diff --git a/pkg/storage/etcd3/event.go b/pkg/storage/etcd3/event.go
new file mode 100644
index 0000000000000..58072bd7b4f23
--- /dev/null
+++ b/pkg/storage/etcd3/event.go
@@ -0,0 +1,50 @@
+/*
+Copyright 2016 The Kubernetes Authors All rights reserved.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+package etcd3
+
+import (
+	"github.com/coreos/etcd/clientv3"
+	"github.com/coreos/etcd/storage/storagepb"
+)
+
+type event struct {
+	key       string
+	value     []byte
+	rev       int64
+	isDeleted bool
+	isCreated bool
+}
+
+func parseKV(kv *storagepb.KeyValue) *event {
+	return &event{
+		key:       string(kv.Key),
+		value:     kv.Value,
+		rev:       kv.ModRevision,
+		isDeleted: false,
+		isCreated: kv.ModRevision == kv.CreateRevision,
+	}
+}
+
+func parseEvent(e *clientv3.Event) *event {
+	return &event{
+		key:       string(e.Kv.Key),
+		value:     e.Kv.Value,
+		rev:       e.Kv.ModRevision,
+		isDeleted: e.Type == clientv3.EventTypeDelete,
+		isCreated: e.IsCreate(),
+	}
+}
diff --git a/pkg/storage/etcd3/store.go b/pkg/storage/etcd3/store.go
index c9b420197a7e0..46f10ad892cdc 100644
--- a/pkg/storage/etcd3/store.go
+++ b/pkg/storage/etcd3/store.go
@@ -42,6 +42,7 @@ type store struct {
 	codec      runtime.Codec
 	versioner  storage.Versioner
 	pathPrefix string
+	watcher    *watcher
 }
 
 type elemForDecode struct {
@@ -57,11 +58,13 @@ type objState struct {
 }
 
 func newStore(c *clientv3.Client, codec runtime.Codec, prefix string) *store {
+	versioner := etcd.APIObjectVersioner{}
 	return &store{
 		client:     c,
-		versioner:  etcd.APIObjectVersioner{},
+		versioner:  versioner,
 		codec:      codec,
 		pathPrefix: prefix,
+		watcher:    newWatcher(c, codec, versioner),
 	}
 }
 
@@ -315,12 +318,21 @@ func (s *store) List(ctx context.Context, key, resourceVersion string, filter st
 
 // Watch implements storage.Interface.Watch.
 func (s *store) Watch(ctx context.Context, key string, resourceVersion string, filter storage.FilterFunc) (watch.Interface, error) {
-	panic("TODO: unimplemented")
+	return s.watch(ctx, key, resourceVersion, filter, false)
 }
 
 // WatchList implements storage.Interface.WatchList.
 func (s *store) WatchList(ctx context.Context, key string, resourceVersion string, filter storage.FilterFunc) (watch.Interface, error) {
-	panic("TODO: unimplemented")
+	return s.watch(ctx, key, resourceVersion, filter, true)
+}
+
+func (s *store) watch(ctx context.Context, key string, rv string, filter storage.FilterFunc, recursive bool) (watch.Interface, error) {
+	rev, err := storage.ParseWatchResourceVersion(rv)
+	if err != nil {
+		return nil, err
+	}
+	key = keyWithPrefix(s.pathPrefix, key)
+	return s.watcher.Watch(ctx, key, int64(rev), recursive, filter)
 }
 
 func (s *store) getState(getResp *clientv3.GetResponse, key string, v reflect.Value, ignoreNotFound bool) (*objState, error) {
diff --git a/pkg/storage/etcd3/watcher.go b/pkg/storage/etcd3/watcher.go
new file mode 100644
index 0000000000000..4473602e799b9
--- /dev/null
+++ b/pkg/storage/etcd3/watcher.go
@@ -0,0 +1,327 @@
+/*
+Copyright 2016 The Kubernetes Authors All rights reserved.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+package etcd3
+
+import (
+	"fmt"
+	"net/http"
+	"strings"
+	"sync"
+
+	"k8s.io/kubernetes/pkg/api/unversioned"
+	"k8s.io/kubernetes/pkg/runtime"
+	"k8s.io/kubernetes/pkg/storage"
+	"k8s.io/kubernetes/pkg/watch"
+
+	"github.com/coreos/etcd/clientv3"
+	etcdrpc "github.com/coreos/etcd/etcdserver/api/v3rpc/rpctypes"
+	"github.com/golang/glog"
+	"golang.org/x/net/context"
+)
+
+const (
+	// We have set a buffer in order to reduce times of context switches.
