diff --git a/user/externallib.php b/user/externallib.php
index 86381b25fea..0f402dfa9a0 100644
--- a/user/externallib.php
+++ b/user/externallib.php
@@ -564,106 +564,143 @@ class core_user_external extends external_api {
                 'maxfiles'       => 1,
                 'accepted_types' => 'optimised_image');
 
-        $transaction = $DB->start_delegated_transaction();
-
+        $warnings = array();
         foreach ($params['users'] as $user) {
-            // First check the user exists.
-            if (!$existinguser = core_user::get_user($user['id'])) {
-                continue;
-            }
-            // Check if we are trying to update an admin.
-            if ($existinguser->id != $USER->id and is_siteadmin($existinguser) and !is_siteadmin($USER)) {
-                continue;
-            }
-            // Other checks (deleted, remote or guest users).
-            if ($existinguser->deleted or is_mnet_remote_user($existinguser) or isguestuser($existinguser->id)) {
-                continue;
-            }
-            // Check duplicated emails.
-            if (isset($user['email']) && $user['email'] !== $existinguser->email) {
-                if (!validate_email($user['email'])) {
-                    continue;
-                } else if (empty($CFG->allowaccountssameemail)) {
-                    // Make a case-insensitive query for the given email address and make sure to exclude the user being updated.
-                    $select = $DB->sql_equal('email', ':email', false) . ' AND mnethostid = :mnethostid AND id <> :userid';
-                    $params = array(
-                        'email' => $user['email'],
-                        'mnethostid' => $CFG->mnet_localhost_id,
-                        'userid' => $user['id']
-                    );
-                    // Skip if there are other user(s) that already have the same email.
-                    if ($DB->record_exists_select('user', $select, $params)) {
-                        continue;
+            // Catch any exception while updating a user and return it as a warning.
+            try {
+                $transaction = $DB->start_delegated_transaction();
+
+                // First check the user exists.
+                if (!$existinguser = core_user::get_user($user['id'])) {
+                    throw new moodle_exception('invaliduserid', '', '', null,
+                            'Invalid user ID');
+                }
+                // Check if we are trying to update an admin.
+                if ($existinguser->id != $USER->id and is_siteadmin($existinguser) and !is_siteadmin($USER)) {
+                    throw new moodle_exception('usernotupdatedadmin', '', '', null,
+                            'Cannot update admin accounts');
+                }
+                // Other checks (deleted, remote or guest users).
+                if ($existinguser->deleted) {
+                    throw new moodle_exception('usernotupdateddeleted', '', '', null,
+                            'User is a deleted user');
+                }
+                if (is_mnet_remote_user($existinguser)) {
+                    throw new moodle_exception('usernotupdatedremote', '', '', null,
+                            'User is a remote user');
+                }
+                if (isguestuser($existinguser->id)) {
+                    throw new moodle_exception('usernotupdatedguest', '', '', null,
+                            'Cannot update guest account');
+                }
+                // Check duplicated emails.
+                if (isset($user['email']) && $user['email'] !== $existinguser->email) {
+                    if (!validate_email($user['email'])) {
+                        throw new moodle_exception('useremailinvalid', '', '', null,
+                                'Invalid email address');
+                    } else if (empty($CFG->allowaccountssameemail)) {
+                        // Make a case-insensitive query for the given email address
+                        // and make sure to exclude the user being updated.
+                        $select = $DB->sql_equal('email', ':email', false) . ' AND mnethostid = :mnethostid AND id <> :userid';
+                        $params = array(
+                            'email' => $user['email'],
+                            'mnethostid' => $CFG->mnet_localhost_id,
+                            'userid' => $user['id']
+                        );
+                        // Skip if there are other user(s) that already have the same email.
+                        if ($DB->record_exists_select('user', $select, $params)) {
+                            throw new moodle_exception('useremailduplicate', '', '', null,
+                                    'Duplicate email address');
+                        }
                     }
                 }
-            }
 
-            user_update_user($user, true, false);
+                user_update_user($user, true, false);
 
-            $userobject = (object)$user;
+                $userobject = (object)$user;
 
-            // Update user picture if it was specified for this user.
-            if (empty($CFG->disableuserimages) && isset($user['userpicture'])) {
-                $userobject->deletepicture = null;
+                // Update user picture if it was specified for this user.
+                if (empty($CFG->disableuserimages) && isset($user['userpicture'])) {
+                    $userobject->deletepicture = null;
 
