diff --git a/dlls/shell32/shell32_main.c b/dlls/shell32/shell32_main.c
index 2778fc07c8f..e95b7073f93 100644
--- a/dlls/shell32/shell32_main.c
+++ b/dlls/shell32/shell32_main.c
@@ -34,50 +34,152 @@ DEFAULT_DEBUG_CHANNEL(shell);
 #define MORE_DEBUG 1
 /*************************************************************************
  * CommandLineToArgvW			[SHELL32.@]
+ *
+ * We must interpret the quotes in the command line to rebuild the argv 
+ * array correctly:
+ * - arguments are separated by spaces or tabs
+ * - quotes serve as optional argument delimiters
+ *   '"a b"'   -> 'a b'
+ * - escaped quotes must be converted back to '"'
+ *   '\"'      -> '"'
+ * - an odd number of '\'s followed by '"' correspond to half that number 
+ *   of '\' followed by a '"' (extension of the above)
+ *   '\\\"'    -> '\"'
+ *   '\\\\\"'  -> '\\"'
+ * - an even number of '\'s followed by a '"' correspond to half that number
+ *   of '\', plus a regular quote serving as an argument delimiter (which 
+ *   means it does not appear in the result)
+ *   'a\\"b c"'   -> 'a\b c'
+ *   'a\\\\"b c"' -> 'a\\b c'
+ * - '\' that are not followed by a '"' are copied literally
+ *   'a\b'     -> 'a\b'
+ *   'a\\b'    -> 'a\\b'
+ *
+ * Note:
+ * '\t' == 0x0009
+ * ' '  == 0x0020
+ * '"'  == 0x0022
+ * '\\' == 0x005c
  */
 LPWSTR* WINAPI CommandLineToArgvW(LPCWSTR lpCmdline, int* numargs)
-{	LPWSTR  *argv,s,t;
-	LPWSTR  cmdline;
-	int	i;
-	TRACE("\n");
+{
+    DWORD argc;
+    LPWSTR  *argv;
+    LPWSTR arg,s,d;
+    LPWSTR cmdline;
+    int in_quotes,bcount;
 
-	/* to get writeable copy */
-        if (!(cmdline = HeapAlloc( GetProcessHeap(), 0, (strlenW(lpCmdline)+1) * sizeof(WCHAR) )))
-            return NULL;
-        strcpyW( cmdline, lpCmdline );
-        s=cmdline;
-        i=0;
-	while (*s)
-	{ /* space */
-	  if (*s==0x0020) 
-	  { i++;
-	    s++;
-	    while (*s && *s==0x0020)
-	      s++;
-	    continue;
-	  }
-	  s++;
-	}
-	argv=(LPWSTR*)HeapAlloc( GetProcessHeap(), 0, sizeof(LPWSTR)*(i+1) );
-	s=t=cmdline;
-	i=0;
-	while (*s)
-	{
-            if (*s==0x0020)
-            {
-                argv[i++]=t;
-                while (*s==0x0020) *s++ = 0;
-                t=s;
-                continue;
+    /* FIXME: same thing if we only have spaces */
+    if (*lpCmdline==0) {
+        /* Return the path to the executable */
+        DWORD size;
+
+        argv=HeapAlloc(GetProcessHeap(), 0, 2*sizeof(LPWSTR));
+        argv[0]=NULL;
+        size=16;
+        do {
+            size*=2;
+            argv[0]=HeapReAlloc(GetProcessHeap(), 0, argv[0], size);
+        } while (GetModuleFileNameW((HMODULE)0, argv[0], size) == 0);
+        argv[1]=NULL;
+        if (numargs)
+            *numargs=2;
+
+        return argv;
+    }
+
+    /* to get a writeable copy */
+    cmdline = HeapAlloc(GetProcessHeap(), 0, (strlenW(lpCmdline)+1) * sizeof(WCHAR));
+    if (!cmdline)
+        return NULL;
+    strcpyW(cmdline, lpCmdline);
+    argc=0;
+    bcount=0;
+    in_quotes=0;
+    s=cmdline;
+    while (1) {
+        if (*s==0 || ((*s==0x0009 || *s==0x0020) && !in_quotes)) {
+            /* space */
+            argc++;
+            /* skip the remaining spaces */
+            while (*s==0x0009 || *s==0x0020) {
+                s++;
             }
-            s++;
-	}
-	if (*t)
-	  argv[i++]=t;
+            if (*s==0)
+                break;
+            bcount=0;
+            continue;
+        } else if (*s==0x005c) {
+            /* '\', count them */
+            bcount++;
+        } else if ((*s==0x0022) && ((bcount & 1)==0)) {
+            /* unescaped '"' */
+            in_quotes=!in_quotes;
+            bcount=0;
+        } else {
+            /* a regular character */
+            bcount=0;
+        }
+        s++;
+    }
+    argv=HeapAlloc(GetProcessHeap(), 0, (argc+1)*sizeof(LPWSTR));
 
