diff --git a/guppylang/src/guppylang/defs.py b/guppylang/src/guppylang/defs.py
index 24a4b6539..db076b9fb 100644
--- a/guppylang/src/guppylang/defs.py
+++ b/guppylang/src/guppylang/defs.py
@@ -195,6 +195,8 @@ def emulator(
 
         Returns:
             An `EmulatorInstance` that can be used to run the function in an emulator.
+        Raises:
+            EmulatorBuildError: If debug mode is enabled without minimal optimization.
         """
         ...
 
@@ -280,6 +282,8 @@ def emulator(
 
         Returns:
             An `EmulatorInstance` that can be used to run the function in an emulator.
+        Raises:
+            EmulatorBuildError: If debug mode is enabled without minimal optimization.
         """
         return (
             self._with_default_opt()
@@ -294,6 +298,7 @@ def _emulator(
         builder: EmulatorBuilder | None = None,
         libs: list[Package] | None = None,
         platform: Platform = "helios",
+        debug_mode: bool = False,
     ) -> EmulatorInstance:
         """Build an emulator instance from a compiled package."""
         if libs is not None:
@@ -337,6 +342,9 @@ def _emulator(
                 )
             )
 
+        if debug_mode:
+            builder = builder.with_build_arg("debug", True)
+
         return builder.build(mod, n_qubits=qubits, arg_specs=arg_specs)
 
     @pretty_errors
diff --git a/guppylang/src/guppylang/emulator/exceptions.py b/guppylang/src/guppylang/emulator/exceptions.py
index 6185d3d17..12d9b443e 100644
--- a/guppylang/src/guppylang/emulator/exceptions.py
+++ b/guppylang/src/guppylang/emulator/exceptions.py
@@ -14,11 +14,49 @@ def __init__(
         failing_shot: QsysShot,
         underlying_exception: Exception | None = None,
     ):
-        super().__init__(str(underlying_exception))
+        super().__init__(self._render_message(underlying_exception))
         self.completed_shots = completed_shots
         self.failing_shot = failing_shot
         self.underlying_exception = underlying_exception
 
