diff --git a/src/cmd/watch.rs b/src/cmd/watch.rs
index 09524f65..a5846b21 100644
--- a/src/cmd/watch.rs
+++ b/src/cmd/watch.rs
@@ -53,33 +53,48 @@ fn remove_ignored_files(book_root: &PathBuf, paths: &[PathBuf]) -> Vec<PathBuf>
         return vec![];
     }
 
-    let gitignore_path = book_root.join(".gitignore");
-
-    match gitignore::File::new(gitignore_path.as_path()) {
-        Ok(exclusion_checker) => paths
-            .iter()
-            .filter(|path| match exclusion_checker.is_excluded(path) {
-                Ok(exclude) => !exclude,
-                Err(error) => {
-                    warn!(
-                        "Unable to determine if {:?} is excluded: {:?}. Including it.",
-                        &path, error
-                    );
-                    true
+    match find_gitignore(book_root) {
+        Some(gitignore_path) => {
+            match gitignore::File::new(gitignore_path.as_path()) {
+                Ok(exclusion_checker) => filter_ignored_files(exclusion_checker, paths),
+                Err(_) => {
+                    // We're unable to read the .gitignore file, so we'll silently allow everything.
+                    // Please see discussion: https://github.com/rust-lang-nursery/mdBook/pull/1051
+                    paths.iter().map(|path| path.to_path_buf()).collect()
                 }
-            })
-            .map(|path| path.to_path_buf())
-            .collect(),
-        Err(error) => {
-            warn!(
-                "Unable to read gitignore file at {:?} file: {:?}. All files will be allowed.",
-                gitignore_path, error
-            );
+            }
+        }
+        None => {
+            // There is no .gitignore file.
             paths.iter().map(|path| path.to_path_buf()).collect()
         }
     }
 }
 
+fn find_gitignore(book_root: &PathBuf) -> Option<PathBuf> {
+    book_root
+        .ancestors()
+        .map(|p| p.join(".gitignore"))
+        .find(|p| p.exists())
+}
+
+fn filter_ignored_files(exclusion_checker: gitignore::File, paths: &[PathBuf]) -> Vec<PathBuf> {
+    paths
+        .iter()
+        .filter(|path| match exclusion_checker.is_excluded(path) {
+            Ok(exclude) => !exclude,
+            Err(error) => {
+                warn!(
+                    "Unable to determine if {:?} is excluded: {:?}. Including it.",
+                    &path, error
+                );
+                true
+            }
+        })
+        .map(|path| path.to_path_buf())
+        .collect()
+}
+
 /// Calls the closure when a book source file is changed, blocking indefinitely.
 pub fn trigger_on_change<F>(book: &MDBook, closure: F)
 where