+	incomingBufSize = 100
+	outgoingBufSize = 100
+)
+
+type watcher struct {
+	client    *clientv3.Client
+	codec     runtime.Codec
+	versioner storage.Versioner
+}
+
+// watchChan implements watch.Interface.
+type watchChan struct {
+	watcher           *watcher
+	key               string
+	initialRev        int64
+	recursive         bool
+	filter            storage.FilterFunc
+	ctx               context.Context
+	cancel            context.CancelFunc
+	incomingEventChan chan *event
+	resultChan        chan watch.Event
+	errChan           chan error
+}
+
+func newWatcher(client *clientv3.Client, codec runtime.Codec, versioner storage.Versioner) *watcher {
+	return &watcher{
+		client:    client,
+		codec:     codec,
+		versioner: versioner,
+	}
+}
+
+// Watch watches on a key and returns a watch.Interface that transfers relevant notifications.
+// If rev is zero, it will return the existing object(s) and then start watching from
+// the maximum revision+1 from returned objects.
+// If rev is non-zero, it will watch events happened after given revision.
+// If recursive is false, it watches on given key.
+// If recursive is true, it watches any children and directories under the key, excluding the root key itself.
+// filter must be non-nil. Only if filter returns true will the changes be returned.
+func (w *watcher) Watch(ctx context.Context, key string, rev int64, recursive bool, filter storage.FilterFunc) (watch.Interface, error) {
+	if recursive && !strings.HasSuffix(key, "/") {
+		key += "/"
+	}
+	wc := &watchChan{
+		watcher:           w,
+		key:               key,
+		initialRev:        rev,
+		recursive:         recursive,
+		filter:            filter,
+		incomingEventChan: make(chan *event, incomingBufSize),
+		resultChan:        make(chan watch.Event, outgoingBufSize),
+		errChan:           make(chan error, 1),
+	}
+	wc.ctx, wc.cancel = context.WithCancel(ctx)
+	go wc.run()
+	return wc, nil
+}
+
+func (wc *watchChan) run() {
+	go wc.startWatching()
+
+	var resultChanWG sync.WaitGroup
+	resultChanWG.Add(1)
+	go wc.processEvent(&resultChanWG)
+
+	select {
+	case err := <-wc.errChan:
+		errResult := parseError(err)
+		wc.cancel()
+		// error result is guaranteed to be received by user before closing ResultChan.
+		if errResult != nil {
+			wc.resultChan <- *errResult
+		}
+	case <-wc.ctx.Done():
+	}
+	// we need to wait until resultChan wouldn't be sent to anymore
+	resultChanWG.Wait()
+	close(wc.resultChan)
+}
+
+func (wc *watchChan) Stop() {
+	wc.cancel()
+}
+
+func (wc *watchChan) ResultChan() <-chan watch.Event {
+	return wc.resultChan
+}
+
+// sync tries to retrieve existing data and send them to process.
+// The revision to watch will be set to the revision in response.
+func (wc *watchChan) sync() error {
+	opts := []clientv3.OpOption{}
+	if wc.recursive {
+		opts = append(opts, clientv3.WithPrefix())
+	}
+	getResp, err := wc.watcher.client.Get(wc.ctx, wc.key, opts...)
+	if err != nil {
+		return err
+	}
+	wc.initialRev = getResp.Header.Revision
+
+	for _, kv := range getResp.Kvs {
+		wc.sendEvent(parseKV(kv))
+	}
+	return nil
+}
+
+// startWatching does:
+// - get current objects if initialRev=0; set initialRev to current rev
+// - watch on given key and send events to process.
+func (wc *watchChan) startWatching() {
+	if wc.initialRev == 0 {
+		if err := wc.sync(); err != nil {
+			wc.sendError(err)
+			return
+		}
+	}
+	opts := []clientv3.OpOption{clientv3.WithRev(wc.initialRev + 1)}
+	if wc.recursive {
+		opts = append(opts, clientv3.WithPrefix())
+	}
+	wch := wc.watcher.client.Watch(wc.ctx, wc.key, opts...)
+	for wres := range wch {
+		if wres.Err() != nil {
+			// If there is an error on server (e.g. compaction), the channel will return it before closed.
+			wc.sendError(wres.Err())
+			return
+		}
+		for _, e := range wres.Events {
+			wc.sendEvent(parseEvent(e))
+		}
+	}
+}
+
+// processEvent processes events from etcd watcher and sends results to resultChan.
+func (wc *watchChan) processEvent(wg *sync.WaitGroup) {
+	defer wg.Done()
+
+	for {
+		select {
+		case e := <-wc.incomingEventChan:
+			res := wc.transform(e)
+			if res == nil {
+				continue
+			}
+			// If user couldn't receive results fast enough, we also block incoming events from watcher.
