diff --git a/cli/tests/integration/watcher_tests.rs b/cli/tests/integration/watcher_tests.rs
index 04320060b2..2d41a74ed5 100644
--- a/cli/tests/integration/watcher_tests.rs
+++ b/cli/tests/integration/watcher_tests.rs
@@ -1371,6 +1371,46 @@ async fn run_watch_reload_once() {
   check_alive_then_kill(child);
 }
 
+/// Regression test for https://github.com/denoland/deno/issues/18960. Ensures that Deno.serve
+/// operates properly after a watch restart.
+#[tokio::test]
+async fn test_watch_serve() {
+  let t = TempDir::new();
+  let file_to_watch = t.path().join("file_to_watch.js");
+  let file_content = r#"
+      console.error("serving");
+      await Deno.serve({port: 4600, handler: () => new Response("hello")});
+    "#;
+  write(&file_to_watch, file_content).unwrap();
+
+  let mut child = util::deno_cmd()
+    .current_dir(util::testdata_path())
+    .arg("run")
+    .arg("--watch")
+    .arg("--unstable")
+    .arg("--allow-net")
+    .arg("-L")
+    .arg("debug")
+    .arg(&file_to_watch)
+    .env("NO_COLOR", "1")
+    .stdout(std::process::Stdio::piped())
+    .stderr(std::process::Stdio::piped())
+    .spawn()
+    .unwrap();
+  let (mut stdout_lines, mut stderr_lines) = child_lines(&mut child);
+
+  wait_contains("Listening on", &mut stdout_lines).await;
+  // Note that we start serving very quickly, so we specifically want to wait for this message
+  wait_contains(r#"Watching paths: [""#, &mut stderr_lines).await;
+
+  write(&file_to_watch, file_content).unwrap();
+
+  wait_contains("serving", &mut stderr_lines).await;
+  wait_contains("Listening on", &mut stdout_lines).await;
+
+  check_alive_then_kill(child);
+}
+
 #[tokio::test]
 async fn run_watch_dynamic_imports() {
   let t = TempDir::new();
diff --git a/cli/tests/unit/serve_test.ts b/cli/tests/unit/serve_test.ts
index 5d5d0428f9..ce7267f580 100644
--- a/cli/tests/unit/serve_test.ts
+++ b/cli/tests/unit/serve_test.ts
@@ -94,8 +94,9 @@ Deno.test(async function httpServerRejectsOnAddrInUse() {
     onListen: onListen(listeningPromise),
     onError: createOnErrorCb(ac),
   });
+  await listeningPromise;
 
-  assertRejects(
+  await assertRejects(
     () =>
       Deno.serve({
         handler: (_req) => new Response("ok"),
diff --git a/cli/util/file_watcher.rs b/cli/util/file_watcher.rs
index 05415f2a63..1ad5e9ba07 100644
--- a/cli/util/file_watcher.rs
+++ b/cli/util/file_watcher.rs
@@ -304,6 +304,13 @@ where
   }
 
   loop {
+    // We may need to give the runtime a tick to settle, as cancellations may need to propagate
+    // to tasks. We choose yielding 10 times to the runtime as a decent heuristic. If watch tests
+    // start to fail, this may need to be increased.
+    for _ in 0..10 {
+      tokio::task::yield_now().await;
+    }
+
     let mut watcher = new_watcher(watcher_sender.clone())?;
     consume_paths_to_watch(&mut watcher, &mut paths_to_watch_receiver);
 
diff --git a/ext/http/http_next.rs b/ext/http/http_next.rs
index 593a9c8166..5ed443142e 100644
--- a/ext/http/http_next.rs
+++ b/ext/http/http_next.rs
@@ -625,83 +625,80 @@ impl<F: Future<Output = ()>> Future for SlabFuture<F> {
 fn serve_http11_unconditional(
   io: impl HttpServeStream,
   svc: impl HttpService<Incoming, ResBody = ResponseBytes> + 'static,
-  cancel: RcRef<CancelHandle>,
 ) -> impl Future<Output = Result<(), AnyError>> + 'static {
   let conn = http1::Builder::new()
     .keep_alive(true)
     .serve_connection(io, svc);
 
-  conn
-    .with_upgrades()
-    .map_err(AnyError::from)
-    .try_or_cancel(cancel)
+  conn.with_upgrades().map_err(AnyError::from)
 }
 
 fn serve_http2_unconditional(
   io: impl HttpServeStream,
   svc: impl HttpService<Incoming, ResBody = ResponseBytes> + 'static,
-  cancel: RcRef<CancelHandle>,
 ) -> impl Future<Output = Result<(), AnyError>> + 'static {
   let conn = http2::Builder::new(LocalExecutor).serve_connection(io, svc);
-  conn.map_err(AnyError::from).try_or_cancel(cancel)
+  conn.map_err(AnyError::from)
 }
 
 async fn serve_http2_autodetect(
   io: impl HttpServeStream,
   svc: impl HttpService<Incoming, ResBody = ResponseBytes> + 'static,
-  cancel: RcRef<CancelHandle>,
 ) -> Result<(), AnyError> {
   let prefix = NetworkStreamPrefixCheck::new(io, HTTP2_PREFIX);
   let (matches, io) = prefix.match_prefix().await?;
   if matches {
-    serve_http2_unconditional(io, svc, cancel).await
+    serve_http2_unconditional(io, svc).await
   } else {
-    serve_http11_unconditional(io, svc, cancel).await
+    serve_http11_unconditional(io, svc).await
   }
 }
 
