diff --git a/packages/angular-cli/plugins/karma.js b/packages/angular-cli/plugins/karma.js
index 1448b2bb4408..0131b660264e 100644
--- a/packages/angular-cli/plugins/karma.js
+++ b/packages/angular-cli/plugins/karma.js
@@ -1,4 +1,6 @@
 const path = require('path');
+const fs = require('fs');
+
 const getWebpackTestConfig = require('../models/webpack-build-test').getWebpackTestConfig;
 const CliConfig = require('../models/config').CliConfig;
 
@@ -17,6 +19,27 @@ const init = (config) => {
     progress: config.angularCli.progress
   }
 
+  // add assets
+  if (appConfig.assets) {
+    const assets = typeof appConfig.assets === 'string' ? [appConfig.assets] : appConfig.assets;
+    config.proxies = config.proxies || {};
+    assets.forEach(asset => {
+      const fullAssetPath = path.join(config.basePath, appConfig.root, asset);
+      const isDirectory = fs.lstatSync(fullAssetPath).isDirectory();
+      const filePattern = isDirectory ? fullAssetPath + '/**' : fullAssetPath;
+      const proxyPath = isDirectory ? asset + '/' : asset;
+      config.files.push({
+        pattern: filePattern,
+        included: false,
+        served: true,
+        watched: true
+      });
+      // The `files` entry serves the file from `/base/{appConfig.root}/{asset}`
+      //  so, we need to add a URL rewrite that exposes the asset as `/{asset}` only
+      config.proxies['/' + proxyPath] = '/base/' + appConfig.root + '/' + proxyPath;
+    });
+  }
+
   // add webpack config
   const webpackConfig = getWebpackTestConfig(config.basePath, environment, appConfig, testConfig);
   const webpackMiddlewareConfig = {
diff --git a/tests/e2e/tests/test/test.ts b/tests/e2e/tests/test/test.ts
index c64a17088ada..89859a4caef9 100644
--- a/tests/e2e/tests/test/test.ts
+++ b/tests/e2e/tests/test/test.ts
@@ -1,8 +1,65 @@
-import {ng} from '../../utils/process';
+import { writeMultipleFiles } from '../../utils/fs';
+import { ng } from '../../utils/process';
+import { updateJsonFile } from '../../utils/project';
+import { expectToFail } from '../../utils/utils';
+import { stripIndent } from 'common-tags';
 
 
-export default function() {
-  // make sure both --watch=false and --single-run work
+export default function () {
+  // Each test function returns PromiseLike<Something_Different>, 
+  //  which would throw normally
+  //  but resolve() normalizes this to <any> from the start
+  return Promise.resolve()
+    .then(() => testWatchFalseAndSingleRun())
+    .then(() => testAssetsAreServed());
+}
+
+// Make sure both --watch=false and --single-run work
+function testWatchFalseAndSingleRun() {
   return ng('test', '--single-run')
     .then(() => ng('test', '--watch=false'));
 }
+
+// Make sure asset files are served
+function testAssetsAreServed() {
+  return Promise.resolve()
+    .then(() => writeMultipleFiles({
+      'src/assets/file.txt': 'assets-folder-content',
+      'src/file.txt': 'file-content',
+      // Not using `async()` in tests as it seemed to swallow `fetch()` errors
+      'src/app/app.component.spec.ts': stripIndent`
+        describe('Test Runner', () => {
+          const fetch = global['fetch'];
+          it('should serve files in assets folder', (done) => {
+            fetch('/assets/file.txt')
+              .then(response => response.text())
+              .then(fileText => {
+                expect(fileText).toMatch('assets-folder-content');
+                done();
+              });
+          });
+          it('should serve files explicitly added to assets array', (done) => {
+            fetch('/file.txt')
+              .then(response => response.text())
+              .then(fileText => {
+                expect(fileText).toMatch('file-content');
+                done();
+              });
+          });
+        });
+      `
+    }))
+    // Test failure condition (no assets in angular-cli.json)
+    .then(() => updateJsonFile('angular-cli.json', configJson => {
+      const app = configJson['apps'][0];
+      app['assets'] = [];
+    }))
+    .then(() => expectToFail(() => ng('test', '--single-run'),
+      'Should fail because the assets to serve were not in the angular-cli config'))
+    // Test passing condition (assets are included)
+    .then(() => updateJsonFile('angular-cli.json', configJson => {
+      const app = configJson['apps'][0];
+      app['assets'] = ['assets', 'file.txt'];
+    }))
+    .then(() => ng('test', '--single-run'));
+}
diff --git a/tests/e2e/utils/utils.ts b/tests/e2e/utils/utils.ts
index f1c92420181b..0e89816b07c1 100644
--- a/tests/e2e/utils/utils.ts
+++ b/tests/e2e/utils/utils.ts
@@ -1,9 +1,12 @@
 
-export function expectToFail(fn: () => Promise<any>): Promise<void> {
+export function expectToFail(fn: () => Promise<any>, errorMessage?: string): Promise<void> {
   return fn()
     .then(() => {
-      throw new Error(`Function ${fn.source} was expected to fail, but succeeded.`);
-    }, () => {});
+      const functionSource = fn.name || (<any>fn).source || fn.toString();
+      const errorDetails = errorMessage ? `\n\tDetails:\n\t${errorMessage}` : '';
+      throw new Error(
+        `Function ${functionSource} was expected to fail, but succeeded.${errorDetails}`);
+    }, () => { });
 }
 
 export function isMobileTest() {