diff --git a/src/node_crypto.cc b/src/node_crypto.cc
index 20a475e35e5..058d0c705b2 100644
--- a/src/node_crypto.cc
+++ b/src/node_crypto.cc
@@ -1825,6 +1825,19 @@ class Cipher : public ObjectWrap {
         outString = Encode(out_hexdigest, out_hex_len, BINARY);
         delete [] out_hexdigest;
       } else if (strcasecmp(*encoding, "base64") == 0) {
+        // Check to see if we need to add in previous base64 overhang
+        if (cipher->incomplete_base64!=NULL){
+          unsigned char* complete_base64 = new unsigned char[out_len+cipher->incomplete_base64_len+1];
+          memcpy(complete_base64, cipher->incomplete_base64, cipher->incomplete_base64_len);
+          memcpy(&complete_base64[cipher->incomplete_base64_len], out_value, out_len);
+          delete [] out_value;
+
+          delete [] cipher->incomplete_base64;
+          cipher->incomplete_base64=NULL;
+
+          out_value=complete_base64;
+          out_len += cipher->incomplete_base64_len;
+        }
         base64(out_value, out_len, &out_hexdigest, &out_hex_len);
         outString = Encode(out_hexdigest, out_hex_len, BINARY);
         delete [] out_hexdigest;
diff --git a/test/simple/test-crypto.js b/test/simple/test-crypto.js
index 9f2d6f32e0f..2e42459c6ff 100644
--- a/test/simple/test-crypto.js
+++ b/test/simple/test-crypto.js
@@ -128,6 +128,25 @@ txt += decipher.final('utf8');
 
 assert.equal(txt, plaintext, 'encryption and decryption');
 
+// encryption and decryption with Base64
+// reported in https://github.com/joyent/node/issues/738
+var plaintext =
+  '32|RmVZZkFUVmpRRkp0TmJaUm56ZU9qcnJkaXNNWVNpTTU*|iXmckfRWZBGWWELw' +
+  'eCBsThSsfUHLeRe0KCsK8ooHgxie0zOINpXxfZi/oNG7uq9JWFVCk70gfzQH8ZUJjAfaFg**';
+var cipher = crypto.createCipher('aes256', '0123456789abcdef');
+
+// encrypt plaintext which is in utf8 format
+// to a ciphertext which will be in Base64
+var ciph = cipher.update(plaintext, 'utf8', 'base64');
+ciph += cipher.final('base64');
+
+var decipher = crypto.createDecipher('aes256', '0123456789abcdef');
+var txt = decipher.update(ciph, 'base64', 'utf8');
+txt += decipher.final('utf8');
+
+assert.equal(txt, plaintext, 'encryption and decryption with Base64');
+
+
 // Test encyrption and decryption with explicit key and iv
 var encryption_key = '0123456789abcd0123456789';
 var iv = '12345678';