diff --git a/common/changes/@microsoft/rush/graceful-exit_2025-04-16-19-31.json b/common/changes/@microsoft/rush/graceful-exit_2025-04-16-19-31.json
new file mode 100644
index 00000000000..3b94781ed66
--- /dev/null
+++ b/common/changes/@microsoft/rush/graceful-exit_2025-04-16-19-31.json
@@ -0,0 +1,10 @@
+{
+  "changes": [
+    {
+      "packageName": "@microsoft/rush",
+      "comment": "Bind \"q\" to gracefully exit the watcher.",
+      "type": "none"
+    }
+  ],
+  "packageName": "@microsoft/rush"
+}
\ No newline at end of file
diff --git a/libraries/rush-lib/src/cli/scriptActions/PhasedScriptAction.ts b/libraries/rush-lib/src/cli/scriptActions/PhasedScriptAction.ts
index 6a893a6b062..4d09afbba02 100644
--- a/libraries/rush-lib/src/cli/scriptActions/PhasedScriptAction.ts
+++ b/libraries/rush-lib/src/cli/scriptActions/PhasedScriptAction.ts
@@ -581,6 +581,7 @@ export class PhasedScriptAction extends BaseScriptAction<IPhasedCommandConfig> {
         }
 
         await this._runWatchPhasesAsync(internalOptions);
+        terminal.writeDebugLine(`Watch mode exited.`);
       }
     } finally {
       await cobuildConfiguration?.destroyLockProviderAsync();
@@ -653,16 +654,21 @@ export class PhasedScriptAction extends BaseScriptAction<IPhasedCommandConfig> {
     };
   }
 
-  private _registerWatchModeInterface(projectWatcher: ProjectWatcher): void {
+  private _registerWatchModeInterface(
+    projectWatcher: ProjectWatcher,
+    abortController: AbortController
+  ): void {
     const toggleWatcherKey: 'w' = 'w';
     const buildOnceKey: 'b' = 'b';
     const invalidateKey: 'i' = 'i';
-    const shutdownKey: 'x' = 'x';
+    const shutdownProcessesKey: 'x' = 'x';
+    const quitKey: 'q' = 'q';
 
     const terminal: ITerminal = this._terminal;
 
     projectWatcher.setPromptGenerator((isPaused: boolean) => {
       const promptLines: string[] = [
+        `  Press <${quitKey}> to gracefully exit.`,
         `  Press <${toggleWatcherKey}> to ${isPaused ? 'resume' : 'pause'}.`,
         `  Press <${invalidateKey}> to invalidate all projects.`
       ];
@@ -670,16 +676,20 @@ export class PhasedScriptAction extends BaseScriptAction<IPhasedCommandConfig> {
         promptLines.push(`  Press <${buildOnceKey}> to build once.`);
       }
       if (this._noIPCParameter?.value === false) {
-        promptLines.push(`  Press <${shutdownKey}> to reset child processes.`);
+        promptLines.push(`  Press <${shutdownProcessesKey}> to reset child processes.`);
       }
       return promptLines;
     });
 
-    process.stdin.setRawMode(true);
-    process.stdin.resume();
-    process.stdin.setEncoding('utf8');
-    process.stdin.on('data', (key: string) => {
+    const onKeyPress = (key: string): void => {
       switch (key) {
+        case quitKey:
+          terminal.writeLine(`Exiting watch mode...`);
+          process.stdin.setRawMode(false);
+          process.stdin.off('data', onKeyPress);
+          process.stdin.unref();
+          abortController.abort();
+          break;
         case toggleWatcherKey:
           if (projectWatcher.isPaused) {
             projectWatcher.resume();
@@ -703,17 +713,25 @@ export class PhasedScriptAction extends BaseScriptAction<IPhasedCommandConfig> {
             projectWatcher.resume();
           }
           break;
-        case shutdownKey:
+        case shutdownProcessesKey:
           projectWatcher.clearStatus();
           terminal.writeLine(`Shutting down long-lived child processes...`);
           // TODO: Inject this promise into the execution queue somewhere so that it gets waited on between runs
           void this.hooks.shutdownAsync.promise();
           break;
         case '\u0003':
+          process.stdin.setRawMode(false);
+          process.stdin.off('data', onKeyPress);
+          process.stdin.unref();
           process.kill(process.pid, 'SIGINT');
           break;
       }
-    });
+    };
+
+    process.stdin.setRawMode(true);
+    process.stdin.resume();
+    process.stdin.setEncoding('utf8');
+    process.stdin.on('data', onKeyPress);
   }
 
   /**
@@ -751,18 +769,22 @@ export class PhasedScriptAction extends BaseScriptAction<IPhasedCommandConfig> {
       '../../logic/ProjectWatcher'
     );
 
+    const abortController: AbortController = new AbortController();
+    const abortSignal: AbortSignal = abortController.signal;
+
     const projectWatcher: typeof ProjectWatcher.prototype = new ProjectWatcher({
       getInputsSnapshotAsync,
       initialSnapshot,
       debounceMs: this._watchDebounceMs,
       rushConfiguration: this.rushConfiguration,
       projectsToWatch,
+      abortSignal,
       terminal
     });
 
     // Ensure process.stdin allows interactivity before using TTY-only APIs
     if (process.stdin.isTTY) {
-      this._registerWatchModeInterface(projectWatcher);
+      this._registerWatchModeInterface(projectWatcher, abortController);
     }
 
     const onWaitingForChanges = (): void => {
@@ -786,11 +808,15 @@ export class PhasedScriptAction extends BaseScriptAction<IPhasedCommandConfig> {
 
     // Loop until Ctrl+C
     // eslint-disable-next-line no-constant-condition
-    while (true) {
+    while (!abortSignal.aborted) {
       // On the initial invocation, this promise will return immediately with the full set of projects
       const { changedProjects, inputsSnapshot: state } =
         await projectWatcher.waitForChangeAsync(onWaitingForChanges);
 
