diff --git a/packages/compilers/src/lib/common.ts b/packages/compilers/src/lib/common.ts
index 94ab331b2..98a1c7354 100644
--- a/packages/compilers/src/lib/common.ts
+++ b/packages/compilers/src/lib/common.ts
@@ -74,9 +74,15 @@ export function asyncExec(
         if (error) {
           reject(error);
         } else if (stderr) {
-          reject(
-            new Error(`Compiler process returned with errors:\n ${stderr}`),
-          );
+          // Vyper compilers <0.4.0 outputs warnings to stderr
+          // we handle this by checking if the stderr starts with "Warning:"
+          if (stderr.startsWith('Warning:')) {
+            resolve(stdout);
+          } else {
+            reject(
+              new Error(`Compiler process returned with errors:\n ${stderr}`),
+            );
+          }
         } else {
           resolve(stdout);
         }
diff --git a/packages/compilers/test/vyperCompiler.spec.ts b/packages/compilers/test/vyperCompiler.spec.ts
new file mode 100644
index 000000000..0d43fca9d
--- /dev/null
+++ b/packages/compilers/test/vyperCompiler.spec.ts
@@ -0,0 +1,114 @@
+import { expect } from 'chai';
+import { useVyperCompiler } from '../src/lib/vyperCompiler';
+import path from 'path';
+
+describe('Verify Vyper Compiler', () => {
+  const vyperRepoPath = path.join('/tmp', 'vyper-repo');
+
+  it('Should compile with vyper', async function () {
+    const compiledJSON = await useVyperCompiler(
+      vyperRepoPath,
+      '0.3.7+commit.6020b8bb',
+      {
+        language: 'Vyper',
+        sources: {
+          'test.vy': {
+            content: '@external\ndef test() -> uint256:\n    return 42',
+          },
+        },
+        settings: {
+          outputSelection: {
+            '*': ['*'],
+          },
+        },
+      },
+    );
+    expect(compiledJSON?.contracts?.['test.vy']?.test).to.not.equal(undefined);
+  });
+
+  it('Should handle vyper 0.3.10 warnings', async function () {
+    const compiledJSON = await useVyperCompiler(
+      vyperRepoPath,
+      '0.3.10+commit.91361694',
+      {
+        language: 'Vyper',
+        sources: {
+          'test.vy': {
+            content: `@external
+@view
+def foo(x: uint256, y: int128) -> uint256:
+    return shift(x, y)`,
+          },
+        },
+        settings: {
+          outputSelection: {
+            '*': ['*'],
+          },
+        },
+      },
+    );
+    expect(compiledJSON?.contracts?.['test.vy']?.test).to.not.equal(undefined);
+    // 0.3.10 doesn't include the warnings in the standardJson output
+    expect(compiledJSON?.errors).to.be.undefined;
+  });
+
+  it('Should handle vyper 0.3.10 warnings and errors', async function () {
+    try {
+      const compiledJSON = await useVyperCompiler(
+        vyperRepoPath,
+        '0.3.10+commit.91361694',
+        {
+          language: 'Vyper',
+          sources: {
+            'test.vy': {
+              content: `@exernal
+@view
+def foo(x: uint256, y: int128) -> uint256:
+    return shift(x, y)`,
+            },
+          },
+          settings: {
+            outputSelection: {
+              '*': ['*'],
+            },
+          },
+        },
+      );
+      expect(compiledJSON?.contracts?.['test.vy']?.test).to.not.equal(
+        undefined,
+      );
+    } catch (error: any) {
+      // 0.3.10 doesn't include the warnings in the standardJson output but in the errors
+      expect(error.errors?.some((e: any) => e.severity === 'warning')).to.be
+        .false;
+      expect(error.errors?.some((e: any) => e.severity === 'error')).to.be.true;
+    }
+  });
+
+  it('Should handle vyper 0.4.0 warnings', async function () {
+    const compiledJSON = await useVyperCompiler(
+      vyperRepoPath,
+      '0.4.0+commit.e9db8d9f',
+      {
+        language: 'Vyper',
+        sources: {
+          'test.vy': {
+            content: `@external
+@view
+def foo(x: uint256, y: int128) -> uint256:
+    return shift(x, y)`,
+          },
+        },
+        settings: {
+          outputSelection: {
+            '*': ['*'],
+          },
+        },
+      },
+    );
+    expect(compiledJSON?.contracts?.['test.vy']?.test).to.not.equal(undefined);
+    // Should still compile successfully despite warnings
+    expect(compiledJSON?.errors?.some((e) => e.severity === 'warning')).to.be
+      .true;
+  });
+});