diff --git a/mercurial/configitems.py b/mercurial/configitems.py
--- a/mercurial/configitems.py
+++ b/mercurial/configitems.py
@@ -296,6 +296,9 @@
 coreconfigitem('merge', 'followcopies',
     default=True,
 )
+coreconfigitem('merge', 'abortonfailure',
+    default=False,
+)
 coreconfigitem('pager', 'ignore',
     default=list,
 )
diff --git a/mercurial/filemerge.py b/mercurial/filemerge.py
--- a/mercurial/filemerge.py
+++ b/mercurial/filemerge.py
@@ -514,13 +514,30 @@
             repo.ui.status(_('running merge tool %s for file %s\n') %
                            (tool, fcd.path()))
         repo.ui.debug('launching merge tool: %s\n' % cmd)
-        r = ui.system(cmd, cwd=repo.root, environ=env, blockedtag='mergetool')
+        onerr = getmergeerrorhandler(repo)
+        r = ui.system(cmd, cwd=repo.root, environ=env, blockedtag='mergetool',
+                      onerr=onerr)
         repo.ui.debug('merge tool returned: %s\n' % r)
         return True, r, False
     finally:
         util.unlink(b)
         util.unlink(c)
 
+def getmergeerrorhandler(repo):
+    """
+    Traditionally, the merge process attempts to merge all unresolved files
+    using the merge tool of choice, regardless of whether previous file merge
+    attempts succeeded or failed. Setting the merge.abortonfailure option to
+    True changes this behavior so that a failed merge will immediately abort
+    the merge operation, leaving the user in a normal unresolved merge state.
+    """
+    onerr = None
+    if repo.ui.configbool('merge', 'abortonfailure'):
+        def onerr(*args):
+            msg = _('merge aborted due to nonrzero mergetool return code')
+            raise error.Abort(msg)
+    return onerr
+
 def _formatconflictmarker(repo, ctx, template, label, pad):
     """Applies the given template to the ctx, prefixed by the label.
 
diff --git a/mercurial/help/config.txt b/mercurial/help/config.txt
--- a/mercurial/help/config.txt
+++ b/mercurial/help/config.txt
@@ -1239,6 +1239,14 @@
    different contents. Similar to ``merge.checkignored``, except for files that
    are not ignored. (default: ``abort``)
 
+``abortonfailure``
+   Traditionally, the merge process attempts to merge all unresolved files
+   using the merge tool of choice, regardless of whether previous file merge
+   attempts succeeded or failed. Setting the ``merge.abortonfailure`` option to
+   True changes this behavior so that a failed merge will immediately abort
+   the merge operation, leaving the user in a normal unresolved merge state.
+   (default: ``False``)
+
 ``merge-patterns``
 ------------------
 
diff --git a/tests/test-filemerge-abort.t b/tests/test-filemerge-abort.t
new file mode 100644
--- /dev/null
+++ b/tests/test-filemerge-abort.t
@@ -0,0 +1,36 @@
+  $ cat >> $HGRCPATH <<EOF
+  > [extensions]
+  > rebase=
+  > [phases]
+  > publish=False
+  > [merge]
+  > abortonfailure=True
+  > EOF
+
+  $ hg init repo
+  $ cd repo
+  $ echo a > a
+  $ echo b > b
+  $ hg commit -qAm ab
+  $ echo c >> a
+  $ echo c >> b
+  $ hg commit -qAm c
+  $ hg up -q .^
+  $ echo d >> a
+  $ echo d >> b
+  $ hg commit -qAm d
+  $ hg rebase -s 1 -d 2 --tool false
+  rebasing 1:1f28a51c3c9b "c"
+  merging a
+  merging b
+  abort: merge aborted due to nonrzero mergetool return code
+  [255]
+  $ hg rebase --abort
+  rebase aborted
+  $ hg rebase -s 1 -d 2 --tool true
+  rebasing 1:1f28a51c3c9b "c"
+  merging a
+  merging b
+  note: rebase of 1:1f28a51c3c9b created no changes to commit
+  saved backup bundle to $TESTTMP/repo/.hg/strip-backup/1f28a51c3c9b-5312ccf5-rebase.hg (glob)
+