diff --git a/auth.h b/auth.h
index fb3a75446..db0f72e1a 100644
--- a/auth.h
+++ b/auth.h
@@ -40,6 +40,8 @@ void send_msg_userauth_banner(buffer *msg);
 void svr_auth_password(void);
 void svr_auth_pubkey(void);
 void svr_auth_pam(void);
+void svr_auth_pam_cleanup(void);
+void svr_auth_pam_env(void);
 
 #if DROPBEAR_SVR_PUBKEY_OPTIONS_BUILT
 int svr_pubkey_allows_agentfwd(void);
@@ -122,6 +124,11 @@ struct AuthState {
 #if DROPBEAR_SVR_PUBKEY_OPTIONS_BUILT
 	struct PubKeyOptions* pubkey_options;
 #endif
+#if DROPBEAR_SVR_PAM_AUTH
+	pam_handle_t* pam_handle;
+	unsigned pam_sesopen : 1;
+	unsigned pam_credset : 1;
+#endif
 };
 
 #if DROPBEAR_SVR_PUBKEY_OPTIONS_BUILT
diff --git a/configure.ac b/configure.ac
index 893b9041b..5a64c8e02 100644
--- a/configure.ac
+++ b/configure.ac
@@ -157,7 +157,7 @@ AC_ARG_ENABLE(pam,
 		if test "x$enableval" = "xyes"; then
 			AC_CHECK_LIB(pam, pam_authenticate, , AC_MSG_ERROR([*** PAM missing - install first or check config.log ***]))
 			AC_MSG_NOTICE(Enabling PAM)
-			AC_CHECK_FUNCS(pam_fail_delay)
+			AC_CHECK_FUNC(pam_fail_delay, [AC_DEFINE(WITH_PAM_FAIL_DELAY,1,[Define 1 if pam_fail_delay available])])
 		else
 			AC_DEFINE(DISABLE_PAM,, Use PAM)
 			AC_MSG_NOTICE(Disabling PAM)
diff --git a/includes.h b/includes.h
index f91a2c2f0..f40f6110f 100644
--- a/includes.h
+++ b/includes.h
@@ -177,4 +177,12 @@ typedef u_int32_t uint32_t;
 # define UNUSED(x) x 
 #endif
 
+#if DROPBEAR_SVR_PAM_AUTH
+#if defined(HAVE_SECURITY_PAM_APPL_H)
+#include <security/pam_appl.h>
+#elif defined (HAVE_PAM_PAM_APPL_H)
+#include <pam/pam_appl.h>
+#endif
+#endif
+
 #endif /* DROPBEAR_INCLUDES_H_ */
diff --git a/svr-auth.c b/svr-auth.c
index 4dc280c4f..8f56504c8 100644
--- a/svr-auth.c
+++ b/svr-auth.c
@@ -191,10 +191,8 @@ void recv_msg_userauth_request() {
 		if (methodlen == AUTH_METHOD_PASSWORD_LEN &&
 				strncmp(methodname, AUTH_METHOD_PASSWORD,
 					AUTH_METHOD_PASSWORD_LEN) == 0) {
-			if (valid_user) {
-				svr_auth_pam();
-				goto out;
-			}
+			svr_auth_pam();
+			goto out;
 		}
 	}
 #endif
diff --git a/svr-authpam.c b/svr-authpam.c
index ac8e5ece6..51545c399 100644
--- a/svr-authpam.c
+++ b/svr-authpam.c
@@ -33,12 +33,6 @@
 
 #if DROPBEAR_SVR_PAM_AUTH
 
-#if defined(HAVE_SECURITY_PAM_APPL_H)
-#include <security/pam_appl.h>
-#elif defined (HAVE_PAM_PAM_APPL_H)
-#include <pam/pam_appl.h>
-#endif
-
 struct UserDataS {
 	char* user;
 	char* passwd;
@@ -186,7 +180,7 @@ void svr_auth_pam() {
 		&userData /* submitted to pamvConvFunc as appdata_ptr */ 
 	};
 
-	pam_handle_t* pamHandlep = NULL;
+	pam_handle_t* pamHandlep = ses.authstate.pam_handle;
 
 	char * password = NULL;
 	unsigned int passwordlen;
@@ -207,16 +201,23 @@ void svr_auth_pam() {
 	/* used to pass data to the PAM conversation function - don't bother with
 	 * strdup() etc since these are touched only by our own conversation
 	 * function (above) which takes care of it */
-	userData.user = ses.authstate.pw_name;
+	userData.user = ses.authstate.username;
 	userData.passwd = password;
 
 	/* Init pam */
-	if ((rc = pam_start("sshd", NULL, &pamConv, &pamHandlep)) != PAM_SUCCESS) {
+	if ((rc = pam_start("sshd", ses.authstate.username, &pamConv, &pamHandlep)) != PAM_SUCCESS) {
 		dropbear_log(LOG_WARNING, "pam_start() failed, rc=%d, %s", 
 				rc, pam_strerror(pamHandlep, rc));
 		goto cleanup;
 	}
 
+	/* many pam modules expect RHOST */
+	if ((rc = pam_set_item(pamHandlep, PAM_RHOST, svr_ses.remotehost)) != PAM_SUCCESS) {
+		dropbear_log(LOG_WARNING, "pam_set_item() failed, rc=%d, %s",
+				rc, pam_strerror(pamHandlep, rc));
+		goto cleanup;
+	}
+
 	/* just to set it to something */
 	if ((rc = pam_set_item(pamHandlep, PAM_TTY, "ssh")) != PAM_SUCCESS) {
 		dropbear_log(LOG_WARNING, "pam_set_item() failed, rc=%d, %s",
@@ -224,7 +225,7 @@ void svr_auth_pam() {
 		goto cleanup;
 	}
 
