diff --git a/include/libtorrent/session.hpp b/include/libtorrent/session.hpp
index 64bc38db6..e5391d546 100644
--- a/include/libtorrent/session.hpp
+++ b/include/libtorrent/session.hpp
@@ -689,7 +689,10 @@ namespace libtorrent
 		// These functions sets and queries the proxy settings to be used for the session.
 		//
 		// For more information on what settings are available for proxies, see
-		// proxy_settings.
+		// proxy_settings. If the session is not in anonymous mode, proxies that
+		// aren't working or fail, will automatically be disabled and packets will
+		// flow without using any proxy. If you want to enforce using a proxy, even when
+		// the proxy doesn't work, enable anonymous_mode in session_settings.
 		void set_proxy(proxy_settings const& s);
 		proxy_settings proxy() const;
 
diff --git a/src/udp_socket.cpp b/src/udp_socket.cpp
index 31cb3f907..cf61f6516 100644
--- a/src/udp_socket.cpp
+++ b/src/udp_socket.cpp
@@ -148,13 +148,9 @@ void udp_socket::send_hostname(char const* hostname, int port
 		wrap(hostname, port, p, len, ec);
 		return;	
 	}
-	else if (m_force_proxy)
-	{
-		return;
-	}
 
 	// this function is only supported when we're using a proxy
-	if (!m_queue_packets)
+	if (!m_queue_packets && !m_force_proxy)
 	{
 		address target = address::from_string(hostname, ec);
 		if (!ec) send(udp::endpoint(target, port), p, len, ec, 0);
@@ -786,10 +782,20 @@ void udp_socket::on_name_lookup(error_code const& e, tcp::resolver::iterator i)
 
 	if (e)
 	{
-		call_handler(e, udp::endpoint(), 0, 0);
+		if (m_force_proxy)
+		{
+			call_handler(e, udp::endpoint(), 0, 0);
+		}
+		else
+		{
+			// if we can't connect to the proxy, and
+			// we're not in privacy mode, try to just
+			// not use a proxy
+			m_proxy_settings = proxy_settings();
+			m_tunnel_packets = false;
+		}
 
 		drain_queue();
-
 		return;
 	}
 
@@ -1352,7 +1358,7 @@ void udp_socket::drain_queue()
 			udp_socket::send_hostname(p.hostname, p.ep.port(), &p.buf[0], p.buf.size(), ec);
 			free(p.hostname);
 		}
-		else if (!m_force_proxy) // block incoming packets that aren't coming via the proxy
+		else
 		{
 			udp_socket::send(p.ep, &p.buf[0], p.buf.size(), ec, p.flags);
 		}
diff --git a/test/test_privacy.cpp b/test/test_privacy.cpp
index 41b09a64f..58e22ff12 100644
--- a/test/test_privacy.cpp
+++ b/test/test_privacy.cpp
@@ -75,7 +75,7 @@ enum flags_t
 	expect_peer_connection = 64,
 };
 
-void test_proxy(proxy_settings::proxy_type proxy_type, int flags)
+session_proxy test_proxy(proxy_settings::proxy_type proxy_type, int flags)
 {
 #ifdef TORRENT_DISABLE_DHT
 	// if DHT is disabled, we won't get any requests to it
@@ -112,6 +112,8 @@ void test_proxy(proxy_settings::proxy_type proxy_type, int flags)
 	sett.enable_outgoing_utp = false;
 	s->set_settings(sett);
 
+	// in non-anonymous mode we circumvent/ignore the proxy if it fails
+	// wheras in anonymous mode, we just fail
 	proxy_settings ps;
 	ps.hostname = "non-existing.com";
 	ps.port = 4444;
@@ -148,9 +150,9 @@ void test_proxy(proxy_settings::proxy_type proxy_type, int flags)
 	rejected_trackers.clear();
 
