diff --git a/src/System.Management.Automation/engine/NativeCommandProcessor.cs b/src/System.Management.Automation/engine/NativeCommandProcessor.cs
index 85b675a9ae9..0912afad435 100644
--- a/src/System.Management.Automation/engine/NativeCommandProcessor.cs
+++ b/src/System.Management.Automation/engine/NativeCommandProcessor.cs
@@ -815,12 +815,6 @@ private ProcessOutputObject DequeueProcessOutput(bool blocking)
         {
             if (blocking)
             {
-                if (_stdOutByteTransfer is not null)
-                {
-                    _stdOutByteTransfer.EOF.GetAwaiter().GetResult();
-                    return null;
-                }
-
                 // If adding was completed and collection is empty (IsCompleted == true)
                 // there is no need to do a blocking Take(), we should just return.
                 if (!_nativeProcessOutputQueue.IsCompleted)
@@ -842,17 +836,9 @@ private ProcessOutputObject DequeueProcessOutput(bool blocking)
 
                 return null;
             }
-            else
-            {
-                if (_stdOutByteTransfer is not null)
-                {
-                    return null;
-                }
 
-                ProcessOutputObject record = null;
-                _nativeProcessOutputQueue.TryTake(out record);
-                return record;
-            }
+            _nativeProcessOutputQueue.TryTake(out ProcessOutputObject record);
+            return record;
         }
 
         /// <summary>
@@ -860,21 +846,38 @@ private ProcessOutputObject DequeueProcessOutput(bool blocking)
         /// </summary>
         private void ConsumeAvailableNativeProcessOutput(bool blocking)
         {
-            if (!_isRunningInBackground)
+            if (_isRunningInBackground)
             {
-                if (_nativeProcess.StartInfo.RedirectStandardOutput || _nativeProcess.StartInfo.RedirectStandardError)
+                return;
+            }
+
+            bool stdOutRedirected = _nativeProcess.StartInfo.RedirectStandardOutput;
+            bool stdErrRedirected = _nativeProcess.StartInfo.RedirectStandardError;
+            if (stdOutRedirected && _stdOutByteTransfer is not null)
+            {
+                if (blocking)
                 {
-                    ProcessOutputObject record;
-                    while ((record = DequeueProcessOutput(blocking)) != null)
-                    {
-                        if (this.Command.Context.CurrentPipelineStopping)
-                        {
-                            this.StopProcessing();
-                            return;
-                        }
+                    _stdOutByteTransfer.EOF.GetAwaiter().GetResult();
+                }
+
+                if (!stdErrRedirected)
+                {
+                    return;
+                }
+            }
 
-                        ProcessOutputRecord(record);
+            if (stdOutRedirected || stdErrRedirected)
+            {
+                ProcessOutputObject record;
+                while ((record = DequeueProcessOutput(blocking)) != null)
+                {
+                    if (this.Command.Context.CurrentPipelineStopping)
+                    {
+                        this.StopProcessing();
+                        return;
                     }
+
+                    ProcessOutputRecord(record);
                 }
             }
         }
@@ -887,7 +890,7 @@ internal override void Complete()
                 if (!_isRunningInBackground)
                 {
                     // Wait for input writer to finish.
-                    if (!UpstreamIsNativeCommand)
+                    if (!UpstreamIsNativeCommand || _nativeProcess.StartInfo.RedirectStandardError)
                     {
                         _inputWriter.Done();
                     }
@@ -1772,7 +1775,7 @@ public ProcessOutputHandler(
 
             // we incrementing refCount on the same thread and before running any processing
             // so it's safe to do it without Interlocked.
-            if (process.StartInfo.RedirectStandardOutput)
+            if (process.StartInfo.RedirectStandardOutput && stdOutDestination is null)
             {
                 _refCount++;
             }
diff --git a/test/powershell/Language/Scripting/NativeExecution/NativeCommandProcessor.Tests.ps1 b/test/powershell/Language/Scripting/NativeExecution/NativeCommandProcessor.Tests.ps1
index d166ca265c7..542f1724303 100644
--- a/test/powershell/Language/Scripting/NativeExecution/NativeCommandProcessor.Tests.ps1
+++ b/test/powershell/Language/Scripting/NativeExecution/NativeCommandProcessor.Tests.ps1
@@ -213,6 +213,12 @@ Describe "Native Command Processor" -tags "Feature" {
         Wait-UntilTrue -sb { (Get-Process mmc).Count -gt 0 } -TimeoutInMilliseconds 5000 -IntervalInMilliseconds 1000 | Should -BeTrue
         Get-Process mmc | Stop-Process
     }
+
+    It 'Can redirect stdout and stderr to different files' {
+        testexe -stderrandout testing > $TestDrive/stdout.txt 2> $TestDrive/stderr.txt
+        Get-Content $TestDrive/stdout.txt | Should -Be testing
+        Get-Content $TestDrive/stderr.txt | Should -Be gnitset
+    }
 }
 
 Describe "Open a text file with NativeCommandProcessor" -tags @("Feature", "RequireAdminOnWindows") {
diff --git a/test/tools/TestExe/TestExe.cs b/test/tools/TestExe/TestExe.cs
index a91e2141b58..39c1d2b2ecb 100644
--- a/test/tools/TestExe/TestExe.cs
+++ b/test/tools/TestExe/TestExe.cs
@@ -8,6 +8,7 @@
 using System.Runtime.InteropServices;
 using System.IO;
 using System.Globalization;
+using System.Linq;
 
 namespace TestExe
 {
@@ -36,6 +37,10 @@ private static int Main(string[] args)
                     case "-stderr":
                         Console.Error.WriteLine(args[1]);
                         break;
+                    case "-stderrandout":
+                        Console.WriteLine(args[1]);
+                        Console.Error.WriteLine(new string(args[1].ToCharArray().Reverse().ToArray()));
+                        break;
                     case "-readbytes":
                         ReadBytes();
                         break;