function() {
+  expect(4);
+
+  var handledError;
+
+  templates['grandma'] = 'GRANDMA {{outlet}}';
+
+  Router.map(function() {
+    this.route('grandma', function() {
+      this.route('mom', { resetNamespace: true }, function() {
+        this.route('sally');
+        this.route('this-route-throws');
+      });
+    });
+  });
+
+  App.ApplicationController = Ember.Controller.extend();
+
+  App.MomSallyRoute = Ember.Route.extend({
+    model() {
+      step(1, 'MomSallyRoute#model');
+
+      return Ember.RSVP.reject({
+        msg: 'did it broke?'
+      });
+    },
+    actions: {
+      error(err) {
+        step(2, 'MomSallyRoute#error');
+
+        handledError = err;
+
+        this.transitionTo('mom.this-route-throws');
+
+        // Marks error as handled
+        return false;
+      }
+    }
+  });
+
+  App.MomThisRouteThrowsRoute = Ember.Route.extend({
+    model() {
+      step(3, 'MomThisRouteThrows#model');
+
+      return Ember.RSVP.reject(handledError);
+    }
+  });
+
+  throws(function() {
+    bootApplication('/grandma/mom/sally');
+  }, function(err) { return err.msg === 'did it broke?'; });
+});
+
 QUnit.test('Setting a query param during a slow transition should work', function() {
   var deferred = RSVP.defer();