-#ifdef HAVE_PAM_FAIL_DELAY
+#ifdef WITH_PAM_FAIL_DELAY
 	/* We have our own random delay code already, disable PAM's */
 	(void) pam_fail_delay(pamHandlep, 0 /* musec_delay */);
 #endif
@@ -236,37 +237,89 @@ void svr_auth_pam() {
 				rc, pam_strerror(pamHandlep, rc));
 		dropbear_log(LOG_WARNING,
 				"Bad PAM password attempt for '%s' from %s",
-				ses.authstate.pw_name,
+				ses.authstate.username,
 				svr_ses.addrstring);
 		send_msg_userauth_failure(0, 1);
 		goto cleanup;
 	}
 
-	if ((rc = pam_acct_mgmt(pamHandlep, 0)) != PAM_SUCCESS) {
+	if ((rc = pam_acct_mgmt(pamHandlep, 0)) == PAM_NEW_AUTHTOK_REQD)
+		rc = pam_chauthtok(pamHandlep, PAM_CHANGE_EXPIRED_AUTHTOK);
+	if (rc != PAM_SUCCESS) {
 		dropbear_log(LOG_WARNING, "pam_acct_mgmt() failed, rc=%d, %s", 
 				rc, pam_strerror(pamHandlep, rc));
 		dropbear_log(LOG_WARNING,
 				"Bad PAM password attempt for '%s' from %s",
-				ses.authstate.pw_name,
+				ses.authstate.username,
 				svr_ses.addrstring);
 		send_msg_userauth_failure(0, 1);
 		goto cleanup;
 	}
 
+	/* establish requested credentials */
+	if ((rc = pam_setcred(pamHandlep, PAM_ESTABLISH_CRED)) != PAM_SUCCESS) {
+		dropbear_log(LOG_WARNING, "pam_setcred() failed, rc=%d, %s",
+				rc, pam_strerror(pamHandlep, rc));
+		send_msg_userauth_failure(0, 1);
+		goto cleanup;
+	}
+
+	/* open session */
+	if ((rc = pam_open_session(pamHandlep, 0)) != PAM_SUCCESS) {
+		dropbear_log(LOG_WARNING, "pam_open_session() failed, rc=%d, %s",
+				rc, pam_strerror(pamHandlep, rc));
+		send_msg_userauth_failure(0, 1);
+		goto cleanup;
+	}
+
 	/* successful authentication */
 	dropbear_log(LOG_NOTICE, "PAM password auth succeeded for '%s' from %s",
-			ses.authstate.pw_name,
+			ses.authstate.username,
 			svr_ses.addrstring);
+
+	ses.authstate.pam_sesopen = 1;
 	send_msg_userauth_success();
+	goto cleanupok;
 
 cleanup:
+	svr_auth_pam_cleanup();
+
+cleanupok:
 	if (password != NULL) {
 		m_burn(password, passwordlen);
 		m_free(password);
 	}
-	if (pamHandlep != NULL) {
-		TRACE(("pam_end"))
-		(void) pam_end(pamHandlep, 0 /* pam_status */);
+}
+
+void svr_auth_pam_cleanup() {
+	int rc = PAM_SUCCESS;
+
+	if (ses.authstate.pam_handle != NULL) {
+		if (ses.authstate.pam_sesopen) {
+			if ((rc = pam_close_session(ses.authstate.pam_handle, PAM_SILENT)) != PAM_SUCCESS) {
+				dropbear_log(LOG_WARNING, "pam_close_session() failed, rc=%d, %s",
+						rc, pam_strerror(ses.authstate.pam_handle, rc));
+			}
+			ses.authstate.pam_sesopen = 0;
+		}
+		if (ses.authstate.pam_credset) {
+			if ((rc = pam_setcred(ses.authstate.pam_handle, PAM_DELETE_CRED)) != PAM_SUCCESS) {
+				dropbear_log(LOG_WARNING, "pam_setcred() failed, rc=%d, %s",
+						rc, pam_strerror(ses.authstate.pam_handle, rc));
+			}
+			ses.authstate.pam_credset = 0;
+		}
+	}
+	TRACE(("pam_end"))
+	(void) pam_end(ses.authstate.pam_handle, 0);
+}
+
+void svr_auth_pam_env() {
+	char **pam_envlist, **pam_env;
+	if ((pam_envlist = pam_getenvlist(ses.authstate.pam_handle)) != NULL) {
+		for (pam_env = pam_envlist; *pam_env != NULL; ++pam_env) {
+			putenv(*pam_env);
+		}
 	}
 }
 
diff --git a/svr-chansession.c b/svr-chansession.c
index 6dbc8ad72..5bfb1bd35 100644
--- a/svr-chansession.c
+++ b/svr-chansession.c
@@ -323,6 +323,10 @@ static void closechansess(struct Channel *channel) {
 	svr_agentcleanup(chansess);
 #endif
 
+#if DROPBEAR_SVR_PAM_AUTH
+	svr_auth_pam_cleanup();
+#endif
+
 	/* clear child pid entries */
 	for (i = 0; i < svr_ses.childpidsize; i++) {
 		if (svr_ses.childpids[i].chansess == chansess) {
@@ -927,6 +931,10 @@ static void execchild(void *user_data) {
 #endif /* HAVE_CLEARENV */
 #endif /* DEBUG_VALGRIND */
 
+#if DROPBEAR_SVR_PAM_AUTH
+	svr_auth_pam_env(chansess);
+#endif
+
 	/* We can only change uid/gid as root ... */
 	if (getuid() == 0) {