diff --git a/spec-dtslint/operators/catchError-spec.ts b/spec-dtslint/operators/catchError-spec.ts
index 5a3b3f2838..dab0ebec49 100644
--- a/spec-dtslint/operators/catchError-spec.ts
+++ b/spec-dtslint/operators/catchError-spec.ts
@@ -1,10 +1,14 @@
-import { of, Observable } from 'rxjs';
+import { of, Observable, EMPTY } from 'rxjs';
 import { catchError } from 'rxjs/operators';
 
 it('should infer correctly', () => {
   const o = of(1, 2, 3).pipe(catchError((() => of(4, 5, 6)))); // $ExpectType Observable<number>
 });
 
+it('should handle empty (never) appropriately', () => {
+  const o = of(1, 2, 3).pipe(catchError(() => EMPTY));
+});
+
 it('should infer correctly when not returning', () => {
   const o = of(1, 2, 3).pipe(catchError((() => { throw new Error('your hands in the air'); }))); // $ExpectType Observable<number>
 });
@@ -24,3 +28,7 @@ it('should enforce that selector returns an Observable', () => {
 it('should enforce type of caught', () => {
   const o = of(1, 2, 3).pipe(catchError((err, caught: Observable<string>) => of('a', 'b', 'c'))); // $ExpectError
 });
+
+it('should handle union types', () => {
+  const o = of(1, 2, 3).pipe(catchError(err => err.message === 'wee' ? of('fun') : of(123))); // $ExpectType Observable<string | number>
+});
diff --git a/src/internal/operators/catchError.ts b/src/internal/operators/catchError.ts
index 6d259b5769..48d6040a0c 100644
--- a/src/internal/operators/catchError.ts
+++ b/src/internal/operators/catchError.ts
@@ -5,10 +5,11 @@ import {Observable} from '../Observable';
 import {OuterSubscriber} from '../OuterSubscriber';
 import { InnerSubscriber } from '../InnerSubscriber';
 import {subscribeToResult} from '../util/subscribeToResult';
-import {ObservableInput, OperatorFunction, MonoTypeOperatorFunction} from '../types';
+import {ObservableInput, OperatorFunction, MonoTypeOperatorFunction, ObservedValueOf} from '../types';
 
-export function catchError<T>(selector: (err: any, caught: Observable<T>) => never): MonoTypeOperatorFunction<T>;
-export function catchError<T, R>(selector: (err: any, caught: Observable<T>) => ObservableInput<R>): OperatorFunction<T, T | R>;
+/* tslint:disable:max-line-length */
+export function catchError<T, O extends ObservableInput<any>>(selector: (err: any, caught: Observable<T>) => O): OperatorFunction<T, T | ObservedValueOf<O>>;
+/* tslint:enable:max-line-length */
 
 /**
  * Catches errors on the observable to be handled by returning a new observable or throwing an error.
@@ -77,8 +78,10 @@ export function catchError<T, R>(selector: (err: any, caught: Observable<T>) =>
  *  catch `selector` function.
  * @name catchError
  */
-export function catchError<T, R>(selector: (err: any, caught: Observable<T>) => ObservableInput<R>): OperatorFunction<T, T | R> {
-  return function catchErrorOperatorFunction(source: Observable<T>): Observable<T | R> {
+export function catchError<T, O extends ObservableInput<any>>(
+  selector: (err: any, caught: Observable<T>) => O
+): OperatorFunction<T, T | ObservedValueOf<O>> {
+  return function catchErrorOperatorFunction(source: Observable<T>): Observable<T | ObservedValueOf<O>> {
     const operator = new CatchOperator(selector);
     const caught = source.lift(operator);
     return (operator.caught = caught as Observable<T>);