diff --git a/.changes/v1.14/ENHANCEMENTS-20250723-122922.yaml b/.changes/v1.14/ENHANCEMENTS-20250723-122922.yaml
new file mode 100644
index 0000000000..2738fafb61
--- /dev/null
+++ b/.changes/v1.14/ENHANCEMENTS-20250723-122922.yaml
@@ -0,0 +1,5 @@
+kind: ENHANCEMENTS
+body: 'terraform test: expected diagnostics will be included in test output when running in verbose mode"'
+time: 2025-07-23T12:29:22.244611+02:00
+custom:
+    Issue: "37362"
diff --git a/internal/command/test_test.go b/internal/command/test_test.go
index a37d9bc031..e2055c892c 100644
--- a/internal/command/test_test.go
+++ b/internal/command/test_test.go
@@ -130,6 +130,37 @@ func TestTest_Runs(t *testing.T) {
 			expectedOut: []string{"1 passed, 0 failed."},
 			code:        0,
 		},
+		"expect_failures_outputs": {
+			expectedOut: []string{"1 passed, 0 failed."},
+			code:        0,
+		},
+		"expect_failures_checks_verbose": {
+			override:    "expect_failures_checks",
+			args:        []string{"-verbose"},
+			expectedOut: []string{"1 passed, 0 failed.", "Warning: Check block assertion failed"},
+			code:        0,
+		},
+		"expect_failures_inputs_verbose": {
+			override:    "expect_failures_inputs",
+			args:        []string{"-verbose"},
+			expectedOut: []string{"1 passed, 0 failed."},
+			expectedErr: []string{"Error: Invalid value for variable"},
+			code:        0,
+		},
+		"expect_failures_resources_verbose": {
+			override:    "expect_failures_resources",
+			args:        []string{"-verbose"},
+			expectedOut: []string{"1 passed, 0 failed."},
+			expectedErr: []string{"Error: Resource postcondition failed"},
+			code:        0,
+		},
+		"expect_failures_outputs_verbose": {
+			override:    "expect_failures_outputs",
+			args:        []string{"-verbose"},
+			expectedOut: []string{"1 passed, 0 failed."},
+			expectedErr: []string{"Error: Module output value precondition failed"},
+			code:        0,
+		},
 		"multiple_files": {
 			expectedOut: []string{"2 passed, 0 failed"},
 			code:        0,
diff --git a/internal/moduletest/graph/apply.go b/internal/moduletest/graph/apply.go
index cda8680ef0..9efcf559f6 100644
--- a/internal/moduletest/graph/apply.go
+++ b/internal/moduletest/graph/apply.go
@@ -63,7 +63,7 @@ func (n *NodeTestRun) testApply(ctx *EvalContext, variables terraform.InputValue
 
 	// Remove expected diagnostics, and add diagnostics in case anything that should have failed didn't.
 	// We'll also update the run status based on the presence of errors or missing expected failures.
-	failOrErr := n.checkForMissingExpectedFailures(run, applyDiags)
+	failOrErr := n.checkForMissingExpectedFailures(ctx, run, applyDiags)
 	if failOrErr {
 		// Even though the apply operation failed, the graph may have done
 		// partial updates and the returned state should reflect this.
@@ -172,11 +172,19 @@ func (n *NodeTestRun) apply(tfCtx *terraform.Context, plan *plans.Plan, progress
 
 // checkForMissingExpectedFailures checks for missing expected failures in the diagnostics.
 // It updates the run status based on the presence of errors or missing expected failures.
-func (n *NodeTestRun) checkForMissingExpectedFailures(run *moduletest.Run, diags tfdiags.Diagnostics) (failOrErr bool) {
+func (n *NodeTestRun) checkForMissingExpectedFailures(ctx *EvalContext, run *moduletest.Run, diags tfdiags.Diagnostics) (failOrErr bool) {
 	// Retrieve and append diagnostics that are either unrelated to expected failures
 	// or report missing expected failures.
 	unexpectedDiags := run.ValidateExpectedFailures(diags)
-	run.Diagnostics = run.Diagnostics.Append(unexpectedDiags)
+
+	if ctx.Verbose() {
+		// in verbose mode, we still add all the original diagnostics for
+		// display even if they are expected.
+		run.Diagnostics = run.Diagnostics.Append(diags)
+	} else {
+		run.Diagnostics = run.Diagnostics.Append(unexpectedDiags)
+	}
+
 	for _, diag := range unexpectedDiags {
 		// // If any diagnostic indicates a missing expected failure, set the run status to fail.
 		if ok := moduletest.DiagnosticFromMissingExpectedFailure(diag); ok {
diff --git a/internal/moduletest/graph/plan.go b/internal/moduletest/graph/plan.go
index 53d3f9407b..8386f9083c 100644
--- a/internal/moduletest/graph/plan.go
+++ b/internal/moduletest/graph/plan.go
@@ -32,11 +32,19 @@ func (n *NodeTestRun) testPlan(ctx *EvalContext, variables terraform.InputValues
 	tfCtx, _ := terraform.NewContext(n.opts.ContextOpts)
 
 	// execute the terraform plan operation
-	planScope, plan, planDiags := n.plan(ctx, tfCtx, setVariables, providers, mocks, waiter)
+	planScope, plan, originalDiags := n.plan(ctx, tfCtx, setVariables, providers, mocks, waiter)
 	// We exclude the diagnostics that are expected to fail from the plan
 	// diagnostics, and if an expected failure is not found, we add a new error diagnostic.
-	planDiags = run.ValidateExpectedFailures(planDiags)
-	run.Diagnostics = run.Diagnostics.Append(planDiags)
+	planDiags := run.ValidateExpectedFailures(originalDiags)
+
+	if ctx.Verbose() {
+		// in verbose mode, we still add all the original diagnostics for
+		// display.
+		run.Diagnostics = run.Diagnostics.Append(originalDiags)
+	} else {
+		run.Diagnostics = run.Diagnostics.Append(planDiags)
+	}
+
 	if planDiags.HasErrors() {
 		run.Status = moduletest.Error
 		return