diff --git a/LICENSE b/LICENSE
index 0a4aa24162..84cdd438d6 100644
--- a/LICENSE
+++ b/LICENSE
@@ -69,3 +69,5 @@ The externally maintained libraries used by Node are:
 
   - lib/buffer_ieee754.js is copyright 2008 Fair Oaks Labs, Inc. and released
     under the New BSD license.
+
+  - lib/punycode.js is copyright 2011 Ben Noordhuis and released under the MIT license.
diff --git a/lib/punycode.js b/lib/punycode.js
new file mode 100644
index 0000000000..a7c07a6634
--- /dev/null
+++ b/lib/punycode.js
@@ -0,0 +1,218 @@
+// Copyright (C) 2011 by Ben Noordhuis <info@bnoordhuis.nl>
+//
+// Permission is hereby granted, free of charge, to any person obtaining a copy
+// of this software and associated documentation files (the "Software"), to deal
+// in the Software without restriction, including without limitation the rights
+// to use, copy, modify, merge, publish, distribute, sublicense, and/or sell
+// copies of the Software, and to permit persons to whom the Software is
+// furnished to do so, subject to the following conditions:
+//
+// The above copyright notice and this permission notice shall be included in
+// all copies or substantial portions of the Software.
+//
+// THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR
+// IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY,
+// FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE
+// AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER
+// LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM,
+// OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN
+// THE SOFTWARE.
+
+exports.encode = encode;
+exports.decode = decode;
+
+var TMIN = 1;
+var TMAX = 26;
+var BASE = 36;
+var SKEW = 38;
+var DAMP = 700; // initial bias scaler
+var INITIAL_N = 128;
+var INITIAL_BIAS = 72;
+
+function adapt_bias(delta, n_points, is_first) {
+  // scale back, then increase delta
+  delta /= is_first ? DAMP : 2;
+  delta += ~~(delta / n_points);
+
+  var s = (BASE - TMIN);
+  var t = ~~((s * TMAX) / 2); // threshold=455
+
+  for (var k = 0; delta > t; k += BASE) {
+    delta = ~~(delta / s);
+  }
+
+  var a = (BASE - TMIN + 1) * delta;
+  var b = (delta + SKEW);
+
+  return k + ~~(a / b);
+}
+
+function next_smallest_codepoint(codepoints, n) {
+  var m = 0x110000; // unicode upper bound + 1
+
+  for (var i = 0, len = codepoints.length; i < len; ++i) {
+    var c = codepoints[i];
+    if (c >= n && c < m) {
+      m = c;
+    }
+  }
+
+  // sanity check - should not happen
+  if (m >= 0x110000) {
+    throw new Error('Next smallest code point not found.');
+  }
+
+  return m;
+}
+
+function encode_digit(d) {
+  return d + (d < 26 ? 97 : 22);
+}
+
+function decode_digit(d) {
+  if (d >= 48 && d <= 57) {
+    return d - 22; // 0..9
+  }
+  if (d >= 65 && d <= 90) {
+    return d - 65; // A..Z
+  }
+  if (d >= 97 && d <= 122) {
+    return d - 97; // a..z
+  }
+  throw new Error('Illegal digit #' + d);
+}
+
+function threshold(k, bias) {
+  if (k <= bias + TMIN) {
+    return TMIN;
+  }
+  if (k >= bias + TMAX) {
+    return TMAX;
+  }
+  return k - bias;
+}
+
+function encode_int(bias, delta) {
+  var result = [];
+
+  for (var k = BASE, q = delta;; k += BASE) {
+    var t = threshold(k, bias);
+    if (q < t) {
+      result.push(encode_digit(q));
+      break;
+    }
+    else {
+      result.push(encode_digit(t + ((q - t) % (BASE - t))));
+      q = ~~((q - t) / (BASE - t));
+    }
+  }
+
+  return result;
+}
+
+function encode(input) {
+  if (typeof input != 'string') {
+    throw new Error('Argument must be a string.');
+  }
+
+  input = input.split('').map(function(c) {
+    return c.charCodeAt(0);
+  });
+
+  var output = [];
+  var non_basic = [];
+
+  for (var i = 0, len = input.length; i < len; ++i) {
+    var c = input[i];
+    if (c < 128) {
+      output.push(c);
+    }
+    else {
+      non_basic.push(c);
+    }
+  }
+
+  var b, h;
+  b = h = output.length;
+
+  if (b) {
+    output.push(45); // delimiter '-'
+  }
+
+  var n = INITIAL_N;
+  var bias = INITIAL_BIAS;
+  var delta = 0;
+
+  for (var len = input.length; h < len; ++n, ++delta) {
+    var m = next_smallest_codepoint(non_basic, n);
+    delta += (m - n) * (h + 1);
+    n = m;
+
+    for (var i = 0; i < len; ++i) {
+      var c = input[i];
+      if (c < n) {
+        if (++delta == 0) {
+          throw new Error('Delta overflow.');
+        }
+      }
+      else if (c == n) {
+        // TODO append in-place?
