diff --git a/xonsh/lexer.py b/xonsh/lexer.py
index 905877dca..a5b033848 100644
--- a/xonsh/lexer.py
+++ b/xonsh/lexer.py
@@ -67,14 +67,16 @@ def handle_dollar(state, token, stream):
     try:
         n = next(stream)
     except:
-        raise Exception("missing token after $")
+        m = "missing token after $"
+        yield _new_token("ERRORTOKEN", m, token.start)
 
     if n.start != token.end:
-        raise Exception("unexpected whitespace after $")
+        m = "unexpected whitespace after $"
+        yield _new_token("ERRORTOKEN", m, token.start)
 
     if n.type == tokenize.NAME:
+        state['last'] = n
         yield _new_token('DOLLAR_NAME', '$' + n.string, token.start)
-        state['last'] = token
     elif n.type == tokenize.OP and n.string == '(':
         state['pymode'].append(False)
         state['last'] = n
@@ -89,13 +91,15 @@ def handle_dollar(state, token, stream):
         yield _new_token('DOLLAR_LBRACE', '${', token.start)
     else:
         e = 'expected NAME, (, [, or {{ after $, but got {0}'
-        raise Exception(e.format(n))
+        m = e.format(n)
+        yield _new_token("ERRORTOKEN", m, token.start)
 
 def handle_at(state, token, stream):
     try:
         n = next(stream)
     except:
-        raise Exception("missing token after @")
+        m = "missing token after @"
+        yield _new_token("ERRORTOKEN", m, token.start)
     
     if n.type == tokenize.OP and n.string == '(' and \
             n.start == token.end:
@@ -146,7 +150,8 @@ def handle_backtick(state, token, stream):
         state['last'] = n
     else:
         e = "Could not find matching backtick for regex on line {0}"
-        raise Exception(e.format(token.start[0]))
+        m = e.format(token.start[0])
+        yield _new_token("ERRORTOKEN", m, token.start)
 
 def handle_newline(state, token, stream):
     try:
@@ -192,6 +197,11 @@ def handle_rbracket(state, token, stream):
     state['last'] = token
     yield _new_token('RBRACKET', ']', token.start)
 
+def handle_error_space(state, token, stream):
+    if state['pymode'][-1]:
+        state['last'] = token
+        yield _new_token('WS', ' ', token.start)
+
 special_handlers = {
     tokenize.ENCODING: lambda s,t,st: [],
     tokenize.NEWLINE: handle_newline,
@@ -205,8 +215,9 @@ special_handlers = {
     (tokenize.ERRORTOKEN, '`'): handle_backtick,
     (tokenize.ERRORTOKEN, '?'): handle_question,
     (tokenize.OP, '@'): handle_at,
+    (tokenize.ERRORTOKEN, ' '): handle_error_space,
     tokenize.INDENT: handle_indent,
-    tokenize.DEDENT: handle_indent
+    tokenize.DEDENT: handle_indent,
 }
 
 def handle_token(state, token, stream):
@@ -234,7 +245,8 @@ def handle_token(state, token, stream):
         for i in special_handlers[typ](state, token, stream):
             yield i
     else:
-        raise Exception('Unexpected token: {0}'.format(token))
+        m = "Unexpected token: {0}".format(token)
+        yield _new_token("ERRORTOKEN", m, token.start)
 
 def preprocess_tokens(tokstream):
     tokstream = clear_NL(tokstream)
@@ -248,9 +260,15 @@ def clear_NL(tokstream):
         if i.type != tokenize.NL:
             yield i
 
+def single_error(exc):
+    yield _new_token("ERRORTOKEN", "{} (line {}, column {})".format(exc.msg, exc.lineno, exc.offset), (0,0))
+
 from io import BytesIO
 def tok(s):
-    return iter(tokenize.tokenize(BytesIO(s.encode('utf-8')).readline))
+    try:
+        return iter(tokenize.tokenize(BytesIO(s.encode('utf-8')).readline))
+    except Exception as e:
+        return iter(single_error(e))
 
 
 #synthesize a new PLY token
@@ -289,31 +307,13 @@ class Lexer(object):
         self.errfunc = errfunc
         self.fname = ''
         self.last = None
-        self.lexer = None
-        self.indent = ''
-        self.in_py_mode = [True]
 
     def build(self, **kwargs):
         """Part of the PLY lexer API."""
-        self.lexer = lex.lex(object=self, **kwargs)
-        self.reset()
+        pass
 
     def reset(self):
-        #self.lexer.lineno = 1
-        self.indent = ''
-        self.last = None
-        self.in_py_mode = [True]
-        self.in_parens = [False]
-
-    @property
-    def lineno(self):
-        if self.lexer is not None:
-            return self.lexer.lineno
-
-    @lineno.setter
-    def lineno(self, value):
-        if self.lexer is not None:
-            self.lexer.lineno = value
+        pass
 
     def input(self, s):
         """Calls the lexer on the string s."""
@@ -324,24 +324,11 @@ class Lexer(object):
         """Retrieves the next token."""
         try:
             self.last = next(self.token_stream)
-            #print(self.last)
+            print(self.last)
             return self.last
-        except:
+        except StopIteration:
             return None
 