+      if (abortSignal.aborted) {
+        return;
+      }
+
       if (stopwatch.state === StopwatchState.Stopped) {
         // Clear and reset the stopwatch so that we only report time from a single execution at a time
         stopwatch.reset();
diff --git a/libraries/rush-lib/src/logic/ProjectWatcher.ts b/libraries/rush-lib/src/logic/ProjectWatcher.ts
index 83dd92b904c..af588838404 100644
--- a/libraries/rush-lib/src/logic/ProjectWatcher.ts
+++ b/libraries/rush-lib/src/logic/ProjectWatcher.ts
@@ -15,6 +15,7 @@ import type { RushConfiguration } from '../api/RushConfiguration';
 import type { RushConfigurationProject } from '../api/RushConfigurationProject';
 
 export interface IProjectWatcherOptions {
+  abortSignal: AbortSignal;
   getInputsSnapshotAsync: GetInputsSnapshotAsyncFn;
   debounceMs?: number;
   rushConfiguration: RushConfiguration;
@@ -53,6 +54,7 @@ interface IPathWatchOptions {
  * more projects differ from the value the previous time it was invoked. The first time will always resolve with the full selection.
  */
 export class ProjectWatcher {
+  private readonly _abortSignal: AbortSignal;
   private readonly _getInputsSnapshotAsync: GetInputsSnapshotAsyncFn;
   private readonly _debounceMs: number;
   private readonly _repoRoot: string;
@@ -64,6 +66,7 @@ export class ProjectWatcher {
   private _previousSnapshot: IInputsSnapshot | undefined;
   private _forceChangedProjects: Map<RushConfigurationProject, string> = new Map();
   private _resolveIfChanged: undefined | (() => Promise<void>);
+  private _onAbort: undefined | (() => void);
   private _getPromptLines: undefined | IPromptGeneratorFunction;
 
   private _renderedStatusLines: number;
@@ -72,6 +75,7 @@ export class ProjectWatcher {
 
   public constructor(options: IProjectWatcherOptions) {
     const {
+      abortSignal,
       getInputsSnapshotAsync: snapshotProvider,
       debounceMs = 1000,
       rushConfiguration,
@@ -80,6 +84,10 @@ export class ProjectWatcher {
       initialSnapshot: initialState
     } = options;
 
+    this._abortSignal = abortSignal;
+    abortSignal.addEventListener('abort', () => {
+      this._onAbort?.();
+    });
     this._debounceMs = debounceMs;
     this._rushConfiguration = rushConfiguration;
     this._projectsToWatch = projectsToWatch;
@@ -87,6 +95,8 @@ export class ProjectWatcher {
 
     const gitPath: string = new Git(rushConfiguration).getGitPathOrThrow();
     this._repoRoot = Path.convertToSlashes(getRepoRoot(rushConfiguration.rushJsonFolder, gitPath));
+    this._resolveIfChanged = undefined;
+    this._onAbort = undefined;
 
     this._initialSnapshot = initialState;
     this._previousSnapshot = initialState;
@@ -191,7 +201,12 @@ export class ProjectWatcher {
       }
     }
 
+    if (this._abortSignal.aborted) {
+      return initialChangeResult;
+    }
+
     const watchers: Map<string, fs.FSWatcher> = new Map();
+    const closePromises: Promise<void>[] = [];
 
     const watchedResult: IProjectChangeResult = await new Promise(
       (resolve: (result: IProjectChangeResult) => void, reject: (err: Error) => void) => {
@@ -202,8 +217,22 @@ export class ProjectWatcher {
 
         const debounceMs: number = this._debounceMs;
 
+        const abortSignal: AbortSignal = this._abortSignal;
+
         this.clearStatus();
 
+        this._onAbort = function onAbort(): void {
+          if (timeout) {
+            clearTimeout(timeout);
+          }
+          terminated = true;
+          resolve(initialChangeResult);
+        };
+
+        if (abortSignal.aborted) {
+          return this._onAbort();
+        }
+
         const resolveIfChanged: () => Promise<void> = (this._resolveIfChanged = async (): Promise<void> => {
           timeout = undefined;
           if (terminated) {
@@ -296,15 +325,23 @@ export class ProjectWatcher {
             watchedPath,
             {
               encoding: 'utf-8',
-              recursive: recursive && useNativeRecursiveWatch
+              recursive: recursive && useNativeRecursiveWatch,
+              signal: abortSignal
             },
             listener
           );
           watchers.set(watchedPath, watcher);
-          watcher.on('error', (err) => {
-            watchers.delete(watchedPath);
+          watcher.once('error', (err) => {
+            watcher.close();
             onError(err);
           });
+          closePromises.push(
+            once(watcher, 'close').then(() => {
+              watchers.delete(watchedPath);
+              watcher.removeAllListeners();
+              watcher.unref();
+            })
+          );
         }
 
         function innerListener(
@@ -362,20 +399,18 @@ export class ProjectWatcher {
         }
       }
     ).finally(() => {
+      this._onAbort = undefined;
       this._resolveIfChanged = undefined;
     });
 
-    const closePromises: Promise<void>[] = [];
-    for (const [watchedPath, watcher] of watchers) {
-      closePromises.push(
-        once(watcher, 'close').then(() => {
-          watchers.delete(watchedPath);
-        })
-      );
+    this._terminal.writeDebugLine(`Closing watchers...`);
+
+    for (const watcher of watchers.values()) {
       watcher.close();
     }
 
     await Promise.all(closePromises);
+    this._terminal.writeDebugLine(`Closed ${closePromises.length} watchers`);
 
     return watchedResult;
   }