diff --git a/packages/playwright-test/src/worker/testInfo.ts b/packages/playwright-test/src/worker/testInfo.ts
index 7d0c689544..9626552a04 100644
--- a/packages/playwright-test/src/worker/testInfo.ts
+++ b/packages/playwright-test/src/worker/testInfo.ts
@@ -53,6 +53,7 @@ export class TestInfoImpl implements TestInfo {
   readonly _traceEvents: trace.TraceEvent[] = [];
   readonly _onTestFailureImmediateCallbacks = new Map<() => Promise<void>, string>(); // fn -> title
   _didTimeout = false;
+  _wasInterrupted = false;
   _lastStepId = 0;
 
   // ------------ TestInfo fields ------------
@@ -184,7 +185,7 @@ export class TestInfoImpl implements TestInfo {
     const timeoutError = await this._timeoutManager.runWithTimeout(cb);
     // When interrupting, we arrive here with a timeoutError, but we should not
     // consider it a timeout.
-    if (this.status !== 'interrupted' && timeoutError && !this._didTimeout) {
+    if (!this._wasInterrupted && timeoutError && !this._didTimeout) {
       this._didTimeout = true;
       this.errors.push(timeoutError);
       // Do not overwrite existing failure upon hook/teardown timeout.
@@ -254,6 +255,15 @@ export class TestInfoImpl implements TestInfo {
     return step;
   }
 
+  _interrupt() {
+    // Mark as interrupted so we can ignore TimeoutError thrown by interrupt() call.
+    this._wasInterrupted = true;
+    this._timeoutManager.interrupt();
+    // Do not overwrite existing failure (for example, unhandled rejection) with "interrupted".
+    if (this.status === 'passed')
+      this.status = 'interrupted';
+  }
+
   _failWithError(error: TestInfoError, isHardError: boolean) {
     // Do not overwrite any previous hard errors.
     // Some (but not all) scenarios include:
diff --git a/packages/playwright-test/src/worker/workerMain.ts b/packages/playwright-test/src/worker/workerMain.ts
index 32944326f2..0c2fcc9015 100644
--- a/packages/playwright-test/src/worker/workerMain.ts
+++ b/packages/playwright-test/src/worker/workerMain.ts
@@ -99,12 +99,7 @@ export class WorkerMain extends ProcessRunner {
   private _stop(): Promise<void> {
     if (!this._isStopped) {
       this._isStopped = true;
-
-      // Interrupt current action.
-      this._currentTest?._timeoutManager.interrupt();
-
-      if (this._currentTest && this._currentTest.status === 'passed')
-        this._currentTest.status = 'interrupted';
+      this._currentTest?._interrupt();
     }
     return this._runFinished;
   }
diff --git a/tests/playwright-test/basic.spec.ts b/tests/playwright-test/basic.spec.ts
index 2565c1a9d6..cd56a0fd2d 100644
--- a/tests/playwright-test/basic.spec.ts
+++ b/tests/playwright-test/basic.spec.ts
@@ -394,6 +394,24 @@ test('test.{skip,fixme} should define a skipped test', async ({ runInlineTest })
   expect(result.output).not.toContain('%%dontseethis');
 });
 
+test('should report unhandled error during test and not report timeout', async ({ runInlineTest }) => {
+  const result = await runInlineTest({
+    'a.test.ts': `
+      import { test, expect } from '@playwright/test';
+      test('unhandled rejection', async () => {
+        setTimeout(() => {
+          throw new Error('Unhandled');
+        }, 0);
+        await new Promise(f => setTimeout(f, 100));
+      });
+    `,
+  });
+  expect(result.exitCode).toBe(1);
+  expect(result.failed).toBe(1);
+  expect(result.output).toContain('Error: Unhandled');
+  expect(result.output).not.toContain('Test timeout of 30000ms exceeded');
+});
+
 test('should report unhandled rejection during worker shutdown', async ({ runInlineTest }) => {
   const result = await runInlineTest({
     'a.test.ts': `