diff --git a/Misc/NEWS b/Misc/NEWS
index fa7ef5e..750b2c3 100644
--- a/Misc/NEWS
+++ b/Misc/NEWS
@@ -25,7 +25,11 @@
 Library
 -------
 
-TBD
+- os.listdir() now returns Unicode strings on platforms that set
+  Py_FileSystemDefaultEncoding, for file names that are not representable
+  in ASCII.  (This currently only affects MacOS X; on Windows versions
+  with wide file name support os.listdir() already returned Unicode
+  strings.)
 
 Tools/Demos
 -----------
@@ -61,6 +65,9 @@
 Mac
 ---
 
+- os.listdir() now may return Unicode strings on MacOS X. See the general
+  news item under "Library".
+
 - A new method MacOS.WMAvailable() returns true if it is safe to access
   the window manager, false otherwise.
 
diff --git a/Modules/posixmodule.c b/Modules/posixmodule.c
index d203378..482bba9 100644
--- a/Modules/posixmodule.c
+++ b/Modules/posixmodule.c
@@ -1795,6 +1795,30 @@
 			d = NULL;
 			break;
 		}
+#ifdef Py_USING_UNICODE
+		if (Py_FileSystemDefaultEncoding != NULL) {
+			PyObject *w;
+
+			w = PyUnicode_FromEncodedObject(v,
+					Py_FileSystemDefaultEncoding, 
+					"strict");
+			Py_DECREF(v);
+			v = w;
+			if (v == NULL) {
+				Py_DECREF(d);
+				d = NULL;
+				break;
+			}
+			/* attempt to convert to ASCII */
+			w = PyUnicode_AsASCIIString(v);
+			if (w != NULL) {
+				Py_DECREF(v);
+				v = w;
+			}
+			else
+				PyErr_Clear();
+		}
+#endif
 		if (PyList_Append(d, v) != 0) {
 			Py_DECREF(v);
 			Py_DECREF(d);