-	argv[i]=NULL;
-	*numargs=i;
-	return argv;
+    argc=0;
+    bcount=0;
+    in_quotes=0;
+    arg=d=s=cmdline;
+    while (*s) {
+        if ((*s==0x0009 || *s==0x0020) && !in_quotes) {
+            /* Close the argument and copy it */
+            *d=0;
+            argv[argc++]=arg;
+
+            /* skip the remaining spaces */
+            do {
+                s++;
+            } while (*s==0x0009 || *s==0x0020);
+
+            /* Start with a new argument */
+            arg=d=s;
+            bcount=0;
+        } else if (*s==0x005c) {
+            /* '\\' */
+            *d++=*s++;
+            bcount++;
+        } else if (*s==0x0022) {
+            /* '"' */
+            if ((bcount & 1)==0) {
+                /* Preceeded by an even number of '\', this is half that 
+                 * number of '\', plus a quote which we erase.
+                 */
+                d-=bcount/2;
+                in_quotes=!in_quotes;
+                s++;
+            } else {
+                /* Preceeded by an odd number of '\', this is half that 
+                 * number of '\' followed by a '"'
+                 */
+                d=d-bcount/2-1;
+                *d++='"';
+                s++;
+            }
+            bcount=0;
+        } else {
+            /* a regular character */
+            *d++=*s++;
+            bcount=0;
+        }
+    }
+    if (*arg) {
+        *d='\0';
+        argv[argc++]=arg;
+    }
+    argv[argc]=NULL;
+    if (numargs)
+        *numargs=argc;
+
+    HeapFree(GetProcessHeap(), 0, cmdline);
+    return argv;
 }
 
 /*************************************************************************
diff --git a/memory/environ.c b/memory/environ.c
index 2bf27850cba..98fadeceb1d 100644
--- a/memory/environ.c
+++ b/memory/environ.c
@@ -174,34 +174,121 @@ ENVDB *ENV_BuildEnvironment(void)
  *
  * Note that it does NOT necessarily include the file name.
  * Sometimes we don't even have any command line options at all.
+ *
+ * We must quote and escape characters so that the argv array can be rebuilt 
+ * from the command line:
+ * - spaces and tabs must be quoted
+ *   'a b'   -> '"a b"'
+ * - quotes must be escaped
+ *   '"'     -> '\"'
+ * - if '\'s are followed by a '"', they must be doubled and followed by '\"', 
+ *   resulting in an odd number of '\' followed by a '"'
+ *   '\"'    -> '\\\"'
+ *   '\\"'   -> '\\\\\"'
+ * - '\'s that are not followed by a '"' can be left as is
+ *   'a\b'   == 'a\b'
+ *   'a\\b'  == 'a\\b'
  */
 BOOL ENV_BuildCommandLine( char **argv )
 {
-    int len, quote = 0;
+    int len;
     char *p, **arg;
 
-    for (arg = argv, len = 0; *arg; arg++) len += strlen(*arg) + 1;
-    if ((argv[0]) && (quote = (strchr( argv[0], ' ' ) != NULL))) len += 2;
-    if (!(p = current_envdb.cmd_line = HeapAlloc( GetProcessHeap(), 0, len ))) return FALSE;
-    arg = argv;
-    if (quote)
+    len = 0;
+    for (arg = argv; *arg; arg++)
     {
-        *p++ = '\"';
-        strcpy( p, *arg );
-        p += strlen(p);
-        *p++ = '\"';
-        *p++ = ' ';
-        arg++;
+        int has_space,bcount;
+        char* a;
+
+        has_space=0;
+        bcount=0;
+        a=*arg;
+        while (*a!='\0') {
+            if (*a=='\\') {
+                bcount++;
+            } else {
+                if (*a==' ' || *a=='\t') {
+                    has_space=1;
+                } else if (*a=='"') {
+                    /* doubling of '\' preceeding a '"', 
+                     * plus escaping of said '"'
+                     */
+                    len+=2*bcount+1;
+                }
+                bcount=0;
+            }
+            a++;
+        }
+        len+=(a-*arg)+1 /* for the separating space */;
+        if (has_space)
+            len+=2; /* for the quotes */
     }
-    while (*arg)
+
+    if (!(current_envdb.cmd_line = HeapAlloc( GetProcessHeap(), 0, len )))
+        return FALSE;
+
+    p = current_envdb.cmd_line;
+    for (arg = argv; *arg; arg++)
     {
-        strcpy( p, *arg );
-        p += strlen(p);
-        *p++ = ' ';
-        arg++;
+        int has_space,has_quote;
+        char* a;
+
+        /* Check for quotes and spaces in this argument */
+        has_space=has_quote=0;
+        a=*arg;
+        while (*a!='\0') {
+            if (*a==' ' || *a=='\t') {
+                has_space=1;
+                if (has_quote)
+                    break;
+            } else if (*a=='"') {
+                has_quote=1;
+                if (has_space)
+                    break;
+            }
+            a++;
+        }
+
+        /* Now transfer it to the command line */
+        if (has_space)
+            *p++='"';
+        if (has_quote) {
+            int bcount;
+            char* a;
+
+            bcount=0;
+            a=*arg;
+            while (*a!='\0') {
+                if (*a=='\\') {
+                    *p++=*a;
+                    bcount++;
+                } else {
+                    if (*a=='"') {
+                        int i;
+
+                        /* Double all the '\\' preceeding this '"', plus one */
+                        for (i=0;i<=bcount;i++)
+                            *p++='\\';
+                        *p++='"';
+                    } else {
+                        *p++=*a;
+                    }
+                    bcount=0;
+                }
+                a++;
+            }
+        } else {
+            strcpy(p,*arg);
+            p+=strlen(*arg);
+        }
+        if (has_space)
+            *p++='"';
+        *p++=' ';
     }
-    if (p > current_envdb.cmd_line) p--;  /* remove last space */
-    *p = 0;
+    if (p > current_envdb.cmd_line)
+        p--;  /* remove last space */
+    *p = '\0';
+
     /* now allocate the Unicode version */
     len = MultiByteToWideChar( CP_ACP, 0, current_envdb.cmd_line, -1, NULL, 0 );
     if (!(cmdlineW = HeapAlloc( GetProcessHeap(), 0, len * sizeof(WCHAR) )))
diff --git a/scheduler/process.c b/scheduler/process.c
index 4255428b67e..084561cb3e9 100644
--- a/scheduler/process.c
+++ b/scheduler/process.c
@@ -531,50 +531,96 @@ void PROCESS_InitWine( int argc, char *argv[], LPSTR win16_exe_name, HANDLE *win
  */
 static char **build_argv( char *cmdline, int reserved )
 {
-    char **argv;
-    int count = reserved + 1;
-    char *p = cmdline;
+    int argc;
+    char** argv;
+    char *arg,*s,*d;
+    int in_quotes,bcount;
 
