diff --git a/python/ray/serve/_private/application_state.py b/python/ray/serve/_private/application_state.py
index 442a114e940f3..30698184846c3 100644
--- a/python/ray/serve/_private/application_state.py
+++ b/python/ray/serve/_private/application_state.py
@@ -18,7 +18,7 @@
 )
 from ray.serve.schema import DeploymentDetails
 import time
-from ray.exceptions import RayTaskError, RuntimeEnvSetupError
+from ray.exceptions import RuntimeEnvSetupError
 from ray.serve._private.constants import SERVE_LOGGER_NAME
 from ray.serve._private.deploy_utils import deploy_args_to_deployment_info
 from ray.serve._private.utils import check_obj_ref_ready_nowait
@@ -335,17 +335,17 @@ def _reconcile_deploy_obj_ref(self) -> Tuple[BuildAppStatus, str]:
         if check_obj_ref_ready_nowait(self._deploy_obj_ref):
             deploy_obj_ref, self._deploy_obj_ref = self._deploy_obj_ref, None
             try:
-                ray.get(deploy_obj_ref)
-                logger.info(f"Deploy task for app '{self._name}' ran successfully.")
-                return BuildAppStatus.SUCCEEDED, ""
-            except RayTaskError as e:
-                # NOTE(zcin): we should use str(e) instead of traceback.format_exc()
-                # here because the full details of the error is not displayed
-                # properly with traceback.format_exc(). RayTaskError has its own
-                # custom __str__ function.
-                error_msg = f"Deploying app '{self._name}' failed:\n{str(e)}"
-                logger.warning(error_msg)
-                return BuildAppStatus.FAILED, error_msg
+                err = ray.get(deploy_obj_ref)
+                if err is None:
+                    logger.info(f"Deploy task for app '{self._name}' ran successfully.")
+                    return BuildAppStatus.SUCCEEDED, ""
+                else:
+                    error_msg = (
+                        f"Deploying app '{self._name}' failed with "
+                        f"exception:\n{err}"
+                    )
+                    logger.warning(error_msg)
+                    return BuildAppStatus.FAILED, error_msg
             except RuntimeEnvSetupError:
                 error_msg = (
                     f"Runtime env setup for app '{self._name}' failed:\n"
diff --git a/python/ray/serve/controller.py b/python/ray/serve/controller.py
index df4f033e8a6bc..726635131747c 100644
--- a/python/ray/serve/controller.py
+++ b/python/ray/serve/controller.py
@@ -834,7 +834,7 @@ def deploy_serve_application(
     route_prefix: str,
     name: str,
     args: Dict,
-):
+) -> Optional[str]:
     """Deploy Serve application from a user-provided config.
 
     Args:
@@ -848,6 +848,8 @@ def deploy_serve_application(
         name: application name. If specified, application will be deployed
             without removing existing applications.
         route_prefix: route_prefix. Define the route path for the application.
+    Returns:
+        Returns None if no error is raised. Otherwise, returns error message.
     """
     try:
         from ray import serve
@@ -905,6 +907,8 @@ def deploy_serve_application(
         # Error is raised when this task is canceled with ray.cancel(), which
         # happens when deploy_apps() is called.
         logger.debug("Existing config deployment request terminated.")
+    except Exception as e:
+        return repr(e)
 
 
 @ray.remote(num_cpus=0)
diff --git a/python/ray/serve/tests/test_config_files/broken_app.py b/python/ray/serve/tests/test_config_files/broken_app.py
new file mode 100644
index 0000000000000..ec0a1cd1bc80f
--- /dev/null
+++ b/python/ray/serve/tests/test_config_files/broken_app.py
@@ -0,0 +1,26 @@
+from ray import serve
+import ray.cloudpickle as pickle
+
+
+class NonserializableException(Exception):
+    """This exception cannot be serialized."""
+
+    def __reduce__(self):
+        raise RuntimeError("This exception cannot be serialized!")
+
+
+# Confirm that NonserializableException cannot be serialized.
+try:
+    pickle.dumps(NonserializableException())
+except RuntimeError as e:
+    assert "This exception cannot be serialized!" in repr(e)
+
+raise NonserializableException("custom exception info")
+
+
+@serve.deployment
+def f():
+    pass
+
+
+app = f.bind()
diff --git a/python/ray/serve/tests/test_controller.py b/python/ray/serve/tests/test_controller.py
index f5a3250e8c6ba..676f7d378f7fe 100644
--- a/python/ray/serve/tests/test_controller.py
+++ b/python/ray/serve/tests/test_controller.py
@@ -1,7 +1,8 @@
-import pytest
 import time
+import pytest
 
 import ray
+from ray._private.test_utils import wait_for_condition
 
 from ray import serve
 from ray.serve._private.common import DeploymentInfo
@@ -10,6 +11,8 @@
     SERVE_DEFAULT_APP_NAME,
     DEPLOYMENT_NAME_PREFIX_SEPARATOR,
 )
+from ray.serve.schema import ServeDeploySchema
+from ray.serve._private.common import ApplicationStatus
 
 
 def get_deployment_name(name: str):
@@ -49,6 +52,33 @@ def test(_):
     assert start_time_ms_1 == start_time_ms_2
 
 
+def test_deploy_app_custom_exception(serve_instance):
+    """Check that controller doesn't deserialize an exception from deploy_app."""
+
+    client = serve_instance
+    controller = serve.context.get_global_client()._controller
+
+    config = {
+        "applications": [
+            {
+                "name": "broken_app",
+                "route_prefix": "/broken",
+                "import_path": "ray.serve.tests.test_config_files.broken_app:app",
+            }
+        ]
+    }
+
+    ray.get(controller.deploy_apps.remote(config=ServeDeploySchema.parse_obj(config)))
+
+    def check_custom_exception() -> bool:
+        status = client.get_serve_status(name="broken_app")
+        assert status.app_status.status == ApplicationStatus.DEPLOY_FAILED
+        assert "custom exception info" in status.app_status.message
+        return True
+
+    wait_for_condition(check_custom_exception, timeout=10)
+
+
 if __name__ == "__main__":
     import sys