-    def token_col(self, token):
-        """Discovers the token column number."""
-        offset = self.lexer.lexdata.rfind('\n', 0, token.lexpos)
-        return token.lexpos - offset
-
-    def _error(self, msg, token):
-        location = self._make_tok_location(token)
-        self.errfunc(msg, location[0], location[1])
-        self.lexer.skip(1)
-
-    def _make_tok_location(self, token):
-        return (token.lineno, self.token_col(token))
-
     def __iter__(self):
         t = self.token()
         while t is not None:
@@ -407,278 +394,3 @@ class Lexer(object):
         # Ellipsis (...)
         'ELLIPSIS',
         )
-
-    #
-    # Token Regexes
-    #
-    identifier = r'[a-zA-Z_][0-9a-zA-Z_]*'
-    dollar = r'\$'
-
-    int_literal = '\d+'
-    hex_literal = '0[xX][0-9a-fA-F]+'
-    oct_literal = '0[oO]?[0-7]+'
-    bin_literal = '0[bB]?[0-1]+'
-
-    # string literals
-    triple_single_string = r"'''((\\(.|\n))|([^'\\])|('(?!''))|\n)*'''"
-    triple_double_string = r'"""((\\(.|\n))|([^"\\])|("(?!""))|\n)*"""'
-    single_single_string = r"'((\\(.|\n))|([^'\\]))*'"
-    single_double_string = r'"((\\(.|\n))|([^"\\]))*"'
-    triple_string = anyof(triple_single_string, triple_double_string) 
-    single_string = anyof(single_single_string, single_double_string)
-    string_literal = anyof(triple_string, single_string)
-    raw_string_literal = '[Rr]' + string_literal
-    unicode_literal = '[Uu]' + string_literal 
-    bytes_literal = '[Bb]' + string_literal
-
-    # floating point
-    float_exponent = r"(?:[eE][-+]?[0-9]+)"
-    float_mantissa = r"(?:[0-9]*\.[0-9]+)|(?:[0-9]+\.)"
-    float_literal = ('((((' + float_mantissa + ')' + float_exponent + 
-                     '?)|([0-9]+' + float_exponent + ')))')
-    imag_literal = '(' + r'[0-9]+[jJ]' + '|' + float_literal + r'[jJ]' + ')'
-
-    #
-    # Rules 
-    #
-
-    # Command line
-    def t_INDENT(self, t):
-        r'[ \t]+'
-        last = self.last
-        if not self.in_py_mode[-1]:
-            return t
-        elif last is not None and last.type != 'NEWLINE':
-            return  # returns None to skip internal whitespace
-        i = self.indent
-        v = t.value
-        if len(i) > len(v):
-            if not i.startswith(v):
-                self._error("indentation level does not match previous level", t)
-            t.type = 'DEDENT'
-        elif not v.startswith(i):
-            self._error("indentation level does not match previous level", t)
-        self.indent = v
-        t.lexer.lineno += 1
-        return t
-
-    t_ENDMARKER = r'\x03'
-
-    # Newlines
-    def t_NEWLINE(self, t):
-        r'\n'
-        if self.in_parens[-1]:
-            t.lexer.lineno += 1
-            return None
-        else:
-            return t
-
-    #
-    # Ignore internal whitespace based on parentherical scope
-    #
-
-    def t_AT_LPAREN(self, t):
-        r'@\('
-        self.in_parens.append(True)
-        self.in_py_mode.append(True)
-        return t
-
-    def t_DOLLAR_LPAREN(self, t):
-        r'\$\('
-        self.in_parens.append(True)
-        self.in_py_mode.append(False)
-        return t
-
-    def t_LPAREN(self, t):
-        r'\('
-        self.in_parens.append(True)
-        self.in_py_mode.append(True)
-        return t
-
-    def t_RPAREN(self, t):
-        r'\)'
-        self.in_parens.pop()
-        self.in_py_mode.pop()
-        return t
-
-    def t_DOLLAR_LBRACE(self, t):
-        r'\$\{'
-        self.in_parens.append(True)
-        self.in_py_mode.append(True)
-        return t
-
-    def t_LBRACE(self, t):
-        r'\{'
-        self.in_parens.append(True)
-        self.in_py_mode.append(True)
-        return t
-
-    def t_RBRACE(self, t):
-        r'\}'