+    @staticmethod
+    def _render_message(underlying_exception: Exception | None) -> str:
+        if underlying_exception is None:
+            return ""
+        stack_trace = getattr(underlying_exception, "stack_trace", None)
+        if stack_trace is not None:
+            from .stack_trace import render_stack_trace
+
+            message = getattr(
+                underlying_exception, "message", str(underlying_exception)
+            )
+            rendered = render_stack_trace(stack_trace, message)
+            if rendered is not None:
+                header = EmulatorError._panic_header(underlying_exception)
+                logs = EmulatorError._render_logs(underlying_exception)
+                return f"{header}\n{rendered}{logs}"
+        return str(underlying_exception)
+
+    @staticmethod
+    def _render_logs(underlying_exception: Exception) -> str:
+        # Renders captured stdout/stderr the way exceptions in Selene do.
+        sections = []
+        for name in ("stdout", "stderr"):
+            contents: str = getattr(underlying_exception, name, "")
+            if contents:
+                sections.append(
+                    f"\n----- {name} -----\n{contents}\n------------------\n"
+                )
+        return "".join(sections)
+
+    @staticmethod
+    def _panic_header(underlying_exception: Exception) -> str:
+        code = getattr(underlying_exception, "code", None)
+        message = getattr(underlying_exception, "message", str(underlying_exception))
+        if isinstance(code, int):
+            return f"Panic (#{code}): {message}"
+        return str(underlying_exception)
+
     @property
     def failed_shot_index(self) -> int:
         """The index of the shot that failed."""
diff --git a/guppylang/src/guppylang/emulator/stack_trace.py b/guppylang/src/guppylang/emulator/stack_trace.py
new file mode 100644
index 000000000..3ffe54a57
--- /dev/null
+++ b/guppylang/src/guppylang/emulator/stack_trace.py
@@ -0,0 +1,70 @@
+"""Render Selene emulator panic stack traces."""
+
+from __future__ import annotations
+
+from typing import TYPE_CHECKING
+
+from guppylang_internals.diagnostic import DiagnosticsRenderer
+from guppylang_internals.span import Loc, SourceMap, Span
+
+if TYPE_CHECKING:
+    from selene_sim.stack_trace import StackTrace
+
+
+def render_stack_trace(stack_trace: StackTrace | None, message: str) -> str | None:
+    """Render a Selene stack trace as source-annotated snippets.
+
+    Each symbolized frame is rendered as its own code snippet. Returns `None` if no
+    frame could be resolved to a readable source location, e.g. because debug info
+    wasn't emitted.
+    """
+    if stack_trace is None:
+        return None
+
+    source = SourceMap()
+    blocks: list[str] = []
+
+    def append_frame_snippet(span: Span, label: str | None, function_name: str) -> None:
+        header = (
+            f'File "{span.start.file}", line {span.start.line}, in {function_name}:'
+        )
+        renderer = DiagnosticsRenderer(source)
+        try:
+            renderer.render_snippet(
+                span,
+                label,
+                span.end.line,
+                is_primary=True,
+                prefix_lines=renderer.PREFIX_ERROR_CONTEXT_LINES,
+            )
+        except Exception:  # noqa: BLE001
+            # The source may have changed since compilation, so the recorded
+            # location might no longer be renderable. Fall back to the header
+            # rather than masking the panic we're reporting.
+            blocks.append(header)
+            return
+        blocks.append(f"{header}\n" + "\n".join(renderer.buffer))
+
+    is_first_frame = True
+
+    for entry in stack_trace.entries:
+        for symbol in entry.symbols:
+            if symbol.filename not in source.sources:
+                source.add_file(symbol.filename)
+            if not source.sources[symbol.filename]:
+                # Source file isn't available, skip this frame.
+                continue
+
+            loc = Loc(symbol.filename, symbol.line, symbol.column)
+            span = Span(loc, loc.shift_right(1))
+            append_frame_snippet(
+                span, message if is_first_frame else None, symbol.function_name
+            )
+            is_first_frame = False
+
+    if not blocks:
+        return None
+
+    trace = "\n\n".join(blocks)
+    indented_trace = "\n".join(f"   {line}" for line in trace.splitlines())
+    return f"Guppy traceback (most recent call last):\n{indented_trace}\n"
diff --git a/guppylang/src/guppylang/optimizer.py b/guppylang/src/guppylang/optimizer.py
index 7807e1d49..dca4a4281 100644
--- a/guppylang/src/guppylang/optimizer.py
+++ b/guppylang/src/guppylang/optimizer.py
@@ -58,6 +58,10 @@ def main() -> None:
 ``with_minimal_opt()`` is shorthand for selecting :py:attr:`OptimizationLevel.Minimal`.
 It disables optional optimizations on the program.
 
+Emulation in debug mode (enabling panic traces) requires minimal optimization. Calling
+``emulator()`` with debug mode enabled and any optimization passes configured raises
+``EmulatorBuildError``.
+
 .. code-block:: python
 
     emulator = main.with_minimal_opt().emulator(n_qubits=1)
@@ -126,6 +130,8 @@ def main() -> None:
     TypeVar,
 )
 
+from guppylang.emulator.exceptions import EmulatorBuildError
+
 if TYPE_CHECKING:
     from collections.abc import Sequence
 
@@ -179,6 +185,9 @@ class OptimizationLevel(Enum):
 
     This is useful for low-level program analysis or when more control over
     the optimization passes is desired.
+
+    Note that any rewrites applied at this level must preserve enough debug information
+    to allow for stack traces to be generated in the event of a panic.
     """
 
     def passes(self) -> list[ComposablePass]:
@@ -257,7 +266,20 @@ def emulator(
         platform: Platform | None = None,
         debug_mode: bool = False,
     ) -> EmulatorInstance:
-        """Compile this function for emulation with the configured optimizations."""
+        """Compile this function for emulation with the configured optimizations.
+
+        Emulation in debug mode (enabling panic traces) requires minimal optimization.
+        """
+        # TODO: Consider changing this to a warning instead of an error after
+        # https://github.com/Quantinuum/tket2/issues/1964 is resolved.
+        if debug_mode and self.passes:
+            raise EmulatorBuildError(
+                ValueError(
+                    "Emulation in debug mode (enabling panic traces) requires minimal "
+                    "optimization. Call `with_minimal_opt()` before `emulator()`, or "
+                    "disable debug mode."
+                )
+            )
 
