diff --git a/dvc/exceptions.py b/dvc/exceptions.py
index a352ada150..bca505c1a9 100644
--- a/dvc/exceptions.py
+++ b/dvc/exceptions.py
@@ -259,10 +259,11 @@ def __init__(self, etag, cached_etag):
         )
 
 
-class OutputFileMissingError(DvcException):
-    def __init__(self, path):
-        super(OutputFileMissingError, self).__init__(
-            "Can't find {} neither locally nor on remote".format(path)
+class FileMissingError(DvcException):
+    def __init__(self, path, cause=None):
+        super(FileMissingError, self).__init__(
+            "Can't find '{}' neither locally nor on remote".format(path),
+            cause=cause,
         )
 
 
diff --git a/dvc/repo/__init__.py b/dvc/repo/__init__.py
index fed4935317..060f32cff9 100644
--- a/dvc/repo/__init__.py
+++ b/dvc/repo/__init__.py
@@ -12,7 +12,7 @@
 from dvc.exceptions import (
     NotDvcRepoError,
     OutputNotFoundError,
-    OutputFileMissingError,
+    FileMissingError,
 )
 from dvc.ignore import DvcIgnoreFilter
 from dvc.path_info import PathInfo
@@ -454,14 +454,29 @@ def is_dvc_internal(self, path):
     @contextmanager
     def open(self, path, remote=None, mode="r", encoding=None):
         """Opens a specified resource as a file descriptor"""
+        cause = None
         try:
-            with self._open(path, remote, mode, encoding) as fd:
+            out, = self.find_outs_by_path(path)
+        except OutputNotFoundError as e:
+            out = None
+            cause = e
+
+        if out and out.use_cache:
+            try:
+                with self._open_cached(out, remote, mode, encoding) as fd:
+                    yield fd
+                return
+            except FileNotFoundError as e:
+                raise FileMissingError(relpath(path, self.root_dir), cause=e)
+
+        if self.tree.exists(path):
+            with self.tree.open(path, mode, encoding) as fd:
                 yield fd
-        except FileNotFoundError:
-            raise OutputFileMissingError(relpath(path, self.root_dir))
+            return
 
-    def _open(self, path, remote=None, mode="r", encoding=None):
-        out, = self.find_outs_by_path(path)
+        raise FileMissingError(relpath(path, self.root_dir), cause=cause)
+
+    def _open_cached(self, out, remote=None, mode="r", encoding=None):
         if out.isdir():
             raise ValueError("Can't open a dir")
 
diff --git a/dvc/scm/git/tree.py b/dvc/scm/git/tree.py
index 1493f40303..23653b2511 100644
--- a/dvc/scm/git/tree.py
+++ b/dvc/scm/git/tree.py
@@ -45,7 +45,8 @@ def __init__(self, git, rev):
     def tree_root(self):
         return self.git.working_dir
 
-    def open(self, path, binary=False):
+    def open(self, path, mode="r", encoding="utf-8"):
+        assert mode in {"r", "rb"}
 
         relative_path = relpath(path, self.git.working_dir)
 
@@ -61,9 +62,9 @@ def open(self, path, binary=False):
         # the `open()` behavior (since data_stream.read() returns bytes,
         # and `open` with default "r" mode returns str)
         data = obj.data_stream.read()
-        if binary:
+        if mode == "rb":
             return BytesIO(data)
-        return StringIO(data.decode("utf-8"))
+        return StringIO(data.decode(encoding))
 
     def exists(self, path):
         return self.git_object_by_path(path) is not None
diff --git a/dvc/scm/tree.py b/dvc/scm/tree.py
index a90306f769..0931a59d0a 100644
--- a/dvc/scm/tree.py
+++ b/dvc/scm/tree.py
@@ -11,7 +11,7 @@ class BaseTree(object):
     def tree_root(self):
         pass
 
-    def open(self, path, binary=False):
+    def open(self, path, mode="r", encoding="utf-8"):
         """Open file and return a stream."""
 
     def exists(self, path):
@@ -42,11 +42,9 @@ def __init__(self, repo_root=os.getcwd()):
     def tree_root(self):
         return self.repo_root
 
-    def open(self, path, binary=False):
+    def open(self, path, mode="r", encoding="utf-8"):
         """Open file and return a stream."""
-        if binary:
-            return open(path, "rb")
-        return open(path, encoding="utf-8")
+        return open(path, mode=mode, encoding=encoding)
 
     def exists(self, path):
         """Test whether a path exists."""
diff --git a/tests/func/test_api.py b/tests/func/test_api.py
index 2bba711b1b..70e36c3ecb 100644
--- a/tests/func/test_api.py
+++ b/tests/func/test_api.py
@@ -1,8 +1,10 @@
+import os
+
 import pytest
 import shutil
 
 from dvc import api
-from dvc.exceptions import OutputFileMissingError
+from dvc.exceptions import FileMissingError
 from dvc.main import main
 from dvc.path_info import URLInfo
 from dvc.remote.config import RemoteConfig
@@ -134,7 +136,7 @@ def test_missing(repo_dir, dvc_repo, remote_url):
     # Remove cache to make foo missing
     shutil.rmtree(dvc_repo.cache.local.cache_dir)
 
-    with pytest.raises(OutputFileMissingError):
+    with pytest.raises(FileMissingError):
         api.read(repo_dir.FOO)
 
 
@@ -143,3 +145,30 @@ def _set_remote_url_and_commit(repo, remote_url):
     rconfig.modify("upstream", "url", remote_url)
     repo.scm.add([repo.config.config_file])
     repo.scm.commit("modify remote")
+
+
+def test_open_scm_controlled(dvc_repo, repo_dir):
+    stage, = dvc_repo.add(repo_dir.FOO)
+
+    stage_content = open(stage.path, "r").read()
+    with api.open(stage.path) as fd:
+        assert fd.read() == stage_content
+
+
+def test_open_not_cached(dvc_repo):
+    metric_file = "metric.txt"
+    metric_content = "0.6"
+    metric_code = "open('{}', 'w').write('{}')".format(
+        metric_file, metric_content
+    )
+    dvc_repo.run(
+        metrics_no_cache=[metric_file],
+        cmd=('python -c "{}"'.format(metric_code)),
+    )
+
+    with api.open(metric_file) as fd:
+        assert fd.read() == metric_content
+
+    os.remove(metric_file)
+    with pytest.raises(FileMissingError):
+        api.read(metric_file)