diff --git a/src/mcp/server/__init__.py b/src/mcp/server/__init__.py
index 26aa6ce..aaf5814 100644
--- a/src/mcp/server/__init__.py
+++ b/src/mcp/server/__init__.py
@@ -74,6 +74,7 @@ from mcp.server.models import InitializationOptions
 from mcp.server.session import ServerSession
 from mcp.server.stdio import stdio_server as stdio_server
 from mcp.shared.context import RequestContext
+from mcp.shared.exceptions import McpError
 from mcp.shared.session import RequestResponder
 
 logger = logging.getLogger(__name__)
@@ -393,8 +394,8 @@ class Server:
         read_stream: MemoryObjectReceiveStream[types.JSONRPCMessage | Exception],
         write_stream: MemoryObjectSendStream[types.JSONRPCMessage],
         initialization_options: InitializationOptions,
-        # When True, exceptions are returned as messages to the client.
-        # When False, exceptions are raised, which will cause the server to shut down
+        # When False, exceptions are returned as messages to the client.
+        # When True, exceptions are raised, which will cause the server to shut down
         # but also make tracing exceptions much easier during testing and when using
         # in-process servers.
         raise_exceptions: bool = False,
@@ -429,6 +430,8 @@ class Server:
                                         )
                                     )
                                     response = await handler(req)
+                                except McpError as err:
+                                    response = err.error
                                 except Exception as err:
                                     if raise_exceptions:
                                         raise err