diff --git a/crates/red_knot_test/src/lib.rs b/crates/red_knot_test/src/lib.rs
index 001bd2a70df4f..b234a64719122 100644
--- a/crates/red_knot_test/src/lib.rs
+++ b/crates/red_knot_test/src/lib.rs
@@ -141,10 +141,23 @@ fn run_test(db: &mut db::Db, test: &parser::MarkdownTest) -> Result<(), Failures
                 Ok(type_diagnostics) => type_diagnostics,
                 Err(info) => {
                     let mut by_line = matcher::FailuresByLine::default();
-                    by_line.push(
-                        OneIndexed::from_zero_indexed(0),
-                        info.info.split('\n').map(String::from).collect(),
-                    );
+                    let mut messages = vec![];
+                    match info.location {
+                        Some(location) => messages.push(format!("panicked at {location}")),
+                        None => messages.push("panicked at unknown location".to_string()),
+                    };
+                    match info.payload {
+                        Some(payload) => messages.push(payload),
+                        // Mimic the default panic hook's rendering of the panic payload if it's
+                        // not a string.
+                        None => messages.push("Box<dyn Any>".to_string()),
+                    };
+                    if let Some(backtrace) = info.backtrace {
+                        if std::env::var("RUST_BACKTRACE").is_ok() {
+                            messages.extend(backtrace.to_string().split('\n').map(String::from));
+                        }
+                    }
+                    by_line.push(OneIndexed::from_zero_indexed(0), messages);
                     return Some(FileFailures {
                         backtick_offset: test_file.backtick_offset,
                         by_line,
diff --git a/crates/ruff_db/src/panic.rs b/crates/ruff_db/src/panic.rs
index 744ab49cbefbc..576425a99e0fe 100644
--- a/crates/ruff_db/src/panic.rs
+++ b/crates/ruff_db/src/panic.rs
@@ -1,20 +1,27 @@
 use std::cell::Cell;
+use std::panic::Location;
 use std::sync::OnceLock;
 
 #[derive(Default, Debug)]
 pub struct PanicError {
-    pub info: String,
+    pub location: Option<String>,
+    pub payload: Option<String>,
     pub backtrace: Option<std::backtrace::Backtrace>,
 }
 
 impl std::fmt::Display for PanicError {
     fn fmt(&self, f: &mut std::fmt::Formatter<'_>) -> std::fmt::Result {
-        writeln!(f, "{}", self.info)?;
+        writeln!(f, "panicked at")?;
+        if let Some(location) = &self.location {
+            write!(f, " {location}")?;
+        }
+        if let Some(payload) = &self.payload {
+            write!(f, ":\n{payload}")?;
+        }
         if let Some(backtrace) = &self.backtrace {
-            writeln!(f, "Backtrace: {backtrace}")
-        } else {
-            Ok(())
+            writeln!(f, "\nBacktrace: {backtrace}")?;
         }
+        Ok(())
     }
 }
 
@@ -34,11 +41,17 @@ fn install_hook() {
             if !should_capture {
                 return (*prev)(info);
             }
-            let info = info.to_string();
+            let payload = if let Some(s) = info.payload().downcast_ref::<&str>() {
+                Some(s.to_string())
+            } else {
+                info.payload().downcast_ref::<String>().cloned()
+            };
+            let location = info.location().map(Location::to_string);
             let backtrace = std::backtrace::Backtrace::force_capture();
             LAST_PANIC.with(|cell| {
                 cell.set(Some(PanicError {
-                    info,
+                    payload,
+                    location,
                     backtrace: Some(backtrace),
                 }));
             });