+			// Because storing events in local will cause more memory usage.
+			// The worst case would be closing the fast watcher.
+			select {
+			case wc.resultChan <- *res:
+			case <-wc.ctx.Done():
+				return
+			}
+		case <-wc.ctx.Done():
+			return
+		}
+	}
+}
+
+// transform transforms an event into a result for user if not filtered.
+// TODO (Optimization):
+// - Save remote round-trip.
+//   Currently, DELETE and PUT event don't contain the previous value.
+//   We need to do another Get() in order to get previous object and have logic upon it.
+//   We could potentially do some optimizations:
+//   - For PUT, we can save current and previous objects into the value.
+//   - For DELETE, See https://github.com/coreos/etcd/issues/4620
+func (wc *watchChan) transform(e *event) (res *watch.Event) {
+	curObj, oldObj, err := prepareObjs(wc.ctx, e, wc.watcher.client, wc.watcher.codec, wc.watcher.versioner)
+	if err != nil {
+		wc.sendError(err)
+		return nil
+	}
+
+	switch {
+	case e.isDeleted:
+		if !wc.filter(oldObj) {
+			return nil
+		}
+		res = &watch.Event{
+			Type:   watch.Deleted,
+			Object: oldObj,
+		}
+	case e.isCreated:
+		if !wc.filter(curObj) {
+			return nil
+		}
+		res = &watch.Event{
+			Type:   watch.Added,
+			Object: curObj,
+		}
+	default:
+		curObjPasses := wc.filter(curObj)
+		oldObjPasses := wc.filter(oldObj)
+		switch {
+		case curObjPasses && oldObjPasses:
+			res = &watch.Event{
+				Type:   watch.Modified,
+				Object: curObj,
+			}
+		case curObjPasses && !oldObjPasses:
+			res = &watch.Event{
+				Type:   watch.Added,
+				Object: curObj,
+			}
+		case !curObjPasses && oldObjPasses:
+			res = &watch.Event{
+				Type:   watch.Deleted,
+				Object: oldObj,
+			}
+		}
+	}
+	return res
+}
+
+func parseError(err error) *watch.Event {
+	var status *unversioned.Status
+	switch {
+	case err == etcdrpc.ErrCompacted:
+		status = &unversioned.Status{
+			Status:  unversioned.StatusFailure,
+			Message: err.Error(),
+			Code:    http.StatusGone,
+			Reason:  unversioned.StatusReasonExpired,
+		}
+	default:
+		status = &unversioned.Status{
+			Status:  unversioned.StatusFailure,
+			Message: err.Error(),
+			Code:    http.StatusInternalServerError,
+			Reason:  unversioned.StatusReasonInternalError,
+		}
+	}
+
+	return &watch.Event{
+		Type:   watch.Error,
+		Object: status,
+	}
+}
+
+func (wc *watchChan) sendError(err error) {
+	select {
+	case wc.errChan <- err:
+	case <-wc.ctx.Done():
+	}
+}
+
+func (wc *watchChan) sendEvent(e *event) {
+	if len(wc.incomingEventChan) == incomingBufSize {
+		glog.V(2).Infof("Fast watcher, slow processing. Number of buffered events: %d."+
+			"Probably caused by slow decoding, user not receiving fast, or other processing logic",
+			incomingBufSize)
+	}
+	select {
+	case wc.incomingEventChan <- e:
+	case <-wc.ctx.Done():
+	}
+}
+
+func prepareObjs(ctx context.Context, e *event, client *clientv3.Client, codec runtime.Codec, versioner storage.Versioner) (curObj runtime.Object, oldObj runtime.Object, err error) {
+	if !e.isDeleted {
+		curObj, err = decodeObj(codec, versioner, e.value, e.rev)
+		if err != nil {
+			return nil, nil, err
+		}
+	}
+	if e.isDeleted || !e.isCreated {
+		getResp, err := client.Get(ctx, e.key, clientv3.WithRev(e.rev-1))
+		if err != nil {
+			return nil, nil, err
+		}
+		oldObj, err = decodeObj(codec, versioner, getResp.Kvs[0].Value, getResp.Kvs[0].ModRevision)
+		if err != nil {
+			return nil, nil, err
+		}
+	}
+	return curObj, oldObj, nil
+}
+
+func decodeObj(codec runtime.Codec, versioner storage.Versioner, data []byte, rev int64) (runtime.Object, error) {
+	obj, err := runtime.Decode(codec, []byte(data))
+	if err != nil {
+		return nil, err
+	}
+	// ensure resource version is set on the object we load from etcd
+	if err := versioner.UpdateObject(obj, uint64(rev)); err != nil {
+		return nil, fmt.Errorf("failure to version api object (%d) %#v: %v", rev, obj, err)
+	}
+	return obj, nil
+}
diff --git a/pkg/storage/etcd3/watcher_test.go b/pkg/storage/etcd3/watcher_test.go
new file mode 100644
index 0000000000000..315d22a0ad7e4
--- /dev/null
+++ b/pkg/storage/etcd3/watcher_test.go
@@ -0,0 +1,209 @@
+/*
+Copyright 2016 The Kubernetes Authors All rights reserved.