         # If platform is set, use it.
         # Else if platform is not explicitly provided, use the target platform
@@ -267,7 +289,12 @@ def emulator(
             platform = "helios"
 
         return self.definition._emulator(
-            self.compile_function(debug_mode), n_qubits, builder, libs, platform
+            self.compile_function(debug_mode),
+            n_qubits,
+            builder,
+            libs,
+            platform,
+            debug_mode=debug_mode,
         )
 
     def compile(self, debug_mode: bool = False) -> Package:
diff --git a/tests/stack_traces/__init__.py b/tests/stack_traces/__init__.py
new file mode 100644
index 000000000..e69de29bb
diff --git a/tests/stack_traces/always_panic.err b/tests/stack_traces/always_panic.err
new file mode 100644
index 000000000..ba92d5f74
--- /dev/null
+++ b/tests/stack_traces/always_panic.err
@@ -0,0 +1,9 @@
+Panic (#1001): Always panics
+Guppy traceback (most recent call last):
+   File "$PATH_TO_FILE/always_panic.py", line 7, in stack_traces.always_panic.main:
+     | 
+   5 | @guppy
+   6 | def main() -> None:
+   7 |     panic("Always panics")
+     |     ^ Always panics
+
diff --git a/tests/stack_traces/always_panic.py b/tests/stack_traces/always_panic.py
new file mode 100644
index 000000000..277b1fca0
--- /dev/null
+++ b/tests/stack_traces/always_panic.py
@@ -0,0 +1,10 @@
+from guppylang import guppy
+from guppylang.std.platform import panic
+
+
+@guppy
+def main() -> None:
+    panic("Always panics")
+
+
+main.with_minimal_opt().emulator(n_qubits=1, debug_mode=True).run()
diff --git a/tests/stack_traces/global_panic_unwrap_error.err b/tests/stack_traces/global_panic_unwrap_error.err
new file mode 100644
index 000000000..defe198d7
--- /dev/null
+++ b/tests/stack_traces/global_panic_unwrap_error.err
@@ -0,0 +1,9 @@
+Panic (#1002): Float value too big to convert to int of given width (64)
+Guppy traceback (most recent call last):
+   File "$PATH_TO_FILE/global_panic_unwrap_error.py", line 10, in stack_traces.global_panic_unwrap_error.main:
+      | 
+    8 |     # through a global compiler function, therefore testing stack traces for panics
+    9 |     # that are not directly annotated.
+   10 |     return int(0.0 / 0.0)
+      |            ^ Float value too big to convert to int of given width (64)
+
diff --git a/tests/stack_traces/global_panic_unwrap_error.py b/tests/stack_traces/global_panic_unwrap_error.py
new file mode 100644
index 000000000..026d5cfed
--- /dev/null
+++ b/tests/stack_traces/global_panic_unwrap_error.py
@@ -0,0 +1,13 @@
+from guppylang import guppy
+from guppylang.std.num import int
+
+
+@guppy
+def main() -> int:
+    # This should internally use the `UnwrapOpCompiler` which relies on a panic built
+    # through a global compiler function, therefore testing stack traces for panics
+    # that are not directly annotated.
+    return int(0.0 / 0.0)
+
+
+main.with_minimal_opt().emulator(n_qubits=1, debug_mode=True).run()
diff --git a/tests/stack_traces/multi_file_out_of_bounds.err b/tests/stack_traces/multi_file_out_of_bounds.err
new file mode 100644
index 000000000..3c5209810
--- /dev/null
+++ b/tests/stack_traces/multi_file_out_of_bounds.err
@@ -0,0 +1,23 @@
+Panic (#1001): Array index out of bounds
+Guppy traceback (most recent call last):
+   File "$PATH_TO_FILE/test_helper.py", line 8, in stack_traces.test_helper.array_with_three_elements:
+     | 
+   6 | def array_with_three_elements(x: int) -> int:
+   7 |     arr = array(1, 2, 3)
+   8 |     return arr[x]
+     |            ^ Array index out of bounds
+   
+   File "$PATH_TO_FILE/multi_file_out_of_bounds.py", line 8, in stack_traces.multi_file_out_of_bounds.array_out_of_bounds:
+     | 
+   6 | @guppy
+   7 | def array_out_of_bounds(x: int) -> int:
+   8 |     return array_with_three_elements(x)
+     |            ^
+   
+   File "$PATH_TO_FILE/multi_file_out_of_bounds.py", line 13, in stack_traces.multi_file_out_of_bounds.main:
+      | 
+   11 | @guppy
+   12 | def main() -> None:
+   13 |     array_out_of_bounds(5)
+      |     ^
+
diff --git a/tests/stack_traces/multi_file_out_of_bounds.py b/tests/stack_traces/multi_file_out_of_bounds.py
new file mode 100644
index 000000000..d14ee4d93
--- /dev/null
+++ b/tests/stack_traces/multi_file_out_of_bounds.py
@@ -0,0 +1,16 @@
+from guppylang import guppy
+
+from tests.stack_traces.test_helper import array_with_three_elements
+
+
+@guppy
+def array_out_of_bounds(x: int) -> int:
+    return array_with_three_elements(x)
+
+
+@guppy
+def main() -> None:
+    array_out_of_bounds(5)
+
+
+main.with_minimal_opt().emulator(n_qubits=1, debug_mode=True).run()
diff --git a/tests/stack_traces/recursive.err b/tests/stack_traces/recursive.err
new file mode 100644
index 000000000..a7dbdaede
--- /dev/null
+++ b/tests/stack_traces/recursive.err
@@ -0,0 +1,37 @@
+Panic (#1001): No more qubits available to allocate.
+Guppy traceback (most recent call last):
+   File "$PATH_TO_FILE/recursive.py", line 7, in stack_traces.recursive.recursive_allocate:
+     | 
+   5 | @guppy
+   6 | def recursive_allocate(source: qubit) -> None:
+   7 |     q = qubit()
+     |         ^ No more qubits available to allocate.
+   
+   File "$PATH_TO_FILE/recursive.py", line 9, in stack_traces.recursive.recursive_allocate:
+     | 
+   7 |     q = qubit()
+   8 |     cx(source, q)
+   9 |     recursive_allocate(q)
+     |     ^
+   
+   File "$PATH_TO_FILE/recursive.py", line 9, in stack_traces.recursive.recursive_allocate:
+     | 
+   7 |     q = qubit()
+   8 |     cx(source, q)
+   9 |     recursive_allocate(q)
+     |     ^
+   
+   File "$PATH_TO_FILE/recursive.py", line 9, in stack_traces.recursive.recursive_allocate:
+     | 
+   7 |     q = qubit()
+   8 |     cx(source, q)
+   9 |     recursive_allocate(q)
+     |     ^
+   
+   File "$PATH_TO_FILE/recursive.py", line 16, in stack_traces.recursive.main:
+      | 
+   14 | def main() -> None:
+   15 |     q = qubit()
+   16 |     recursive_allocate(q)
+      |     ^
+
diff --git a/tests/stack_traces/recursive.py b/tests/stack_traces/recursive.py
new file mode 100644
index 000000000..14380c625
--- /dev/null
+++ b/tests/stack_traces/recursive.py
@@ -0,0 +1,20 @@
+from guppylang import guppy
+from guppylang.std.quantum import cx, discard, qubit
+
+
+@guppy
+def recursive_allocate(source: qubit) -> None:
+    q = qubit()
+    cx(source, q)
+    recursive_allocate(q)
+    discard(q)
+
+
+@guppy
+def main() -> None:
+    q = qubit()
+    recursive_allocate(q)
+    discard(q)
+
+
+main.with_minimal_opt().emulator(n_qubits=4, debug_mode=True).run()
diff --git a/tests/stack_traces/test_helper.py b/tests/stack_traces/test_helper.py
new file mode 100644
index 000000000..697c51c8f
--- /dev/null
+++ b/tests/stack_traces/test_helper.py
@@ -0,0 +1,8 @@
+from guppylang import guppy
+from guppylang.std.array import array
+
+
+@guppy
+def array_with_three_elements(x: int) -> int:
+    arr = array(1, 2, 3)
+    return arr[x]
diff --git a/tests/test_optimization.py b/tests/test_optimization.py
index 0c4a1f9af..4e98d9f45 100644
--- a/tests/test_optimization.py
+++ b/tests/test_optimization.py
@@ -12,7 +12,9 @@
     OptimizerInstance,
     guppy,
 )
+from guppylang.emulator.exceptions import EmulatorBuildError
 from guppylang.optimizer import _RemoveRedundanciesPass
+from hugr.metadata import HugrDebugInfo
 from hugr.passes.composable import ComposablePass, PassResult
 
