diff --git a/Lib/test/test_exceptions.py b/Lib/test/test_exceptions.py
index 9068554..55a57ba 100644
--- a/Lib/test/test_exceptions.py
+++ b/Lib/test/test_exceptions.py
@@ -480,7 +480,12 @@
                 inner_raising_func()
             except:
                 raise KeyError
-        except KeyError:
+        except KeyError as e:
+            # We want to test that the except block above got rid of
+            # the exception raised in inner_raising_func(), but it
+            # also ends up in the __context__ of the KeyError, so we
+            # must clear the latter manually for our test to succeed.
+            e.__context__ = None
             obj = None
             obj = wr()
             self.failUnless(obj is None, "%s" % obj)
diff --git a/Lib/test/test_raise.py b/Lib/test/test_raise.py
index 5f0070e..3072c14 100644
--- a/Lib/test/test_raise.py
+++ b/Lib/test/test_raise.py
@@ -181,32 +181,102 @@
             self.fail("No exception raised")
 
 
-# Disabled until context is implemented
-# class TestContext(object):
-#     def test_instance_context_bare_raise(self):
-#         context = IndexError()
-#         try:
-#             try:
-#                 raise context
-#             except:
-#                 raise OSError()
-#         except OSError as e:
-#             self.assertEqual(e.__context__, context)
-#         else:
-#             self.fail("No exception raised")
-#
-#     def test_class_context_bare_raise(self):
-#         context = IndexError
-#         try:
-#             try:
-#                 raise context
-#             except:
-#                 raise OSError()
-#         except OSError as e:
-#             self.assertNotEqual(e.__context__, context)
-#             self.failUnless(isinstance(e.__context__, context))
-#         else:
-#             self.fail("No exception raised")
+class TestContext(unittest.TestCase):
+    def test_instance_context_instance_raise(self):
+        context = IndexError()
+        try:
+            try:
+                raise context
+            except:
+                raise OSError()
+        except OSError as e:
+            self.assertEqual(e.__context__, context)
+        else:
+            self.fail("No exception raised")
+
+    def test_class_context_instance_raise(self):
+        context = IndexError
+        try:
+            try:
+                raise context
+            except:
+                raise OSError()
+        except OSError as e:
+            self.assertNotEqual(e.__context__, context)
+            self.failUnless(isinstance(e.__context__, context))
+        else:
+            self.fail("No exception raised")
+
+    def test_class_context_class_raise(self):
+        context = IndexError
+        try:
+            try:
+                raise context
+            except:
+                raise OSError
+        except OSError as e:
+            self.assertNotEqual(e.__context__, context)
+            self.failUnless(isinstance(e.__context__, context))
+        else:
+            self.fail("No exception raised")
+
+    def test_c_exception_context(self):
+        try:
+            try:
+                1/0
+            except:
+                raise OSError
+        except OSError as e:
+            self.failUnless(isinstance(e.__context__, ZeroDivisionError))
+        else:
+            self.fail("No exception raised")
+
+    def test_c_exception_raise(self):
+        try:
+            try:
+                1/0
+            except:
+                xyzzy
+        except NameError as e:
+            self.failUnless(isinstance(e.__context__, ZeroDivisionError))
+        else:
+            self.fail("No exception raised")
+
+    def test_noraise_finally(self):
+        try:
+            try:
+                pass
+            finally:
+                raise OSError
+        except OSError as e:
+            self.failUnless(e.__context__ is None)
+        else:
+            self.fail("No exception raised")
+
+    def test_raise_finally(self):
+        try:
+            try:
+                1/0
+            finally:
+                raise OSError
+        except OSError as e:
+            self.failUnless(isinstance(e.__context__, ZeroDivisionError))
+        else:
+            self.fail("No exception raised")
+
+    def test_context_manager(self):
+        class ContextManager:
+            def __enter__(self):
+                pass
+            def __exit__(self, t, v, tb):
+                xyzzy
+        try:
+            with ContextManager():
+                1/0
+        except NameError as e:
+            self.failUnless(isinstance(e.__context__, ZeroDivisionError))
+        else:
+            self.fail("No exception raised")
 
 
 class TestRemovedFunctionality(unittest.TestCase):
diff --git a/Python/ceval.c b/Python/ceval.c
index bcb15e7..6aaa52d 100644
--- a/Python/ceval.c
+++ b/Python/ceval.c
@@ -2817,11 +2817,12 @@
 static enum why_code
 do_raise(PyObject *exc, PyObject *cause)
 {
-	PyObject *type = NULL, *value = NULL, *tb = NULL;
+	PyObject *type = NULL, *value = NULL;
 
 	if (exc == NULL) {
 		/* Reraise */
 		PyThreadState *tstate = PyThreadState_GET();
+		PyObject *tb;
 		type = tstate->exc_type;
 		value = tstate->exc_value;
 		tb = tstate->exc_traceback;
@@ -2862,7 +2863,6 @@
 		goto raise_error;
 	}
 
-	tb = PyException_GetTraceback(value);
 	if (cause) {
 		PyObject *fixed_cause;
 		if (PyExceptionClass_Check(cause)) {
@@ -2883,13 +2883,15 @@
 		PyException_SetCause(value, fixed_cause);
 	}
 
-	PyErr_Restore(type, value, tb);
+	PyErr_SetObject(type, value);
+	/* PyErr_SetObject incref's its arguments */
+	Py_XDECREF(value);
+	Py_XDECREF(type);
 	return WHY_EXCEPTION;
 
 raise_error:
 	Py_XDECREF(value);
 	Py_XDECREF(type);
-	Py_XDECREF(tb);
 	Py_XDECREF(cause);
 	return WHY_EXCEPTION;
 }
diff --git a/Python/errors.c b/Python/errors.c
index b765b03..ac64b6a 100644
--- a/Python/errors.c
+++ b/Python/errors.c
@@ -52,6 +52,9 @@
 void
 PyErr_SetObject(PyObject *exception, PyObject *value)
 {
+	PyThreadState *tstate = PyThreadState_GET();
+	PyObject *tb = NULL;
+
 	if (exception != NULL &&
 	    !PyExceptionClass_Check(exception)) {
 		PyErr_Format(PyExc_SystemError,
@@ -59,9 +62,35 @@
 			     exception);
 		return;
 	}
-	Py_XINCREF(exception);
 	Py_XINCREF(value);
-	PyErr_Restore(exception, value, (PyObject *)NULL);
+	if (tstate->exc_value != NULL && tstate->exc_value != Py_None) {
+		/* Implicit exception chaining */
+		if (value == NULL || !PyExceptionInstance_Check(value)) {
+			/* We must normalize the value right now */
+			PyObject *args, *fixed_value;
+			if (value == NULL || value == Py_None)
+				args = PyTuple_New(0);
+			else if (PyTuple_Check(value)) {
+				Py_INCREF(value);
+				args = value;
+			}
+			else
+				args = PyTuple_Pack(1, value);
+			fixed_value = args ?
+				PyEval_CallObject(exception, args) : NULL;
+			Py_XDECREF(args);
+			Py_XDECREF(value);
+			if (fixed_value == NULL)
+				return;
+			value = fixed_value;
+		}
+		Py_INCREF(tstate->exc_value);
+		PyException_SetContext(value, tstate->exc_value);
+	}
+	if (value != NULL && PyExceptionInstance_Check(value))
+		tb = PyException_GetTraceback(value);
+	Py_XINCREF(exception);
+	PyErr_Restore(exception, value, tb);
 }
 
 void