-                if ($user['userpicture'] == 0) {
-                    $userobject->deletepicture = true;
-                } else {
-                    $userobject->imagefile = $user['userpicture'];
+                    if ($user['userpicture'] == 0) {
+                        $userobject->deletepicture = true;
+                    } else {
+                        $userobject->imagefile = $user['userpicture'];
+                    }
+
+                    core_user::update_picture($userobject, $filemanageroptions);
                 }
 
-                core_user::update_picture($userobject, $filemanageroptions);
-            }
-
-            // Update user interests.
-            if (!empty($user['interests'])) {
-                $trimmedinterests = array_map('trim', explode(',', $user['interests']));
-                $interests = array_filter($trimmedinterests, function($value) {
-                    return !empty($value);
-                });
-                useredit_update_interests($userobject, $interests);
-            }
-
-            // Update user custom fields.
-            if (!empty($user['customfields'])) {
-
-                foreach ($user['customfields'] as $customfield) {
-                    // Profile_save_data() saves profile file it's expecting a user with the correct id,
-                    // and custom field to be named profile_field_"shortname".
-                    $user["profile_field_".$customfield['type']] = $customfield['value'];
+                // Update user interests.
+                if (!empty($user['interests'])) {
+                    $trimmedinterests = array_map('trim', explode(',', $user['interests']));
+                    $interests = array_filter($trimmedinterests, function($value) {
+                        return !empty($value);
+                    });
+                    useredit_update_interests($userobject, $interests);
                 }
-                profile_save_data((object) $user);
-            }
 
-            // Trigger event.
-            \core\event\user_updated::create_from_userid($user['id'])->trigger();
+                // Update user custom fields.
+                if (!empty($user['customfields'])) {
 
-            // Preferences.
-            if (!empty($user['preferences'])) {
-                $userpref = clone($existinguser);
-                foreach ($user['preferences'] as $preference) {
-                    $userpref->{'preference_'.$preference['type']} = $preference['value'];
+                    foreach ($user['customfields'] as $customfield) {
+                        // Profile_save_data() saves profile file it's expecting a user with the correct id,
+                        // and custom field to be named profile_field_"shortname".
+                        $user["profile_field_".$customfield['type']] = $customfield['value'];
+                    }
+                    profile_save_data((object) $user);
+                }
+
+                // Trigger event.
+                \core\event\user_updated::create_from_userid($user['id'])->trigger();
+
+                // Preferences.
+                if (!empty($user['preferences'])) {
+                    $userpref = clone($existinguser);
+                    foreach ($user['preferences'] as $preference) {
+                        $userpref->{'preference_'.$preference['type']} = $preference['value'];
+                    }
+                    useredit_update_user_preference($userpref);
+                }
+                if (isset($user['suspended']) and $user['suspended']) {
+                    \core\session\manager::kill_user_sessions($user['id']);
+                }
+
+                $transaction->allow_commit();
+            } catch (Exception $e) {
+                try {
+                    $transaction->rollback($e);
+                } catch (Exception $e) {
+                    $warning = [];
+                    $warning['item'] = 'user';
+                    $warning['itemid'] = $user['id'];
+                    if ($e instanceof moodle_exception) {
+                        $warning['warningcode'] = $e->errorcode;
+                    } else {
+                        $warning['warningcode'] = $e->getCode();
+                    }
+                    $warning['message'] = $e->getMessage();
+                    $warnings[] = $warning;
                 }
-                useredit_update_user_preference($userpref);
-            }
-            if (isset($user['suspended']) and $user['suspended']) {
-                \core\session\manager::kill_user_sessions($user['id']);
             }
         }
 
-        $transaction->allow_commit();
-
-        return null;
+        return ['warnings' => $warnings];
     }
 
     /**
      * Returns description of method result value
      *
-     * @return null
+     * @return external_description
      * @since Moodle 2.2
      */
     public static function update_users_returns() {
-        return null;
+        return new external_single_structure(
+            array(
+                'warnings' => new external_warnings()
+            )
+        );
     }
 
     /**
diff --git a/user/tests/externallib_test.php b/user/tests/externallib_test.php
index f2a6176745c..fd9f5cb1693 100644
--- a/user/tests/externallib_test.php
+++ b/user/tests/externallib_test.php
@@ -715,6 +715,7 @@ class core_user_externallib_testcase extends externallib_advanced_testcase {
         global $USER, $CFG, $DB;
 
         $this->resetAfterTest(true);
+        $this->preventResetByRollback();
 
         $wsuser = self::getDataGenerator()->create_user();
         self::setUser($wsuser);
@@ -780,8 +781,20 @@ class core_user_externallib_testcase extends externallib_advanced_testcase {
         $user4['id'] = $userdeleted->id;
         user_delete_user($userdeleted);
 