+
+Licensed under the Apache License, Version 2.0 (the "License");
+you may not use this file except in compliance with the License.
+You may obtain a copy of the License at
+
+    http://www.apache.org/licenses/LICENSE-2.0
+
+Unless required by applicable law or agreed to in writing, software
+distributed under the License is distributed on an "AS IS" BASIS,
+WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+See the License for the specific language governing permissions and
+limitations under the License.
+*/
+
+package etcd3
+
+import (
+	"errors"
+	"reflect"
+	"testing"
+	"time"
+
+	"github.com/coreos/etcd/integration"
+	"golang.org/x/net/context"
+	"k8s.io/kubernetes/pkg/api"
+	"k8s.io/kubernetes/pkg/api/testapi"
+	"k8s.io/kubernetes/pkg/api/unversioned"
+	"k8s.io/kubernetes/pkg/runtime"
+	"k8s.io/kubernetes/pkg/storage"
+	"k8s.io/kubernetes/pkg/util/wait"
+	"k8s.io/kubernetes/pkg/watch"
+)
+
+func TestWatch(t *testing.T) {
+	testWatch(t, false)
+}
+
+func TestWatchList(t *testing.T) {
+	testWatch(t, true)
+}
+
+// It tests that
+// - first occurrence of objects should notify Add event
+// -
+func testWatch(t *testing.T, recursive bool) {
+	ctx, store, cluster := testSetup(t)
+	defer cluster.Terminate(t)
+
+	podFoo := &api.Pod{ObjectMeta: api.ObjectMeta{Name: "foo"}}
+	podBar := &api.Pod{ObjectMeta: api.ObjectMeta{Name: "bar"}}
+
+	tests := []struct {
+		key        string
+		filter     storage.FilterFunc
+		watchTests []*testWatchStruct
+	}{{ // create a key
+		key:        "/somekey-1",
+		watchTests: []*testWatchStruct{{podFoo, true, watch.Added}},
+		filter:     storage.Everything,
+	}, { // create a key but obj gets filtered
+		key:        "/somekey-2",
+		watchTests: []*testWatchStruct{{podFoo, false, ""}},
+		filter:     func(runtime.Object) bool { return false },
+	}, { // create a key but obj gets filtered. Then update it with unfiltered obj
+		key:        "/somekey-3",
+		watchTests: []*testWatchStruct{{podFoo, false, ""}, {podBar, true, watch.Added}},
+		filter: func(obj runtime.Object) bool {
+			pod := obj.(*api.Pod)
+			return pod.Name == "bar"
+		},
+	}, { // update
+		key:        "/somekey-4",
+		watchTests: []*testWatchStruct{{podFoo, true, watch.Added}, {podBar, true, watch.Modified}},
+		filter:     storage.Everything,
+	}, { // delete because of being filtered
+		key:        "/somekey-5",
+		watchTests: []*testWatchStruct{{podFoo, true, watch.Added}, {podBar, true, watch.Deleted}},
+		filter: func(obj runtime.Object) bool {
+			pod := obj.(*api.Pod)
+			return pod.Name != "bar"
+		},
+	}}
+	for i, tt := range tests {
+		w, err := store.watch(ctx, tt.key, "0", tt.filter, recursive)
+		if err != nil {
+			t.Fatalf("Watch failed: %v", err)
+		}
+		for _, watchTest := range tt.watchTests {
+			out := &api.Pod{}
+			key := tt.key
+			if recursive {
+				key = key + "/item"
+			}
+			err := store.GuaranteedUpdate(ctx, key, out, true, nil, storage.SimpleUpdate(
+				func(runtime.Object) (runtime.Object, error) {
+					return watchTest.obj, nil
+				}))
+			if err != nil {
+				t.Fatalf("GuaranteedUpdate failed: %v", err)
+			}
+			if watchTest.expectEvent {
+				testCheckResult(t, i, watchTest.watchType, w, nil)
+			}
+		}
+		w.Stop()
+		testCheckStop(t, i, w)
+	}
+}
+
+func TestDeleteTriggerWatch(t *testing.T) {
+	ctx, store, cluster := testSetup(t)
+	defer cluster.Terminate(t)