+        // i.e. -> output.push.apply(output, encode_int(bias, delta));
+        output = output.concat(encode_int(bias, delta));
+        bias = adapt_bias(delta, h + 1, b == h);
+        delta = 0;
+        h++;
+      }
+    }
+  }
+
+  return String.fromCharCode.apply(String, output);
+}
+
+function decode(input) {
+  if (typeof input != 'string') {
+    throw new Error('Argument must be a string.');
+  }
+
+  // find basic code points/delta separator
+  var b = 1 + input.lastIndexOf('-');
+
+  input = input.split('').map(function(c) {
+    return c.charCodeAt(0);
+  });
+
+  // start with a copy of the basic code points
+  var output = input.slice(0, b ? (b - 1) : 0);
+
+  var n = INITIAL_N;
+  var bias = INITIAL_BIAS;
+
+  for (var i = 0, len = input.length; b < len; ++i) {
+    var org_i = i;
+
+    for (var k = BASE, w = 1;; k += BASE) {
+      var d = decode_digit(input[b++]);
+
+      // TODO overflow check
+      i += d * w;
+
+      var t = threshold(k, bias);
+      if (d < t) {
+        break;
+      }
+
+      // TODO overflow check
+      w *= BASE - t;
+    }
+
+    var x = 1 + output.length;
+    bias = adapt_bias(i - org_i, x, org_i == 0);
+    // TODO overflow check
+    n += ~~(i / x);
+    i %= x;
+
+    output.splice(i, 0, n);
+  }
+
+  return String.fromCharCode.apply(String, output);
+}
diff --git a/lib/url.js b/lib/url.js
index 8b01c8548f..ed90e5cad1 100644
--- a/lib/url.js
+++ b/lib/url.js
@@ -19,6 +19,8 @@
 // OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE
 // USE OR OTHER DEALINGS IN THE SOFTWARE.
 
+var punycode = require('punycode');
+
 exports.parse = urlParse;
 exports.resolve = urlResolve;
 exports.resolveObject = urlResolveObject;
@@ -183,24 +185,56 @@ function urlParse(url, parseQueryString, slashesDenoteHost) {
         var part = hostparts[i];
         if (!part) continue;
         if (!part.match(hostnamePartPattern)) {
-          var validParts = hostparts.slice(0, i);
-          var notHost = hostparts.slice(i + 1);
-          var bit = part.match(hostnamePartStart);
-          if (bit) {
-            validParts.push(bit[1]);
-            notHost.unshift(bit[2]);
+          var newpart = '';
+          for (var j = 0, k = part.length; j < k; j++) {
+            if (part.charCodeAt(j) > 127) {
+              // we replace non-ASCII char with a temporary placeholder
+              // we need this to make sure size of hostname is not
+              // broken by replacing non-ASCII by nothing
+              newpart += 'x';
+            } else {
+              newpart += part[j];
+            }
           }
-          if (notHost.length) {
-            rest = '/' + notHost.join('.') + rest
+          // we test again with ASCII char only
+          if (!newpart.match(hostnamePartPattern)) {
+            var validParts = hostparts.slice(0, i);
+            var notHost = hostparts.slice(i + 1);
+            var bit = part.match(hostnamePartStart);
+            if (bit) {
+              validParts.push(bit[1]);
+              notHost.unshift(bit[2]);
+            }
+            if (notHost.length) {
+              rest = '/' + notHost.join('.') + rest;
+            }
+            out.hostname = validParts.join('.');
+            break;
           }
-          out.hostname = validParts.join('.');
-          break;
         }
       }
     }
+
     // hostnames are always lower case.
     out.hostname = out.hostname.toLowerCase();
 
+    // IDNA Support: Returns a puny coded representation of "domain".
+    // It only converts the part of the domain name that
+    // has non ASCII characters. I.e. it dosent matter if
+    // you call it with a domain that already is in ASCII.
+    try {
+      var domainArray = out.hostname.split('.');
+      var newOut = [];
+      for (var i = 0; i < domainArray.length; ++i) {
+        var s = domainArray[i];
+        newOut.push(s.match(/[^A-Za-z0-9-]/) ?
+          'xn--' + punycode.encode(s) : s);
+      }
+      out.hostname = newOut.join('.');
+    } catch (e) {
+      // if encode fail for some reason, we just do the classic behavior.
+    }
+
     out.host = ((out.auth) ? out.auth + '@' : '') +
         (out.hostname || '') +
         ((out.port) ? ':' + out.port : '');
diff --git a/test/simple/test-punycode.js b/test/simple/test-punycode.js
new file mode 100644
index 0000000000..64f8100ee5
--- /dev/null
+++ b/test/simple/test-punycode.js
@@ -0,0 +1,38 @@
+// Copyright (C) 2011 by Ben Noordhuis <info@bnoordhuis.nl>
+//
+// Permission is hereby granted, free of charge, to any person obtaining a copy
+// of this software and associated documentation files (the "Software"), to deal
+// in the Software without restriction, including without limitation the rights
+// to use, copy, modify, merge, publish, distribute, sublicense, and/or sell
+// copies of the Software, and to permit persons to whom the Software is
+// furnished to do so, subject to the following conditions:
+//
+// The above copyright notice and this permission notice shall be included in
+// all copies or substantial portions of the Software.
