diff --git a/tests/aliases/__init__.py b/tests/aliases/__init__.py
new file mode 100644
index 000000000..e69de29bb
diff --git a/tests/aliases/test_source.py b/tests/aliases/test_source.py
new file mode 100644
index 000000000..10ccc0c09
--- /dev/null
+++ b/tests/aliases/test_source.py
@@ -0,0 +1,38 @@
+import os.path
+import pytest
+
+from contextlib import contextmanager
+from unittest.mock import MagicMock
+from xonsh.aliases import source_alias, builtins
+
+
+@pytest.fixture
+def mockopen(xonsh_builtins, monkeypatch):
+    @contextmanager
+    def mocked_open(fpath, *args, **kwargs):
+        yield MagicMock(read=lambda: fpath)
+    monkeypatch.setattr(builtins, 'open', mocked_open)
+
+
+def test_source_current_dir(mockopen, monkeypatch):
+    checker = []
+
+    def mocked_execx(src, *args, **kwargs):
+        checker.append(src.strip())
+    monkeypatch.setattr(builtins, 'execx', mocked_execx)
+    monkeypatch.setattr(os.path, 'isfile', lambda x: True)
+    source_alias(['foo', 'bar'])
+    assert checker == ['foo', 'bar']
+
+
+def test_source_path(mockopen, monkeypatch):
+    checker = []
+
+    def mocked_execx(src, *args, **kwargs):
+        checker.append(src.strip())
+    monkeypatch.setattr(builtins, 'execx', mocked_execx)
+    source_alias(['foo', 'bar'])
+    path_foo = os.path.join('tests', 'bin', 'foo')
+    path_bar = os.path.join('tests', 'bin', 'bar')
+    assert checker[0].endswith(path_foo)
+    assert checker[1].endswith(path_bar)
diff --git a/xonsh/aliases.py b/xonsh/aliases.py
index 0b09add1f..bb5acf288 100644
--- a/xonsh/aliases.py
+++ b/xonsh/aliases.py
@@ -256,9 +256,13 @@ def source_alias(args, stdin=None):
     encoding = env.get('XONSH_ENCODING')
     errors = env.get('XONSH_ENCODING_ERRORS')
     for fname in args:
-        if not os.path.isfile(fname):
-            fname = locate_binary(fname)
-        with open(fname, 'r', encoding=encoding, errors=errors) as fp:
+        fpath = fname
+        if not os.path.isfile(fpath):
+            fpath = locate_binary(fname)
+            if fpath is None:
+                print('source: {}: No such file'.format(fname), file=sys.stderr)
+                continue
+        with open(fpath, 'r', encoding=encoding, errors=errors) as fp:
             src = fp.read()
         if not src.endswith('\n'):
             src += '\n'