-        self.in_parens.pop()
-        self.in_py_mode.pop()
-        return t
-
-    def t_DOLLAR_LBRACKET(self, t):
-        r'\$\['
-        self.in_parens.append(True)
-        self.in_py_mode.append(False)
-        return t
-
-    def t_LBRACKET(self, t):
-        r'\['
-        self.in_parens.append(True)
-        self.in_py_mode.append(True)
-        return t
-
-    def t_RBRACKET(self, t):
-        r'\]'
-        self.in_parens.pop()
-        self.in_py_mode.pop()
-        return t
-
-    # Basic Operators
-    t_PLUS = r'\+'
-    t_MINUS = r'-'
-    t_TIMES = r'\*'
-    t_DIVIDE = r'/'
-    t_DOUBLEDIV = r'//'
-    t_MOD = r'%'
-    t_POW = r'\*\*'
-    t_PIPE = r'\|'
-    t_AMPERSAND = r'&'
-    t_TILDE = r'~'
-    t_XOR = r'\^'
-    t_LSHIFT = r'<<'
-    t_RSHIFT = r'>>'
-    #t_LOGIC_OR = r'\|\|'
-    #t_LOGIC_AND = r'&&'
-    t_LT = r'<'
-    t_GT = r'>'
-    t_LE = r'<='
-    t_GE = r'>='
-    t_EQ = r'=='
-    t_NE = r'!='
-    #t_LARROW = r'<-'
-    t_RARROW = r'->'
-
-    # Assignment Operators
-    t_EQUALS = r'='
-    t_PLUSEQUAL = r'\+='
-    t_MINUSEQUAL = r'-='
-    t_TIMESEQUAL = r'\*='
-    t_DIVEQUAL = r'/='
-    t_MODEQUAL = r'%='
-    t_POWEQUAL = r'\*\*='
-    t_LSHIFTEQUAL = r'<<='
-    t_RSHIFTEQUAL = r'>>='
-    t_AMPERSANDEQUAL = r'&='
-    t_PIPEEQUAL = r'\|='
-    t_XOREQUAL = r'\^='
-    t_DOUBLEDIVEQUAL = r'//='
-    t_DOLLAR = dollar
-    t_REGEXPATH = r'`[^`]*`'
-
-    def t_DOUBLE_QUESTION(self, t):
-        r'\?\?'
-        return t
-
-    t_QUESTION = r'\?'
-
-    # Delimeters
-    #t_LPAREN = r'\('
-    #t_RPAREN = r'\)'
-    #t_LBRACKET = r'\['
-    #t_RBRACKET = r'\]'
-    #t_LBRACE = r'\{'
-    #t_RBRACE = r'\}'
-    t_COMMA = r','
-    t_PERIOD = r'\.'
-    t_SEMI = r';'
-    t_COLON = r':'
-    t_AT = r'@'
-    t_ELLIPSIS = r'\.\.\.'
-
-    def t_COMMENT(self, t):
-        r'\#.*'
-        return
-
-    #
-    # Literals
-    #
-
-    # strings, functions to ensure correct ordering
-
-    @TOKEN(string_literal)
-    def t_STRING_LITERAL(self, t):
-        return t
-
-    # float literal must come before int literals
-
-    @TOKEN(imag_literal)
-    def t_IMAG_LITERAL(self, t):
-        if self.in_py_mode[-1]:
-            t.value = eval(t.value)
-        return t
-
-    @TOKEN(float_literal)
-    def t_FLOAT_LITERAL(self, t):
-        if self.in_py_mode[-1]:
-            t.value = float(t.value)
-        return t
-
-    # ints, functions to ensure correct ordering
-
-    @TOKEN(hex_literal)
-    def t_HEX_LITERAL(self, t):
-        if self.in_py_mode[-1]:
-            t.value = int(t.value, 16)
-        return t
-
-    @TOKEN(oct_literal)
-    def t_OCT_LITERAL(self, t):
-        if self.in_py_mode[-1]:
-            t.value = int(t.value, 8)
-        return t
-
-    @TOKEN(bin_literal)
-    def t_BIN_LITERAL(self, t):
-        if self.in_py_mode[-1]:
-            t.value = int(t.value, 2)
-        return t
-
-    @TOKEN(int_literal)
-    def t_INT_LITERAL(self, t):
-        if self.in_py_mode[-1]:
-            t.value = int(t.value)
-        return t
-
-    def t_NONE(self, t):
-        r'None'
-        if self.in_py_mode[-1]:
-            t.value = None
-        return t
-
-    def t_TRUE(self, t):
-        r'True'
-        if self.in_py_mode[-1]:
-            t.value = True
-        return t
-
-    def t_FALSE(self, t):
-        r'False'
-        if self.in_py_mode[-1]:
-            t.value = False
-        return t
-
-    # Extra
-    @TOKEN(identifier)
-    def t_NAME(self, t):
-        if self.in_py_mode[-1] and t.value in self.pykeyword_map:
-            t.type = self.pykeyword_map[t.value]
-        return t
-
-    def t_error(self, t):
-        msg = 'Invalid token {0!r}'.format(t.value[0])
-        self._error(msg, t)
-