 if TYPE_CHECKING:
@@ -174,3 +176,36 @@ def main() -> None:
     classical.compile()
     minimal.compile()
     assert custom_pass.calls == 0
+
+
+def test_debug_emulator_requires_minimal_optimization() -> None:
+    @guppy
+    def main() -> None:
+        pass
+
+    with pytest.raises(EmulatorBuildError, match="with_minimal_opt"):
+        main.emulator(n_qubits=0, debug_mode=True)
+
+    with pytest.raises(EmulatorBuildError, match="with_minimal_opt"):
+        main.with_opt_level(OptimizationLevel.Classical).emulator(
+            n_qubits=0, debug_mode=True
+        )
+
+    with pytest.raises(EmulatorBuildError, match="with_minimal_opt"):
+        main.with_minimal_opt().with_optimization(CountingPass()).emulator(
+            n_qubits=0, debug_mode=True
+        )
+
+
+def test_debug_compile_allows_optimization() -> None:
+    @guppy
+    def main() -> None:
+        pass
+
+    hugr = (
+        main.with_opt_level(OptimizationLevel.Classical)
+        .compile(debug_mode=True)
+        .modules[0]
+    )
+    meta = hugr[hugr.module_root].metadata
+    assert HugrDebugInfo in meta
diff --git a/tests/test_stack_traces.py b/tests/test_stack_traces.py
new file mode 100644
index 000000000..d31466359
--- /dev/null
+++ b/tests/test_stack_traces.py
@@ -0,0 +1,30 @@
+"""Snapshot tests for emulator panic stack traces."""
+
+from __future__ import annotations
+
+import importlib
+import re
+from pathlib import Path
+
+import pytest
+from guppylang.emulator import EmulatorError
+
+TEST_CASES_DIR = Path(__file__).parent / "stack_traces"
+EMULATOR_LOGS = re.compile(r"^----- std(?:out|err) -----$", re.MULTILINE)
+FILES = [
+    path
+    for path in TEST_CASES_DIR.glob("*.py")
+    if path.name != "__init__.py" and path.name != "test_helper.py"
+]
+
+
+@pytest.mark.parametrize("file", FILES)
+def test_stack_trace(file: Path, snapshot: pytest.Snapshot) -> None:
+    with pytest.raises(EmulatorError) as exc_info:
+        importlib.import_module(f"tests.stack_traces.{file.stem}")
+
+    output = str(exc_info.value).replace(str(TEST_CASES_DIR.resolve()), "$PATH_TO_FILE")
+    # The emulator's captured stdout/stderr varies by machine.
+    output = EMULATOR_LOGS.split(output, maxsplit=1)[0].rstrip("\n") + "\n"
+    snapshot.snapshot_dir = str(file.parent)
+    snapshot.assert_match(output + "\n", file.with_suffix(".err").name)