 #ifdef TORRENT_USE_VALGRIND
-	const int timeout = 90;
+	const int timeout = 100;
 #else
-	const int timeout = 15;
+	const int timeout = 20;
 #endif
 
 	for (int i = 0; i < timeout; ++i)
@@ -192,40 +194,42 @@ void test_proxy(proxy_settings::proxy_type proxy_type, int flags)
 		TEST_CHECK(std::find(rejected_trackers.begin(), rejected_trackers.end(), http_tracker_url) != rejected_trackers.end());
 
 	fprintf(stderr, "%s: ~session\n", time_now_string());
+	session_proxy pr = s->abort();
 	delete s;
-	fprintf(stderr, "%s: ~session done\n", time_now_string());
 
 	stop_peer();
 	stop_dht();
 	stop_tracker();
 	stop_web_server();
+	return pr;
 }
 
 int test_main()
 {
+	session_proxy pr[20];
 	// not using anonymous mode
 	// UDP fails open if we can't connect to the proxy
 	// or if the proxy doesn't support UDP
-	test_proxy(proxy_settings::none, expect_udp_connection | expect_http_connection | expect_dht_msg | expect_peer_connection);
-	test_proxy(proxy_settings::socks4, expect_udp_connection | expect_dht_msg);
-	test_proxy(proxy_settings::socks5, expect_udp_connection | expect_dht_msg);
-	test_proxy(proxy_settings::socks5_pw, expect_udp_connection | expect_dht_msg);
-	test_proxy(proxy_settings::http, expect_udp_connection | expect_dht_msg);
-	test_proxy(proxy_settings::http_pw, expect_udp_connection | expect_dht_msg);
-	test_proxy(proxy_settings::i2p_proxy, expect_udp_connection | expect_dht_msg);
+	pr[0] = test_proxy(proxy_settings::none, expect_udp_connection | expect_http_connection | expect_dht_msg | expect_peer_connection);
+	pr[1] = test_proxy(proxy_settings::socks4, expect_udp_connection | expect_dht_msg);
+	pr[2] = test_proxy(proxy_settings::socks5, expect_udp_connection | expect_dht_msg);
+	pr[3] = test_proxy(proxy_settings::socks5_pw, expect_udp_connection | expect_dht_msg);
+	pr[4] = test_proxy(proxy_settings::http, expect_udp_connection | expect_dht_msg);
+	pr[5] = test_proxy(proxy_settings::http_pw, expect_udp_connection | expect_dht_msg);
+	pr[6] = test_proxy(proxy_settings::i2p_proxy, expect_udp_connection | expect_dht_msg);
 
 	// using anonymous mode
 
 	// anonymous mode doesn't require a proxy when one isn't configured. It could be
 	// used with a VPN for instance. This will all changed in 1.0, where anonymous
 	// mode is separated from force_proxy
-	test_proxy(proxy_settings::none, anonymous_mode | expect_peer_connection);
-	test_proxy(proxy_settings::socks4, anonymous_mode | expect_udp_reject);
-	test_proxy(proxy_settings::socks5, anonymous_mode);
-	test_proxy(proxy_settings::socks5_pw, anonymous_mode);
-	test_proxy(proxy_settings::http, anonymous_mode | expect_udp_reject);
-	test_proxy(proxy_settings::http_pw, anonymous_mode | expect_udp_reject);
-	test_proxy(proxy_settings::i2p_proxy, anonymous_mode);
+	pr[7] = test_proxy(proxy_settings::none, anonymous_mode | expect_peer_connection);
+	pr[8] = test_proxy(proxy_settings::socks4, anonymous_mode | expect_udp_reject);
+	pr[9] = test_proxy(proxy_settings::socks5, anonymous_mode);
+	pr[10] = test_proxy(proxy_settings::socks5_pw, anonymous_mode);
+	pr[11] = test_proxy(proxy_settings::http, anonymous_mode | expect_udp_reject);
+	pr[12] = test_proxy(proxy_settings::http_pw, anonymous_mode | expect_udp_reject);
+	pr[13] = test_proxy(proxy_settings::i2p_proxy, anonymous_mode);
 	return 0;
 }