+        $user5 = self::getDataGenerator()->create_user();
+        $user5 = array('id' => $user5->id, 'email' => $user5->email);
+
         // Call the external function.
-        core_user_external::update_users(array($user1, $user2, $user3, $user4));
+        $returnvalue = core_user_external::update_users(array($user1, $user2, $user3, $user4));
+        $returnvalue = external_api::clean_returnvalue(core_user_external::update_users_returns(), $returnvalue);
+
+        // Check warnings.
+        $this->assertEquals($user2['id'], $returnvalue['warnings'][0]['itemid']); // Guest user.
+        $this->assertEquals('usernotupdatedguest', $returnvalue['warnings'][0]['warningcode']);
+        $this->assertEquals($user3['id'], $returnvalue['warnings'][1]['itemid']); // Admin user.
+        $this->assertEquals('usernotupdatedadmin', $returnvalue['warnings'][1]['warningcode']);
+        $this->assertEquals($user4['id'], $returnvalue['warnings'][2]['itemid']); // Deleted user.
+        $this->assertEquals('usernotupdateddeleted', $returnvalue['warnings'][2]['warningcode']);
 
         $dbuser2 = $DB->get_record('user', array('id' => $user2['id']));
         $this->assertNotEquals($dbuser2->username, $user2['username']);
@@ -824,6 +837,39 @@ class core_user_externallib_testcase extends externallib_advanced_testcase {
         $dbuserdelpic = $DB->get_record('user', array('id' => $user1['id']));
         $this->assertEquals(0, $dbuserdelpic->picture, 'Picture must be deleted when sent as 0.');
 
+        // Updating user with an invalid email.
+        $user5['email'] = 'bogus';
+        $returnvalue = core_user_external::update_users(array($user5));
+        $returnvalue = external_api::clean_returnvalue(core_user_external::update_users_returns(), $returnvalue);
+        $this->assertEquals('useremailinvalid', $returnvalue['warnings'][0]['warningcode']);
+        $this->assertStringContainsString('Invalid email address',
+            $returnvalue['warnings'][0]['message']);
+
+        // Updating user with a duplicate email.
+        $user5['email'] = $user1['email'];
+        $returnvalue = core_user_external::update_users(array($user1, $user5));
+        $returnvalue = external_api::clean_returnvalue(core_user_external::update_users_returns(), $returnvalue);
+        $this->assertEquals('useremailduplicate', $returnvalue['warnings'][0]['warningcode']);
+        $this->assertStringContainsString('Duplicate email address',
+                $returnvalue['warnings'][0]['message']);
+
+        // Updating a user that does not exist.
+        $user5['id'] = -1;
+        $returnvalue = core_user_external::update_users(array($user5));
+        $returnvalue = external_api::clean_returnvalue(core_user_external::update_users_returns(), $returnvalue);
+        $this->assertEquals('invaliduserid', $returnvalue['warnings'][0]['warningcode']);
+        $this->assertStringContainsString('Invalid user ID',
+                $returnvalue['warnings'][0]['message']);
+
+        // Updating a remote user.
+        $user1['mnethostid'] = 5;
+        user_update_user($user1); // Update user not using webservice.
+        unset($user1['mnethostid']); // The mnet host ID field is not in the allowed field list for the webservice.
+        $returnvalue = core_user_external::update_users(array($user1));
+        $returnvalue = external_api::clean_returnvalue(core_user_external::update_users_returns(), $returnvalue);
+        $this->assertEquals('usernotupdatedremote', $returnvalue['warnings'][0]['warningcode']);
+        $this->assertStringContainsString('User is a remote user',
+                $returnvalue['warnings'][0]['message']);
 
         // Call without required capability.
         $this->unassignUserCapability('moodle/user:update', $context->id, $roleid);
diff --git a/user/upgrade.txt b/user/upgrade.txt
index d20af1afffd..51d0ee8f5de 100644
--- a/user/upgrade.txt
+++ b/user/upgrade.txt
@@ -1,5 +1,12 @@
 This files describes API changes for code that uses the user API.
 
+=== 4.0 ===
+
+* External function core_user_external::update_users() will now fail on a per user basis. Previously if one user
+  update failed all users in the operation would fail.
+* External function core_user_external::update_users() now returns an error code and message to why a user update
+  action failed.
+
 === 3.11 ===
 
 * Added new core_user/form_user_selector JS module that can be used as the 'ajax' handler for the autocomplete form