 fn serve_https(
   mut io: TlsStream,
   request_info: HttpConnectionProperties,
-  cancel: RcRef<CancelHandle>,
+  cancel: Rc<CancelHandle>,
   tx: tokio::sync::mpsc::Sender<u32>,
 ) -> JoinHandle<Result<(), AnyError>> {
   // TODO(mmastrac): This is faster if we can use tokio::spawn but then the send bounds get us
   let svc = service_fn(move |req: Request| {
     new_slab_future(req, request_info.clone(), tx.clone())
   });
-  spawn_local(async {
-    io.handshake().await?;
-    // If the client specifically negotiates a protocol, we will use it. If not, we'll auto-detect
-    // based on the prefix bytes
-    let handshake = io.get_ref().1.alpn_protocol();
-    if handshake == Some(TLS_ALPN_HTTP_2) {
-      serve_http2_unconditional(io, svc, cancel).await
-    } else if handshake == Some(TLS_ALPN_HTTP_11) {
-      serve_http11_unconditional(io, svc, cancel).await
-    } else {
-      serve_http2_autodetect(io, svc, cancel).await
+  spawn_local(
+    async {
+      io.handshake().await?;
+      // If the client specifically negotiates a protocol, we will use it. If not, we'll auto-detect
+      // based on the prefix bytes
+      let handshake = io.get_ref().1.alpn_protocol();
+      if handshake == Some(TLS_ALPN_HTTP_2) {
+        serve_http2_unconditional(io, svc).await
+      } else if handshake == Some(TLS_ALPN_HTTP_11) {
+        serve_http11_unconditional(io, svc).await
+      } else {
+        serve_http2_autodetect(io, svc).await
+      }
     }
-  })
+    .try_or_cancel(cancel),
+  )
 }
 
 fn serve_http(
   io: impl HttpServeStream,
   request_info: HttpConnectionProperties,
-  cancel: RcRef<CancelHandle>,
+  cancel: Rc<CancelHandle>,
   tx: tokio::sync::mpsc::Sender<u32>,
 ) -> JoinHandle<Result<(), AnyError>> {
   // TODO(mmastrac): This is faster if we can use tokio::spawn but then the send bounds get us
   let svc = service_fn(move |req: Request| {
     new_slab_future(req, request_info.clone(), tx.clone())
   });
-  spawn_local(serve_http2_autodetect(io, svc, cancel))
+  spawn_local(serve_http2_autodetect(io, svc).try_or_cancel(cancel))
 }
 
 fn serve_http_on(
   network_stream: NetworkStream,
   listen_properties: &HttpListenProperties,
-  cancel: RcRef<CancelHandle>,
+  cancel: Rc<CancelHandle>,
   tx: tokio::sync::mpsc::Sender<u32>,
 ) -> JoinHandle<Result<(), AnyError>> {
   // We always want some sort of peer address. If we can't get one, just make up one.
@@ -733,13 +730,14 @@ fn serve_http_on(
 
 struct HttpJoinHandle(
   AsyncRefCell<Option<JoinHandle<Result<(), AnyError>>>>,
-  CancelHandle,
+  // Cancel handle must live in a separate Rc to avoid keeping the outer join handle ref'd
+  Rc<CancelHandle>,
   AsyncRefCell<tokio::sync::mpsc::Receiver<u32>>,
 );
 
 impl HttpJoinHandle {
-  fn cancel_handle(self: &Rc<Self>) -> RcRef<CancelHandle> {
-    RcRef::map(self, |this| &this.1)
+  fn cancel_handle(self: &Rc<Self>) -> Rc<CancelHandle> {
+    self.1.clone()
   }
 }
 
@@ -753,6 +751,13 @@ impl Resource for HttpJoinHandle {
   }
 }
 
+impl Drop for HttpJoinHandle {
+  fn drop(&mut self) {
+    // In some cases we may be dropped without closing, so let's cancel everything on the way out
+    self.1.cancel();
+  }
+}
+
 #[op(v8)]
 pub fn op_serve_http(
   state: Rc<RefCell<OpState>>,
@@ -773,12 +778,12 @@ pub fn op_serve_http(
   let (tx, rx) = tokio::sync::mpsc::channel(10);
   let resource: Rc<HttpJoinHandle> = Rc::new(HttpJoinHandle(
     AsyncRefCell::new(None),
-    CancelHandle::new(),
+    CancelHandle::new_rc(),
     AsyncRefCell::new(rx),
   ));
   let cancel_clone = resource.cancel_handle();
 
-  let listen_properties_clone = listen_properties.clone();
+  let listen_properties_clone: HttpListenProperties = listen_properties.clone();
   let handle = spawn_local(async move {
     loop {
       let conn = listener
@@ -813,7 +818,7 @@ pub fn op_serve_http_on(
   state: Rc<RefCell<OpState>>,
   conn: ResourceId,
 ) -> Result<(ResourceId, &'static str, String), AnyError> {
-  let network_stream =
+  let network_stream: NetworkStream =
     DefaultHttpRequestProperties::get_network_stream_for_rid(
       &mut state.borrow_mut(),
       conn,
@@ -828,7 +833,7 @@ pub fn op_serve_http_on(
   let (tx, rx) = tokio::sync::mpsc::channel(10);
   let resource: Rc<HttpJoinHandle> = Rc::new(HttpJoinHandle(
     AsyncRefCell::new(None),
-    CancelHandle::new(),
+    CancelHandle::new_rc(),
     AsyncRefCell::new(rx),
   ));
 
@@ -862,7 +867,7 @@ pub async fn op_http_wait(
     .resource_table
     .get::<HttpJoinHandle>(rid)?;
 
-  let cancel = join_handle.clone().cancel_handle();
+  let cancel = join_handle.cancel_handle();
   let next = async {
     let mut recv = RcRef::map(&join_handle, |this| &this.2).borrow_mut().await;
     recv.recv().await