diff --git a/CHANGELOG.rst b/CHANGELOG.rst
index 625c7edc566..bddd392d6cd 100644
--- a/CHANGELOG.rst
+++ b/CHANGELOG.rst
@@ -5,6 +5,10 @@
 
 *
 
+* Fix (`#1178 <https://github.com/pytest-dev/pytest/issues/1178>`_):
+  ``pytest.fail`` with non-ascii characters raises an internal pytest error.
+  Thanks `@nicoddemus`_ for the PR.
+
 * Fix (`#469`_): junit parses report.nodeid incorrectly, when params IDs
   contain ``::``. Thanks `@tomviner`_ for the PR (`#1431`_).
 
diff --git a/_pytest/python.py b/_pytest/python.py
index ec346f587e0..48e4ebf5fe0 100644
--- a/_pytest/python.py
+++ b/_pytest/python.py
@@ -740,7 +740,7 @@ def _prunetraceback(self, excinfo):
     def _repr_failure_py(self, excinfo, style="long"):
         if excinfo.errisinstance(pytest.fail.Exception):
             if not excinfo.value.pytrace:
-                return str(excinfo.value)
+                return py._builtin._totext(excinfo.value)
         return super(FunctionMixin, self)._repr_failure_py(excinfo,
             style=style)
 
diff --git a/_pytest/runner.py b/_pytest/runner.py
index a50c2d73888..cde94c8c89e 100644
--- a/_pytest/runner.py
+++ b/_pytest/runner.py
@@ -435,7 +435,10 @@ def __init__(self, msg=None, pytrace=True):
 
     def __repr__(self):
         if self.msg:
-            return str(self.msg)
+            val = self.msg
+            if isinstance(val, bytes):
+                val = py._builtin._totext(val, errors='replace')
+            return val
         return "<%s instance>" %(self.__class__.__name__,)
     __str__ = __repr__
 
diff --git a/testing/test_runner.py b/testing/test_runner.py
index c3c415e0fb8..4421c5d0d29 100644
--- a/testing/test_runner.py
+++ b/testing/test_runner.py
@@ -1,3 +1,4 @@
+# -*- coding: utf-8 -*-
 from __future__ import with_statement
 
 import _pytest._code
@@ -439,6 +440,27 @@ def teardown_function(function):
     assert 'def teardown_function' not in result.stdout.str()
 
 
+@pytest.mark.parametrize('str_prefix', ['u', ''])
+def test_pytest_fail_notrace_non_ascii(testdir, str_prefix):
+    """Fix pytest.fail with pytrace=False with non-ascii characters (#1178).
+
+    This tests with native and unicode strings containing non-ascii chars.
+    """
+    testdir.makepyfile(u"""
+        # coding: utf-8
+        import pytest
+
+        def test_hello():
+            pytest.fail(%s'oh oh: ☺', pytrace=False)
+    """ % str_prefix)
+    result = testdir.runpytest()
+    if sys.version_info[0] >= 3:
+        result.stdout.fnmatch_lines(['*test_hello*', "oh oh: ☺"])
+    else:
+        result.stdout.fnmatch_lines(['*test_hello*', "oh oh: *"])
+    assert 'def test_hello' not in result.stdout.str()
+
+
 def test_pytest_no_tests_collected_exit_status(testdir):
     result = testdir.runpytest()
     result.stdout.fnmatch_lines('*collected 0 items*')