diff --git a/src/compiler/sys.ts b/src/compiler/sys.ts
index 1b16efe4a7a..e8ad3c309fd 100644
--- a/src/compiler/sys.ts
+++ b/src/compiler/sys.ts
@@ -8,7 +8,7 @@ namespace ts {
         write(s: string): void;
         readFile(path: string, encoding?: string): string;
         writeFile(path: string, data: string, writeByteOrderMark?: boolean): void;
-        watchFile?(path: string, callback: (path: string) => void): FileWatcher;
+        watchFile?(path: string, callback: (path: string, removed?: boolean) => void): FileWatcher;
         watchDirectory?(path: string, callback: (path: string) => void, recursive?: boolean): FileWatcher;
         resolvePath(path: string): string;
         fileExists(path: string): boolean;
@@ -23,7 +23,7 @@ namespace ts {
 
     interface WatchedFile {
         fileName: string;
-        callback: (fileName: string) => void;
+        callback: (fileName: string, removed?: boolean) => void;
         mtime: Date;
     }
 
@@ -235,7 +235,7 @@ namespace ts {
                         }
                         else if (watchedFile.mtime.getTime() !== stats.mtime.getTime()) {
                             watchedFile.mtime = WatchedFileSet.getModifiedTime(watchedFile.fileName);
-                            watchedFile.callback(watchedFile.fileName);
+                            watchedFile.callback(watchedFile.fileName, watchedFile.mtime.getTime() === 0);
                         }
                     });
                 }
@@ -263,7 +263,7 @@ namespace ts {
                     }, this.interval);
                 }
 
-                addFile(fileName: string, callback: (fileName: string) => void): WatchedFile {
+                addFile(fileName: string, callback: (fileName: string, removed?: boolean) => void): WatchedFile {
                     var file: WatchedFile = {
                         fileName,
                         callback,
diff --git a/src/compiler/tsc.ts b/src/compiler/tsc.ts
index d5682d8860e..a6d51542989 100644
--- a/src/compiler/tsc.ts
+++ b/src/compiler/tsc.ts
@@ -291,7 +291,7 @@ namespace ts {
             let sourceFile = hostGetSourceFile(fileName, languageVersion, onError);
             if (sourceFile && compilerOptions.watch) {
                 // Attach a file watcher
-                sourceFile.fileWatcher = sys.watchFile(sourceFile.fileName, () => sourceFileChanged(sourceFile));
+                sourceFile.fileWatcher = sys.watchFile(sourceFile.fileName, (fileName: string, removed?: boolean) => sourceFileChanged(sourceFile, removed));
             }
             return sourceFile;
         }
@@ -313,9 +313,15 @@ namespace ts {
         }
 
         // If a source file changes, mark it as unwatched and start the recompilation timer
-        function sourceFileChanged(sourceFile: SourceFile) {
+        function sourceFileChanged(sourceFile: SourceFile, removed?: boolean) {
             sourceFile.fileWatcher.close();
             sourceFile.fileWatcher = undefined;
+            if (removed) {
+                var index = rootFileNames.indexOf(sourceFile.fileName);
+                if (index !== -1) {
+                    rootFileNames.splice(index, 1);
+                }
+            }
             startTimer();
         }