diff --git a/tools/karma/reporter.js b/tools/karma/reporter.js
index 4eae3083be..ca0693509a 100644
--- a/tools/karma/reporter.js
+++ b/tools/karma/reporter.js
@@ -6,62 +6,90 @@
  * found in the LICENSE file at https://angular.io/license
  */
 
-var SourceMapConsumer = require('source-map').SourceMapConsumer;
-var DotsReporter = require('karma/lib/reporters/dots_color');
+'use strict';
 
-var createErrorFormatter = function(basePath, emitter, SourceMapConsumer) {
-  var lastServedFiles = [];
-  emitter.on('file_list_modified', function(files) { lastServedFiles = files.served; });
-  function findFile(path) { return lastServedFiles.filter(_ => _.path === path)[0]; }
+const DotsColorReporter = require('karma/lib/reporters/dots_color');
+const {SourceMapConsumer} = require('source-map');
+const {resolve} = require('url');
 
-  var URL_REGEXP = new RegExp(
-      '(?:https?:\\/\\/[^\\/]*)?\\/?' +
-          '(base|absolute)' +               // prefix
+// Based on `karma/lib/reporter.js` (v2.0.4):
+// https://github.com/karma-runner/karma/blob/v2.0.4/lib/reporter.js
+function createErrorFormatter(config, emitter, SourceMapConsumer) {
+  const basePath = config.basePath;
+  const urlRoot = (config.urlRoot === '/') ? '' : (config.urlRoot || '');
+  const urlRegexp = new RegExp(
+      '(?:https?:\\/\\/' + config.hostname + '(?:\\:' + config.port + ')?' +
+          ')?\\/?' + urlRoot + '\\/?' +
+          '(base/|absolute)' +  // prefix, including slash for base/ to create relative paths.
           '((?:[A-z]\\:)?[^\\?\\s\\:]*)' +  // path
           '(\\?\\w*)?' +                    // sha
           '(\\:(\\d+))?' +                  // line
           '(\\:(\\d+))?' +                  // column
           '',
       'g');
+  const sourceMapConsumerCache = new WeakMap();
+  let lastServedFiles = [];
 
-  return function(msg, indentation) {
-    msg = (msg || '').replace(URL_REGEXP, function(_, prefix, path, __, ___, line, ____, column) {
-      if (prefix === 'base') {
-        path = basePath + path;
-      }
-      line = parseInt(line || '0', 10);
-      column = parseInt(column || '0', 10);
+  // Helpers
+  const findFile = path => lastServedFiles.find(f => f.path === path);
+  const formatPathMapping = (path, line, column) =>
+      path + (line ? `:${line}` : '') + (column ? `:${column}` : '');
+  const isString = input => typeof input === 'string';
+  const getSourceMapConsumer = sourceMap => {
+    if (!sourceMapConsumerCache.has(sourceMap)) {
+      sourceMapConsumerCache.set(sourceMap, new SourceMapConsumer(sourceMap));
+    }
+    return sourceMapConsumerCache.get(sourceMap);
+  };
+
+  emitter.on('file_list_modified', files => lastServedFiles = files.served);
+
+  return (input, indentation) => {
+    if (!isString(indentation)) indentation = '';
+    if (!input) input = '';
+    if (isString(input.message)) input = input.message;
+    if (!isString(input)) input = JSON.stringify(input, null, indentation);
+
+    let msg = input.replace(urlRegexp, (_, prefix, path, __, ___, line, ____, column) => {
+      const normalizedPath = (prefix === 'base/') ? `${basePath}/${path}` : path;
+      const file = findFile(normalizedPath);
+
+      if (file && file.sourceMap && line) {
+        line = +line;
+        column = +column || 0;
+        const bias =
+            column ? SourceMapConsumer.GREATEST_LOWER_BOUND : SourceMapConsumer.LEAST_UPPER_BOUND;
 
-      var file = findFile(path);
-      if (file && file.sourceMap) {
         try {
-          var original = new SourceMapConsumer(file.sourceMap)
-                             .originalPositionFor({line: line, column: column});
-          return process.cwd() + '/modules/' + original.source + ':' + original.line + ':' +
-              original.column;
+          const original =
+              getSourceMapConsumer(file.sourceMap).originalPositionFor({line, column, bias});
+          return formatPathMapping(
+              `${resolve(path, original.source)}`, original.line, original.column);
         } catch (e) {
-          console.warn('SourceMap position not found for trace: %s', msg);
+          console.warn(`SourceMap position not found for trace: ${input}`);
         }
       }
-      return path + ':' + line + ':' + column;
+
+      return formatPathMapping(path, line, column) || prefix;
     });
 
-    // indent every line
+    // Indent every line.
     if (indentation) {
-      msg = indentation + msg.replace(/\n/g, '\n' + indentation);
+      msg = indentation + msg.replace(/\n/g, `\n${indentation}`);
     }
-    return msg + '\n';
+
+    return config.formatError ? config.formatError(msg) : `${msg}\n`;
   };
-};
+}
 
 
-var InternalAngularReporter = function(config, emitter) {
-  var formatter = createErrorFormatter(config.basePath, emitter, SourceMapConsumer);
-  DotsReporter.call(this, formatter, false, config.colors);
-};
-
 InternalAngularReporter.$inject = ['config', 'emitter'];
+function InternalAngularReporter(config, emitter) {
+  var formatter = createErrorFormatter(config, emitter, SourceMapConsumer);
+  DotsColorReporter.call(this, formatter, false, config.colors, config.browserConsoleLogOptions);
+}
+
 
 module.exports = {
-  'reporter:internal-angular': ['type', InternalAngularReporter]
+  'reporter:internal-angular': ['type', InternalAngularReporter],
 };
diff --git a/tools/tsc-watch/index.ts b/tools/tsc-watch/index.ts
index cd3065ec1e..0400b3ce45 100644
--- a/tools/tsc-watch/index.ts
+++ b/tools/tsc-watch/index.ts
@@ -7,10 +7,9 @@
  */
 
 /* tslint:disable:no-console  */
-import {spawn} from 'child_process';
-import {existsSync, mkdirSync, writeFileSync} from 'fs';
+import {existsSync, mkdirSync} from 'fs';
 
-import {TSC, TscWatch, reportError} from './tsc_watch';
+import {TscWatch} from './tsc_watch';
 
 export * from './tsc_watch';
 import 'reflect-metadata';
diff --git a/tools/tsc-watch/tsc_watch.ts b/tools/tsc-watch/tsc_watch.ts
index 5143b6bd93..49367b3f55 100644
--- a/tools/tsc-watch/tsc_watch.ts
+++ b/tools/tsc-watch/tsc_watch.ts
@@ -10,7 +10,6 @@
 import {spawn} from 'child_process';
 import {platform} from 'os';
 import {normalize} from 'path';
-import {resolve} from 'url';
 
 enum State {
   idle,