diff --git a/code/builders/builder-webpack5/src/index.ts b/code/builders/builder-webpack5/src/index.ts
index 0106cfea091d..45775dc7d04f 100644
--- a/code/builders/builder-webpack5/src/index.ts
+++ b/code/builders/builder-webpack5/src/index.ts
@@ -9,6 +9,7 @@ import { dirname, join, parse } from 'path';
 import express from 'express';
 import fs from 'fs-extra';
 import { PREVIEW_BUILDER_PROGRESS } from '@storybook/core-events';
+import { WebpackCompilationError } from '@storybook/core-events/server-errors';
 
 import prettyTime from 'pretty-hrtime';
 
@@ -195,8 +196,7 @@ const starter: StarterFunction = async function* starterGeneratorFn({
   }
 
   if (stats.hasErrors()) {
-    // eslint-disable-next-line @typescript-eslint/no-throw-literal
-    throw stats;
+    throw new WebpackCompilationError({ error: stats });
   }
 
   return {
diff --git a/code/lib/core-events/src/errors/server-errors.test.ts b/code/lib/core-events/src/errors/server-errors.test.ts
new file mode 100644
index 000000000000..9b0e08f01522
--- /dev/null
+++ b/code/lib/core-events/src/errors/server-errors.test.ts
@@ -0,0 +1,61 @@
+/* eslint-disable local-rules/no-uncategorized-errors */
+import { WebpackCompilationError } from './server-errors';
+
+describe('WebpackCompilationError', () => {
+  it('should correctly handle error with error property', () => {
+    const error = new Error('Custom error message');
+    const data = {
+      error,
+    };
+
+    const webpackError = new WebpackCompilationError(data);
+
+    expect(webpackError.message).toBe(error.message);
+  });
+
+  it('should correctly handle error with error within error', () => {
+    const error = new Error('Custom error message');
+    const data = {
+      error: new Error(),
+    };
+    data.error = error;
+
+    const webpackError = new WebpackCompilationError(data);
+
+    expect(webpackError.message).toBe(error.message);
+  });
+
+  it('should correctly handle error with stats.compilation.errors', () => {
+    const compilationErrors = [new Error('Error 1 message'), new Error('Error 2 message')];
+    const data = new Error() as Error & {
+      error: Error & { stats?: { compilation: { errors: Error[] } } };
+    };
+    data.error = new Error();
+    data.error.stats = {
+      compilation: {
+        errors: compilationErrors,
+      },
+    };
+
+    const webpackError = new WebpackCompilationError(data);
+
+    expect(webpackError.message).toMatchInlineSnapshot(`
+      "Error: Error 1 message
+
+      Error: Error 2 message"
+    `);
+  });
+
+  it('should correctly handle error without specific format', () => {
+    const errorMessage = 'Generic error message';
+    const data = new Error() as Error & {
+      error: Error;
+    };
+
+    data.error = new Error(errorMessage);
+
+    const webpackError = new WebpackCompilationError(data);
+
+    expect(webpackError.message).toBe(errorMessage);
+  });
+});
diff --git a/code/lib/core-events/src/errors/server-errors.ts b/code/lib/core-events/src/errors/server-errors.ts
index 93f7355a3024..5c1eb801ee57 100644
--- a/code/lib/core-events/src/errors/server-errors.ts
+++ b/code/lib/core-events/src/errors/server-errors.ts
@@ -137,3 +137,48 @@ export class InvalidStoriesEntryError extends StorybookError {
     `;
   }
 }
+
+export class WebpackCompilationError extends StorybookError {
+  readonly category = Category.BUILDER_WEBPACK5;
+
+  readonly code = 1;
+
+  private errorMessage = '';
+
+  constructor(
+    public data: {
+      error:
+        | (Error & {
+            error?: Error;
+            stats?: { compilation: { errors: Error[] } };
+            compilation?: { errors: Error[] };
+          })
+        | {
+            compilation?: { errors: Error[] };
+          };
+    }
+  ) {
+    super();
+
+    if (data.error instanceof Error) {
+      if (data.error.error) {
+        this.errorMessage = data.error.error.message;
+        this.stack = data.error.error.stack;
+      } else if (data.error.stats && data.error.stats.compilation.errors) {
+        data.error.stats.compilation.errors.forEach((e: Error) => {
+          this.errorMessage += `${e.name}: ${e.message}\n\n`;
+        });
+      } else {
+        this.errorMessage = data.error.message;
+      }
+    } else if (data.error.compilation?.errors) {
+      data.error.compilation.errors.forEach((e: Error) => {
+        this.errorMessage += `${e.name}: ${e.message}\n\n`;
+      });
+    }
+  }
+
+  template() {
+    return this.errorMessage.trim();
+  }
+}
diff --git a/code/lib/core-server/src/withTelemetry.ts b/code/lib/core-server/src/withTelemetry.ts
index e07387d1a918..086ee991e5ec 100644
--- a/code/lib/core-server/src/withTelemetry.ts
+++ b/code/lib/core-server/src/withTelemetry.ts
@@ -5,7 +5,7 @@ import { telemetry, getPrecedingUpgrade, oneWayHash } from '@storybook/telemetry
 import type { EventType } from '@storybook/telemetry';
 import { logger } from '@storybook/node-logger';
 
-export type TelemetryOptions = {
+type TelemetryOptions = {
   cliOptions: CLIOptions;
   presetOptions?: Parameters<typeof loadAllPresets>[0];
   printError?: (err: any) => void;