--- dbus-transport-unix.c.~1.37.~	2004-07-23 03:23:02.061060197 +0200
+++ dbus-transport-unix.c	2004-07-23 03:56:52.355889351 +0200
@@ -721,7 +721,7 @@
       (flags & DBUS_WATCH_READABLE))
     {
 #if 1
-      _dbus_verbose ("handling read watch\n");
+      _dbus_verbose ("handling read watch (%x)\n", flags);
 #endif
       if (!do_authentication (transport, TRUE, FALSE))
         return FALSE;
@@ -763,8 +763,16 @@
     }
 #endif /* DBUS_ENABLE_VERBOSE_MODE */
 
-  if (flags & (DBUS_WATCH_HANGUP | DBUS_WATCH_ERROR))
+  /* Disconnect in case of an error.  In case of hangup do not
+   * disconnect the transport here because do_reading may have hit its
+   * max_bytes_read_per_iteration limit and some data may be left to
+   * read.  The condition where flags == HANGUP (without READABLE)
+   * probably never happen in fact.
+   */
+  if ((flags & DBUS_WATCH_ERROR) ||
+      ((flags & DBUS_WATCH_HANGUP) && !(flags & DBUS_WATCH_READABLE)))
     {
+      _dbus_verbose ("Hang up or error on watch\n");
       _dbus_transport_disconnect (transport);
       return TRUE;
     }