-    /* if first word is quoted store it as a single arg */
-    if (*cmdline == '\"')
-    {
-        if ((p = strchr( cmdline + 1, '\"' )))
-        {
-            p++;
-            count++;
-        }
-        else p = cmdline;
-    }
-    while (*p)
-    {
-        while (*p && isspace(*p)) p++;
-        if (!*p) break;
-        count++;
-        while (*p && !isspace(*p)) p++;
-    }
-
-    if ((argv = malloc( count * sizeof(*argv) )))
-    {
-        char **argvptr = argv + reserved;
-        p = cmdline;
-        if (*cmdline == '\"')
-        {
-            if ((p = strchr( cmdline + 1, '\"' )))
-            {
-                *argvptr++ = cmdline + 1;
-                *p++ = 0;
+    argc=reserved+1;
+    bcount=0;
+    in_quotes=0;
+    s=cmdline;
+    while (1) {
+        if (*s=='\0' || ((*s==' ' || *s=='\t') && !in_quotes)) {
+            /* space */
+            argc++;
+            /* skip the remaining spaces */
+            while (*s==' ' || *s=='\t') {
+                s++;
             }
-            else p = cmdline;
+            if (*s=='\0')
+                break;
+            bcount=0;
+            continue;
+        } else if (*s=='\\') {
+            /* '\', count them */
+            bcount++;
+        } else if ((*s=='"') && ((bcount & 1)==0)) {
+            /* unescaped '"' */
+            in_quotes=!in_quotes;
+            bcount=0;
+        } else {
+            /* a regular character */
+            bcount=0;
         }
-        while (*p)
-        {
-            while (*p && isspace(*p)) *p++ = 0;
-            if (!*p) break;
-            *argvptr++ = p;
-            while (*p && !isspace(*p)) p++;
-        }
-        *argvptr = 0;
+        s++;
     }
+    argv=malloc(argc*sizeof(*argv));
+    if (!argv)
+        return NULL;
+
+    arg=d=s=cmdline;
+    bcount=0;
+    in_quotes=0;
+    argc=reserved;
+    while (*s) {
+        if ((*s==' ' || *s=='\t') && !in_quotes) {
+            /* Close the argument and copy it */
+            *d=0;
+            argv[argc++]=arg;
+
+            /* skip the remaining spaces */
+            do {
+                s++;
+            } while (*s==' ' || *s=='\t');
+
+            /* Start with a new argument */
+            arg=d=s;
+            bcount=0;
+        } else if (*s=='\\') {
+            /* '\\' */
+            *d++=*s++;
+            bcount++;
+        } else if (*s=='"') {
+            /* '"' */
+            if ((bcount & 1)==0) {
+                /* Preceeded by an even number of '\', this is half that 
+                 * number of '\', plus a '"' which we discard.
+                 */
+                d-=bcount/2;
+                s++;
+                in_quotes=!in_quotes;
+            } else {
+                /* Preceeded by an odd number of '\', this is half that 
+                 * number of '\' followed by a '"'
+                 */
+                d=d-bcount/2-1;
+                *d++='"';
+                s++;
+            }
+            bcount=0;
+        } else {
+            /* a regular character */
+            *d++=*s++;
+            bcount=0;
+        }
+    }
+    if (*arg) {
+        *d='\0';
+        argv[argc++]=arg;
+    }
+    argv[argc]=NULL;
+
     return argv;
 }