diff --git a/main/src/main/scala/sbt/Defaults.scala b/main/src/main/scala/sbt/Defaults.scala
index ff1b8895d..c2604a1d3 100755
--- a/main/src/main/scala/sbt/Defaults.scala
+++ b/main/src/main/scala/sbt/Defaults.scala
@@ -330,7 +330,18 @@ object Defaults extends BuildCommon {
       val baseDir = baseDirectory.value
       val bases = unmanagedSourceDirectories.value
       val include = (includeFilter in unmanagedSources).value
-      val exclude = (excludeFilter in unmanagedSources).value
+      val exclude = (excludeFilter in unmanagedSources).value match {
+        case e =>
+          (managedSources in ThisScope).value match {
+            case l if l.nonEmpty =>
+              e || new FileFilter {
+                private val files = l.toSet
+                override def accept(pathname: File): Boolean = files.contains(pathname)
+                override def toString = s"ManagedSourcesFilter($files)"
+              }
+            case _ => e
+          }
+      }
       val baseSources =
         if (sourcesInBase.value) Seq(new Source(baseDir, include, exclude, recursive = false))
         else Nil
@@ -342,7 +353,7 @@ object Defaults extends BuildCommon {
     sourceDirectories := Classpaths
       .concatSettings(unmanagedSourceDirectories, managedSourceDirectories)
       .value,
-    sources := Classpaths.concat(unmanagedSources, managedSources).value
+    sources := Classpaths.concatDistinct(unmanagedSources, managedSources).value
   )
   lazy val resourceConfigPaths = Seq(
     resourceDirectory := sourceDirectory.value / "resources",
diff --git a/sbt/src/sbt-test/tests/watch-loop/build.sbt b/sbt/src/sbt-test/tests/watch-loop/build.sbt
new file mode 100644
index 000000000..effea2c79
--- /dev/null
+++ b/sbt/src/sbt-test/tests/watch-loop/build.sbt
@@ -0,0 +1,17 @@
+import java.nio.file.Files
+
+lazy val watchLoopTest = taskKey[Unit]("Check that managed sources are filtered")
+
+sourceGenerators in Compile += Def.task {
+  val path = baseDirectory.value.toPath.resolve("src/main/scala/Foo.scala")
+  Files.write(path, "object Foo".getBytes).toFile :: Nil
+}
+
+watchLoopTest := {
+  val watched = watchSources.value
+  val managedSource = (managedSources in Compile).value.head
+  assert(!SourceWrapper.accept(watched, managedSource))
+  assert((sources in Compile).value.foldLeft((true, Set.empty[File])) {
+    case ((res, set), f) => (res && !set.contains(f), set + f)
+  }._1)
+}
diff --git a/sbt/src/sbt-test/tests/watch-loop/project/SourceWrapper.scala b/sbt/src/sbt-test/tests/watch-loop/project/SourceWrapper.scala
new file mode 100644
index 000000000..ff351168a
--- /dev/null
+++ b/sbt/src/sbt-test/tests/watch-loop/project/SourceWrapper.scala
@@ -0,0 +1,6 @@
+package sbt
+
+object SourceWrapper {
+  def accept(sources: Seq[sbt.internal.io.Source], file: File): Boolean =
+    sources.exists(_.accept(file.toPath))
+}
diff --git a/sbt/src/sbt-test/tests/watch-loop/src/main/scala/Bar.scala b/sbt/src/sbt-test/tests/watch-loop/src/main/scala/Bar.scala
new file mode 100644
index 000000000..3b43dece6
--- /dev/null
+++ b/sbt/src/sbt-test/tests/watch-loop/src/main/scala/Bar.scala
@@ -0,0 +1 @@
+object Bar
diff --git a/sbt/src/sbt-test/tests/watch-loop/src/main/scala/Foo.scala b/sbt/src/sbt-test/tests/watch-loop/src/main/scala/Foo.scala
new file mode 100644
index 000000000..d37c10456
--- /dev/null
+++ b/sbt/src/sbt-test/tests/watch-loop/src/main/scala/Foo.scala
@@ -0,0 +1 @@
+object Foo
\ No newline at end of file
diff --git a/sbt/src/sbt-test/tests/watch-loop/test b/sbt/src/sbt-test/tests/watch-loop/test
new file mode 100644
index 000000000..41d621982
--- /dev/null
+++ b/sbt/src/sbt-test/tests/watch-loop/test
@@ -0,0 +1 @@
+> watchLoopTest