diff --git a/src/Cryptol/Parser/NoInclude.hs b/src/Cryptol/Parser/NoInclude.hs
index 7e8218d9..b8f749cb 100644
--- a/src/Cryptol/Parser/NoInclude.hs
+++ b/src/Cryptol/Parser/NoInclude.hs
@@ -18,9 +18,12 @@ import qualified Control.Applicative as A
 import Control.DeepSeq
 import qualified Control.Exception as X
 import qualified Control.Monad.Fail as Fail
+
+import qualified Data.ByteString as B
 import Data.Either (partitionEithers)
 import Data.Text(Text)
-import qualified Data.Text.IO as T
+import qualified Data.Text.Encoding as T (decodeUtf8')
+import Data.Text.Encoding.Error (UnicodeException)
 import GHC.Generics (Generic)
 import MonadLib
 import System.Directory (makeAbsolute)
@@ -38,6 +41,7 @@ removeIncludesModule modPath m = runNoIncM modPath (noIncludeModule m)
 
 data IncludeError
   = IncludeFailed (Located FilePath)
+  | IncludeDecodeFailed (Located FilePath) UnicodeException
   | IncludeParseError ParseError
   | IncludeCycle [Located FilePath]
     deriving (Show, Generic, NFData)
@@ -50,6 +54,13 @@ ppIncludeError ie = case ie of
                   <+> pp (srcRange lp)
                   <+> text "was not found"
 
+  IncludeDecodeFailed lp err -> (char '`' <.> text (thing lp) <.> char '`')
+                            <+> text "included at"
+                            <+> pp (srcRange lp)
+                            <+> text "contains invalid UTF-8."
+                            <+> text "Details:"
+                            $$  nest 2 (vcat (map text (lines (X.displayException err))))
+
   IncludeParseError pe -> ppError pe
 
   IncludeCycle is -> text "includes form a cycle:"
@@ -181,9 +192,12 @@ resolveInclude lf = pushPath lf $ do
 -- | Read a file referenced by an include.
 readInclude :: Located FilePath -> NoIncM Text
 readInclude path = do
-  file   <- fromIncPath (thing path)
-  source <- T.readFile file `failsWith` handler
-  return source
+  file        <- fromIncPath (thing path)
+  sourceBytes <- B.readFile file `failsWith` handler
+  sourceText  <- X.evaluate (T.decodeUtf8' sourceBytes) `failsWith` handler
+  case sourceText of
+    Left encodingErr -> M (raise [IncludeDecodeFailed path encodingErr])
+    Right txt -> return txt
   where
   handler :: X.IOException -> NoIncM a
   handler _ = includeFailed path
diff --git a/tests/modsys/T14.icry b/tests/modsys/T14.icry
new file mode 100644
index 00000000..f75fccc3
--- /dev/null
+++ b/tests/modsys/T14.icry
@@ -0,0 +1 @@
+:module T14::Main
diff --git a/tests/modsys/T14.icry.stdout b/tests/modsys/T14.icry.stdout
new file mode 100644
index 00000000..520c4ab6
--- /dev/null
+++ b/tests/modsys/T14.icry.stdout
@@ -0,0 +1,4 @@
+Loading module Cryptol
+
+Parse error at ./T14/Main.cry:3:9,
+  unexpected: MalformedUtf8
diff --git a/tests/modsys/T14/Main.cry b/tests/modsys/T14/Main.cry
new file mode 100644
index 00000000..5a711e61
--- /dev/null
+++ b/tests/modsys/T14/Main.cry
@@ -0,0 +1,3 @@
+module T14::Main where
+
+include MalformedUtf8.cry
diff --git a/tests/modsys/T14/MalformedUtf8.cry b/tests/modsys/T14/MalformedUtf8.cry
new file mode 100644
index 00000000..77cc0014
--- /dev/null
+++ b/tests/modsys/T14/MalformedUtf8.cry
@@ -0,0 +1,2 @@
+foo : [8]
+foo = 0