diff --git a/test/powershell/Scripting/NativeExecution/NativeStreams.Tests.ps1 b/test/powershell/Scripting/NativeExecution/NativeStreams.Tests.ps1
new file mode 100644
index 0000000000..7c191802ef
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+++ b/test/powershell/Scripting/NativeExecution/NativeStreams.Tests.ps1
@@ -0,0 +1,53 @@
+Describe "Native streams behavior with PowerShell" -Tags 'CI' {
+    $powershell = Join-Path -Path $PsHome -ChildPath "powershell"
+
+    Context "Error stream" {
+        # we are using powershell itself as an example of a native program.
+        # we can create a behavior we want on the fly and test complex scenarios.
+
+        $error.Clear()
+
+        $command = [string]::Join('', @(
+            '[Console]::Error.Write(\"foo`n`nbar`n`nbaz\"); ',
+            '[Console]::Error.Write(\"middle\"); ',
+            '[Console]::Error.Write(\"foo`n`nbar`n`nbaz\")'
+        ))
+
+        $out = & $powershell -noprofile -command $command 2>&1
+
+        # this check should be the first one, because $error is a global shared variable
+        It 'should not add records to $error variable' {
+            # we are keeping existing Windows PS v5.1 behavior for $error variable
+            $error.Count | Should Be 9
+        }
+
+        It 'uses ErrorRecord object to return stderr output' {
+            ($out | measure).Count | Should BeGreaterThan 1
+
+            $out[0] | Should BeOfType 'System.Management.Automation.ErrorRecord'
+            $out[0].FullyQualifiedErrorId | Should Be 'NativeCommandError'
+
+            $out | Select-Object -Skip 1 | % {
+                $_ | Should BeOfType 'System.Management.Automation.ErrorRecord'
+                $_.FullyQualifiedErrorId | Should Be 'NativeCommandErrorMessage'
+            }
+        }
+
+        It 'uses correct exception messages for error stream' {
+            ($out | measure).Count | Should Be 9
+            $out[0].Exception.Message | Should Be 'foo'
+            $out[1].Exception.Message | Should Be ''
+            $out[2].Exception.Message | Should Be 'bar'
+            $out[3].Exception.Message | Should Be ''
+            $out[4].Exception.Message | Should Be 'bazmiddlefoo'
+            $out[5].Exception.Message | Should Be ''
+            $out[6].Exception.Message | Should Be 'bar'
+            $out[7].Exception.Message | Should Be ''
+            $out[8].Exception.Message | Should Be 'baz'
+        }
+
+        It 'preserves error stream as is with Out-String' {
+            ($out | Out-String).Replace("`r", '') | Should Be "foo`n`nbar`n`nbazmiddlefoo`n`nbar`n`nbaz`n"
+        }
+    }
+}