+	key, storedObj := testPropogateStore(t, store, ctx, &api.Pod{ObjectMeta: api.ObjectMeta{Name: "foo"}})
+	w, err := store.Watch(ctx, key, storedObj.ResourceVersion, storage.Everything)
+	if err != nil {
+		t.Fatalf("Watch failed: %v", err)
+	}
+	if err := store.Delete(ctx, key, &api.Pod{}, nil); err != nil {
+		t.Fatalf("Delete failed: %v", err)
+	}
+	testCheckResult(t, 0, watch.Deleted, w, storedObj)
+}
+
+// TestWatchSync tests that
+// - watch from 0 should sync up and grab the object added before
+// - watch from non-0 should just watch changes after given version
+func TestWatchFromZeroAndNoneZero(t *testing.T) {
+	ctx, store, cluster := testSetup(t)
+	defer cluster.Terminate(t)
+	key, storedObj := testPropogateStore(t, store, ctx, &api.Pod{ObjectMeta: api.ObjectMeta{Name: "foo"}})
+
+	w, err := store.Watch(ctx, key, "0", storage.Everything)
+	if err != nil {
+		t.Fatalf("Watch failed: %v", err)
+	}
+	testCheckResult(t, 0, watch.Added, w, storedObj)
+	w.Stop()
+	testCheckStop(t, 0, w)
+
+	w, err = store.Watch(ctx, key, storedObj.ResourceVersion, storage.Everything)
+	if err != nil {
+		t.Fatalf("Watch failed: %v", err)
+	}
+	out := &api.Pod{}
+	store.GuaranteedUpdate(ctx, key, out, true, nil, storage.SimpleUpdate(
+		func(runtime.Object) (runtime.Object, error) {
+			return &api.Pod{ObjectMeta: api.ObjectMeta{Name: "bar"}}, err
+		}))
+	testCheckResult(t, 0, watch.Modified, w, out)
+}
+
+func TestWatchError(t *testing.T) {
+	cluster := integration.NewClusterV3(t, &integration.ClusterConfig{Size: 1})
+	defer cluster.Terminate(t)
+	invalidStore := newStore(cluster.RandClient(), &testCodec{testapi.Default.Codec()}, "")
+	ctx := context.Background()
+	w, err := invalidStore.Watch(ctx, "/abc", "0", storage.Everything)
+	if err != nil {
+		t.Fatalf("Watch failed: %v", err)
+	}
+	validStore := newStore(cluster.RandClient(), testapi.Default.Codec(), "")
+	validStore.GuaranteedUpdate(ctx, "/abc", &api.Pod{}, true, nil, storage.SimpleUpdate(
+		func(runtime.Object) (runtime.Object, error) {
+			return &api.Pod{ObjectMeta: api.ObjectMeta{Name: "foo"}}, nil
+		}))
+	testCheckResult(t, 0, watch.Error, w, nil)
+}
+
+type testWatchStruct struct {
+	obj         *api.Pod
+	expectEvent bool
+	watchType   watch.EventType
+}
+
+type testCodec struct {
+	runtime.Codec
+}
+
+func (c *testCodec) Decode(data []byte, defaults *unversioned.GroupVersionKind, into runtime.Object) (runtime.Object, *unversioned.GroupVersionKind, error) {
+	return nil, nil, errors.New("Expected decoding failure")
+}
+
+func testCheckResult(t *testing.T, i int, expectEventType watch.EventType, w watch.Interface, expectObj *api.Pod) {
+	select {
+	case res := <-w.ResultChan():
+		if res.Type != expectEventType {
+			t.Errorf("#%d: event type want=%v, get=%v", i, expectEventType, res.Type)
+			return
+		}
+		if expectObj != nil && !reflect.DeepEqual(expectObj, res.Object) {
+			t.Errorf("#%d: obj want=\n%#v\nget=\n%#v", i, expectObj, res.Object)
+		}
+	case <-time.After(wait.ForeverTestTimeout):
+		t.Errorf("#%d: time out after waiting %v on ResultChan", i, wait.ForeverTestTimeout)
+	}
+}
+
+func testCheckStop(t *testing.T, i int, w watch.Interface) {
+	select {
+	case _, ok := <-w.ResultChan():
+		if ok {
+			t.Errorf("#%d: ResultChan should have been closed", i)
+		}
+	case <-time.After(wait.ForeverTestTimeout):
+		t.Errorf("#%d: time out after waiting 1s on ResultChan", i)
+	}
+}