diff --git a/test/e2e/continue_on_error_test.go b/test/e2e/continue_on_error_test.go
new file mode 100644
index 0000000..26d9676
--- /dev/null
+++ b/test/e2e/continue_on_error_test.go
@@ -0,0 +1,100 @@
+// Copyright 2020 The Kubernetes Authors.
+// SPDX-License-Identifier: Apache-2.0
+
+package e2e
+
+import (
+	"context"
+	"fmt"
+	"strings"
+
+	. "github.com/onsi/ginkgo"
+	. "github.com/onsi/gomega"
+	"k8s.io/apimachinery/pkg/apis/meta/v1/unstructured"
+	"sigs.k8s.io/cli-utils/pkg/apply"
+	"sigs.k8s.io/cli-utils/pkg/apply/event"
+	"sigs.k8s.io/cli-utils/pkg/object"
+	"sigs.k8s.io/controller-runtime/pkg/client"
+)
+
+func continueOnErrorTest(_ client.Client, invConfig InventoryConfig, inventoryName, namespaceName string) {
+	By("apply a set of resources that includes an invalid CRD and a deployment")
+	applier := invConfig.ApplierFactoryFunc()
+
+	inv := invConfig.InvWrapperFunc(invConfig.InventoryFactoryFunc(inventoryName, namespaceName, "test"))
+
+	resources := []*unstructured.Unstructured{
+		deploymentManifest(namespaceName),
+		manifestToUnstructured(invalidCrd),
+	}
+
+	ch := applier.Run(context.TODO(), inv, resources, apply.Options{})
+
+	var applierEvents []event.Event
+	for e := range ch {
+		Expect(e.Type).NotTo(Equal(event.ErrorType))
+		applierEvents = append(applierEvents, e)
+	}
+	err := verifyEvents([]expEvent{
+		{
+			eventType: event.InitType,
+		},
+		{
+			eventType: event.ApplyType,
+			applyEvent: &expApplyEvent{
+				applyEventType: event.ApplyEventResourceUpdate,
+				operation:      event.Failed,
+				identifier:     object.UnstructuredToObjMeta(manifestToUnstructured(invalidCrd)),
+				error:          fmt.Errorf("failed to apply"),
+			},
+		},
+		{
+			eventType: event.ApplyType,
+			applyEvent: &expApplyEvent{
+				applyEventType: event.ApplyEventResourceUpdate,
+				operation:      event.Created,
+			},
+		},
+		{
+			// complete
+			eventType: event.ApplyType,
+		},
+		{
+			// complete
+			eventType: event.PruneType,
+		},
+	}, applierEvents)
+	Expect(err).ToNot(HaveOccurred())
+
+	By("destroy the resources")
+	destroyer := invConfig.DestroyerFactoryFunc()
+	destroyerEvents := runCollectNoErr(destroyer.Run(inv))
+	err = verifyEvents([]expEvent{
+		{
+			eventType: event.DeleteType,
+			deleteEvent: &expDeleteEvent{
+				deleteEventType: event.DeleteEventResourceUpdate,
+				operation:       event.Deleted,
+				error:           nil,
+			},
+		},
+	}, destroyerEvents)
+	Expect(err).ToNot(HaveOccurred())
+}
+
+var invalidCrd = []byte(strings.TrimSpace(`
+apiVersion: apiextensions.k8s.io/v1
+kind: CustomResourceDefinition
+metadata:
+  name: invalidexamples.cli-utils.example.io
+spec:
+  conversion:
+    strategy: None
+  group: cli-utils.example.io
+  names:
+    kind: InvalidExample
+    listKind: InvalidExampleList
+    plural: invalidexamples
+    singular: invalidexample
+  scope: Cluster
+`))
diff --git a/test/e2e/e2e_test.go b/test/e2e/e2e_test.go
index de53121..3fc5975 100644
--- a/test/e2e/e2e_test.go
+++ b/test/e2e/e2e_test.go
@@ -105,6 +105,10 @@ var _ = Describe("Applier", func() {
 				It("Apply CRD and CR", func() {
 					crdTest(c, invConfig, inventoryName, namespace.GetName())
 				})
+
+				It("Apply continues on error", func() {
+					continueOnErrorTest(c, invConfig, inventoryName, namespace.GetName())
+				})
 			})
 
 			Context("Inventory policy", func() {