diff --git a/CHANGELOG.md b/CHANGELOG.md
index 4de7910b..6c57900d 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -5,6 +5,11 @@ All notable changes to this project will be documented in this file.
 The format is based on [Keep a Changelog](https://keepachangelog.com/en/1.0.0/),
 and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0.html).
 
+## Unreleased
+### Fixed
+ - Errors from code evaluation (with `continue_on_error = true`) are now properly displayed
+   with `showerror`. ([#261])
+
 ## [v2.20.0] - 2024-10-16
 ### Added
  - A new keyword argument configuration `continue_on_error::Bool = false` has been added
diff --git a/src/Literate.jl b/src/Literate.jl
index 5003bc9f..8f5ca2e0 100644
--- a/src/Literate.jl
+++ b/src/Literate.jl
@@ -936,15 +936,24 @@ function execute_block(sb::Module, block::String; inputfile::String, fake_source
         end
     end
     popdisplay(disp) # IOCapture.capture has a try-catch so should always end up here
-    if c.error && !continue_on_error
-        error("""
-             $(sprint(showerror, c.value))
-             when executing the following code block from inputfile `$(Base.contractuser(inputfile))`
-
-             ```julia
-             $block
-             ```
-             """)
+    if c.error
+        if continue_on_error
+            err = c.value
+            if err isa LoadError # include_string may wrap error in LoadError
+                err = err.error
+            end
+            all_output = c.output * "\n\nERROR: " * sprint(showerror, err)
+            return nothing, all_output, disp.data
+        else
+           error("""
+                 $(sprint(showerror, c.value))
+                 when executing the following code block from inputfile `$(Base.contractuser(inputfile))`
+
+                 ```julia
+                 $block
+                 ```
+                 """)
+        end
     end
     return c.value, c.output, disp.data
 end
diff --git a/test/runtests.jl b/test/runtests.jl
index af30d8e0..253de1da 100644
--- a/test/runtests.jl
+++ b/test/runtests.jl
@@ -1462,8 +1462,8 @@ end end
 @testset "continue_on_error=true" begin
     input_with_error =
         """
-        # The following will error
-
+        # The following will print something, then error
+        print("I always wanted to calculate")
         sqrt(-1.0)
         """
     mktempdir(@__DIR__) do sandbox
@@ -1471,7 +1471,8 @@ end end
         write(inputfile, input_with_error)
         Literate.markdown(inputfile, sandbox; continue_on_error = true, execute = true)
         output_md = read(joinpath(sandbox, "input.md"), String)
-        @test occursin("DomainError(-1.0", output_md)
+        @test occursin("I always wanted to calculate", output_md)
+        @test occursin("ERROR: DomainError with -1.0", output_md)
     end
 end