+//
+// THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR
+// IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY,
+// FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE
+// AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER
+// LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM,
+// OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN
+// THE SOFTWARE.
+
+punycode = require('punycode');
+assert = require('assert');
+
+assert.equal(punycode.encode('ü'), 'tda');
+assert.equal(punycode.encode('Goethe'), 'Goethe-');
+assert.equal(punycode.encode('Bücher'), 'Bcher-kva');
+assert.equal(punycode.encode(
+    'Willst du die Blüthe des frühen, die Früchte des späteren Jahres'),
+    'Willst du die Blthe des frhen, die Frchte des spteren Jahres-x9e96lkal');
+assert.equal(punycode.encode('日本語'), 'wgv71a119e');
+
+assert.equal(punycode.decode('tda'), 'ü');
+assert.equal(punycode.decode('Goethe-'), 'Goethe');
+assert.equal(punycode.decode('Bcher-kva'), 'Bücher');
+assert.equal(punycode.decode(
+    'Willst du die Blthe des frhen, die Frchte des spteren Jahres-x9e96lkal'),
+    'Willst du die Blüthe des frühen, die Früchte des späteren Jahres');
+assert.equal(punycode.decode('wgv71a119e'), '日本語');
diff --git a/test/simple/test-url.js b/test/simple/test-url.js
index ea85bc967f..f07edb5cd4 100644
--- a/test/simple/test-url.js
+++ b/test/simple/test-url.js
@@ -79,7 +79,7 @@ var parseTests = {
     'protocol': 'http:',
     'host': 'x.com',
     'hostname': 'x.com',
-    'pathname': '/Y',
+    'pathname': '/Y'
   },
   // an unexpected invalid char in the hostname.
   'HtTp://x.y.cOm*a/b/c?d=e#f g<h>i' : {
@@ -113,7 +113,7 @@ var parseTests = {
   },
   'http://x/p/"quoted"': {
     'href': 'http://x/p/',
-    'protocol':'http:',
+    'protocol': 'http:',
     'host': 'x',
     'hostname': 'x',
     'pathname': '/p/'
@@ -274,6 +274,59 @@ var parseTests = {
     'search' : '?search=foo',
     'query' : 'search=foo',
     'hash' : '#bar'
+  },
+  // IDNA tests
+  'http://www.日本語.com/' : {
+    'href': 'http://www.xn--wgv71a119e.com/',
+    'protocol': 'http:',
+    'host': 'www.xn--wgv71a119e.com',
+    'hostname': 'www.xn--wgv71a119e.com',
+    'pathname': '/'
+  },
+  'http://example.Bücher.com/' : {
+    'href': 'http://example.xn--bcher-kva.com/',
+    'protocol': 'http:',
+    'host': 'example.xn--bcher-kva.com',
+    'hostname': 'example.xn--bcher-kva.com',
+    'pathname': '/'
+  },
+  'http://www.Äffchen.com/' : {
+    'href': 'http://www.xn--ffchen-9ta.com/',
+    'protocol': 'http:',
+    'host': 'www.xn--ffchen-9ta.com',
+    'hostname': 'www.xn--ffchen-9ta.com',
+    'pathname': '/'
+  },
+  'http://www.Äffchen.cOm*A/b/c?d=e#f g<h>i' : {
+    'href': 'http://www.xn--ffchen-9ta.com/*A/b/c?d=e#f',
+    'protocol': 'http:',
+    'host': 'www.xn--ffchen-9ta.com',
+    'hostname': 'www.xn--ffchen-9ta.com',
+    'pathname': '/*A/b/c',
+    'search': '?d=e',
+    'query': 'd=e',
+    'hash': '#f'
+  },
+  'http://SÉLIER.COM/' : {
+    'href': 'http://xn--slier-bsa.com/',
+    'protocol': 'http:',
+    'host': 'xn--slier-bsa.com',
+    'hostname': 'xn--slier-bsa.com',
+    'pathname': '/'
+  },
+  'http://ليهمابتكلموشعربي؟.ي؟/' : {
+    'href': 'http://xn--egbpdaj6bu4bxfgehfvwxn.xn--egb9f/',
+    'protocol': 'http:',
+    'host': 'xn--egbpdaj6bu4bxfgehfvwxn.xn--egb9f',
+    'hostname': 'xn--egbpdaj6bu4bxfgehfvwxn.xn--egb9f',
+    'pathname': '/'
+  },
+  'http://➡.ws/➡' : {
+    'href': 'http://xn--hgi.ws/➡',
+    'protocol': 'http:',
+    'host': 'xn--hgi.ws',
+    'hostname': 'xn--hgi.ws',
+    'pathname': '/➡'
   }
 };
 for (var u in parseTests) {