diff --git a/papermill/tests/notebooks/line_magic_error.ipynb b/papermill/tests/notebooks/line_magic_error.ipynb
new file mode 100644
index 00000000..1751eab5
--- /dev/null
+++ b/papermill/tests/notebooks/line_magic_error.ipynb
@@ -0,0 +1,43 @@
+{
+ "cells": [
+  {
+   "cell_type": "code",
+   "execution_count": null,
+   "metadata": {},
+   "outputs": [],
+   "source": [
+    "%undefined-line-magic"
+   ]
+  },
+  {
+   "cell_type": "code",
+   "execution_count": null,
+   "metadata": {},
+   "outputs": [],
+   "source": [
+    "print(\"Cell should not execute.\")"
+   ]
+  }
+ ],
+ "metadata": {
+  "kernelspec": {
+   "display_name": "Python 3",
+   "language": "python",
+   "name": "python3"
+  },
+  "language_info": {
+   "codemirror_mode": {
+    "name": "ipython",
+    "version": 3
+   },
+   "file_extension": ".py",
+   "mimetype": "text/x-python",
+   "name": "python",
+   "nbconvert_exporter": "python",
+   "pygments_lexer": "ipython3",
+   "version": "3.6.7"
+  }
+ },
+ "nbformat": 4,
+ "nbformat_minor": 2
+}
diff --git a/papermill/tests/test_execute.py b/papermill/tests/test_execute.py
index 46b59524..705d418c 100644
--- a/papermill/tests/test_execute.py
+++ b/papermill/tests/test_execute.py
@@ -327,6 +327,19 @@ def test_system_exit(self):
         self.assertEqual(nb.cells[1].outputs[0].evalue, '')
         self.assertEqual(nb.cells[2].execution_count, None)
 
+    def test_line_magic_error(self):
+        notebook_name = 'line_magic_error.ipynb'
+        result_path = os.path.join(self.test_dir, f'output_{notebook_name}')
+        with self.assertRaises(PapermillExecutionError):
+            execute_notebook(get_notebook_path(notebook_name), result_path)
+        nb = load_notebook_node(result_path)
+        self.assertEqual(nb.cells[0].cell_type, "markdown")
+        self.assertRegex(nb.cells[0].source, r'^<span .*<a href="#papermill-error-cell".*In \[1\].*</span>$')
+        self.assertEqual(nb.cells[0].metadata["tags"], ["papermill-error-cell-tag"])
+        self.assertEqual(nb.cells[2].cell_type, "code")
+        self.assertEqual(nb.cells[2].execution_count, 1)
+        self.assertEqual(nb.cells[3].execution_count, None)
+
 
 class TestNotebookValidation(unittest.TestCase):
     def setUp(self):