diff --git a/platform/testFramework/src/com/intellij/testFramework/FailedTestDebugLogConsoleFolding.java b/platform/testFramework/src/com/intellij/testFramework/FailedTestDebugLogConsoleFolding.java
new file mode 100644
index 000000000000..a9517fe76b57
--- /dev/null
+++ b/platform/testFramework/src/com/intellij/testFramework/FailedTestDebugLogConsoleFolding.java
@@ -0,0 +1,32 @@
+/*
+ * Copyright 2000-2016 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+package com.intellij.testFramework;
+
+import com.intellij.execution.ConsoleFolding;
+
+import java.util.List;
+
+public class FailedTestDebugLogConsoleFolding extends ConsoleFolding {
+  @Override
+  public boolean shouldFoldLine(String line) {
+    return line.indexOf(TestLoggerFactory.FAILED_TEST_DEBUG_OUTPUT_MARKER) != -1;
+  }
+
+  @Override
+  public String getPlaceholderText(List<String> lines) {
+    return " <Failed tests DEBUG log>";
+  }
+}
diff --git a/platform/testFramework/src/com/intellij/testFramework/TestLoggerFactory.java b/platform/testFramework/src/com/intellij/testFramework/TestLoggerFactory.java
index 7f9752c9d06a..75f22b2e4e5f 100644
--- a/platform/testFramework/src/com/intellij/testFramework/TestLoggerFactory.java
+++ b/platform/testFramework/src/com/intellij/testFramework/TestLoggerFactory.java
@@ -20,6 +20,7 @@ import com.intellij.openapi.application.PathManager;
 import com.intellij.openapi.diagnostic.Logger;
 import com.intellij.openapi.util.Disposer;
 import com.intellij.openapi.util.io.FileUtil;
+import com.intellij.openapi.util.text.LineTokenizer;
 import com.intellij.openapi.util.text.StringUtil;
 import org.apache.log4j.*;
 import org.apache.log4j.spi.LoggingEvent;
@@ -145,6 +146,8 @@ public class TestLoggerFactory implements Logger.Factory {
 
   private static final StringWriter STRING_WRITER = new StringWriter();
   private static final StringBuffer BUFFER = STRING_WRITER.getBuffer();
+  static final char FAILED_TEST_DEBUG_OUTPUT_MARKER = '\u2003';
+  // inserted unicode whitespace to be able to tell these failed tests log lines from the others and fold them
   private static final WriterAppender APPENDER = new WriterAppender(new PatternLayout("%d{HH:mm:ss,SSS} %p %.30c - %m%n"), STRING_WRITER);
   private static final int MAX_BUFFER_LENGTH = 100000;
   private static final String CFQN = Category.class.getName();
@@ -165,8 +168,20 @@ public class TestLoggerFactory implements Logger.Factory {
   }
 
   public static void onTestFinished(boolean success) {
-    if (!success) {
-      System.err.println(BUFFER);
+    if (!success && BUFFER.length() != 0) {
+      if (UsefulTestCase.IS_UNDER_TEAMCITY) {
+        // print in one statement to avoid exception text cutting in between causing this fold to expand
+        BUFFER.insert(0, "##teamcity[blockOpened name='DEBUG log']\n");
+        BUFFER.append( "\n##teamcity[blockClosed name='DEBUG log']\n");
+        System.err.println(BUFFER);
+      }
+      else {
+        // mark each line in IDEA console with this hidden mark to be able to fold it automatically
+        String[] lines = LineTokenizer.tokenize(BUFFER, false, false);
+        String text = StringUtil.join(lines, FAILED_TEST_DEBUG_OUTPUT_MARKER + "\n");
+        if (!text.startsWith("\n")) text = "\n" + text;
+        System.err.println(text);
+      }
     }
     BUFFER.setLength(0);
   }
diff --git a/resources/src/META-INF/IdeaPlugin.xml b/resources/src/META-INF/IdeaPlugin.xml
index 2e0249035038..4de90ce9f8e3 100644
--- a/resources/src/META-INF/IdeaPlugin.xml
+++ b/resources/src/META-INF/IdeaPlugin.xml
@@ -1244,6 +1244,7 @@
     <stacktrace.fold substring="at sun.rmi."/>
     <stacktrace.fold substring="at com.sun.proxy.$Proxy"/>
     <stacktrace.fold substring="at com.intellij.rt.execution."/>
+    <console.folding implementation="com.intellij.testFramework.FailedTestDebugLogConsoleFolding"/>
 
     <debuggerEditorTextProvider language="JAVA" implementationClass="com.intellij.debugger.impl.JavaEditorTextProviderImpl"/>