diff --git a/libtransmission/peer.c b/libtransmission/peer.c
index 3641ee993..1ec7c6b7a 100644
--- a/libtransmission/peer.c
+++ b/libtransmission/peer.c
@@ -111,6 +111,10 @@ static const int SWIFT_REFRESH_INTERVAL_SEC = 5;
 /* uncomment this to disable support for the azureus protocol bit */
 /* #define DISABLE_AZPROTO */
 
+/* uncomment this to use the new reserved bits proposed here:
+   http://www.azureuswiki.com/index.php/Extension_negotiation_protocol */
+/* #define NEW_AZ_BITS */
+
 #define HANDSHAKE_NAME          "\023BitTorrent protocol"
 #define HANDSHAKE_NAME_LEN      20
 #define HANDSHAKE_FLAGS_OFF     HANDSHAKE_NAME_LEN
@@ -119,6 +123,7 @@ static const int SWIFT_REFRESH_INTERVAL_SEC = 5;
 #define HANDSHAKE_PEERID_OFF    ( HANDSHAKE_HASH_OFF + SHA_DIGEST_LENGTH )
 #define HANDSHAKE_SIZE          ( HANDSHAKE_PEERID_OFF + TR_ID_LEN )
 
+/* these macros test and set the bit indicating extended messaging support */
 #ifdef DISABLE_EXTMSGS
 #define HANDSHAKE_HAS_EXTMSGS( bits ) ( 0 )
 #define HANDSHAKE_SET_EXTMSGS( bits ) ( (void)0 )
@@ -127,6 +132,7 @@ static const int SWIFT_REFRESH_INTERVAL_SEC = 5;
 #define HANDSHAKE_SET_EXTMSGS( bits ) ( (bits)[5] |= 0x10 )
 #endif
 
+/* these macros test and set the bit indicating azureus protocol support */
 #ifdef DISABLE_AZPROTO
 #define HANDSHAKE_HAS_AZPROTO( bits ) ( 0 )
 #define HANDSHAKE_SET_AZPROTO( bits ) ( (void)0 )
@@ -135,6 +141,20 @@ static const int SWIFT_REFRESH_INTERVAL_SEC = 5;
 #define HANDSHAKE_SET_AZPROTO( bits ) ( (bits)[0] |= 0x80 )
 #endif
 
+/* these macros are to be used if both extended messaging and the
+   azureus protocol is supported, they indicate which protocol is preferred */
+#ifdef NEW_AZ_BITS
+#define HANDSHAKE_GET_EXTPREF( bits )      ( (bits)[5] & 0x03 )
+#define HANDSHAKE_SET_EXTPREF( bits, val ) ( (bits)[5] |= 0x03 & (val) )
+#else
+#define HANDSHAKE_GET_EXTPREF( bits )      ( 0 )
+#define HANDSHAKE_SET_EXTPREF( bits, val ) ( (void)0 )
+#endif
+#define HANDSHAKE_EXTPREF_FORCE_EXT        ( 0x00 )
+#define HANDSHAKE_EXTPREF_WANT_EXT         ( 0x01 )
+#define HANDSHAKE_EXTPREF_WANT_AZ          ( 0x10 )
+#define HANDSHAKE_EXTPREF_FORCE_AZ         ( 0x11 )
+
 #define PEER_MSG_CHOKE          0
 #define PEER_MSG_UNCHOKE        1
 #define PEER_MSG_INTERESTED     2
@@ -558,6 +578,8 @@ int tr_peerPulse( tr_peer_t * peer )
         memset( buf + HANDSHAKE_FLAGS_OFF, 0, HANDSHAKE_FLAGS_LEN );
         HANDSHAKE_SET_EXTMSGS( buf + HANDSHAKE_FLAGS_OFF );
         HANDSHAKE_SET_AZPROTO( buf + HANDSHAKE_FLAGS_OFF );
+        HANDSHAKE_SET_EXTPREF( buf + HANDSHAKE_FLAGS_OFF,
+                               HANDSHAKE_EXTPREF_WANT_EXT );
         memcpy( buf + HANDSHAKE_HASH_OFF, inf->hash, SHA_DIGEST_LENGTH );
         memcpy( buf + HANDSHAKE_PEERID_OFF, tor->peer_id, TR_ID_LEN );
 
diff --git a/libtransmission/peerparse.h b/libtransmission/peerparse.h
index 60bdeddd2..f5669b411 100644
--- a/libtransmission/peerparse.h
+++ b/libtransmission/peerparse.h
@@ -603,7 +603,8 @@ static const uint8_t * parseBufHash( const tr_peer_t * peer )
 static int parseHandshake( tr_torrent_t * tor, tr_peer_t * peer )
 {
     tr_info_t * inf = &tor->info;
-    int         ii;
+    int         ii, extmsgs, azproto;
+    char      * dbgsup, * dbgwant;
 
     if( 0 != memcmp( peer->buf + HANDSHAKE_HASH_OFF, inf->hash,
                      SHA_DIGEST_LENGTH ) )
@@ -635,26 +636,63 @@ static int parseHandshake( tr_torrent_t * tor, tr_peer_t * peer )
         }
     }
 
+    extmsgs = 0;
+    azproto = 0;
+    dbgsup  = "";
+    dbgwant = "";
+
     if( HANDSHAKE_HAS_EXTMSGS( peer->buf + HANDSHAKE_FLAGS_OFF ) )
+    {
+        dbgsup = " extended messaging supported";
+        extmsgs = 1;
+    }
+    if( HANDSHAKE_HAS_AZPROTO( peer->buf + HANDSHAKE_FLAGS_OFF ) )
+    {
+        dbgsup = " will use azureus protocol";
+        azproto = 1;
+    }
+    if( extmsgs && azproto )
+    {
+        dbgsup = " both extended and azureus messaging supported";
+        switch( HANDSHAKE_GET_EXTPREF( peer->buf + HANDSHAKE_FLAGS_OFF ) )
+        {
+            case HANDSHAKE_EXTPREF_FORCE_EXT:
+                dbgwant = ", peer forces extended";
+                azproto = 0;
+                break;
+            case HANDSHAKE_EXTPREF_WANT_EXT:
+                dbgwant = ", peer prefers extended";
+                azproto = 0;
+                break;
+            case HANDSHAKE_EXTPREF_WANT_AZ:
+                dbgwant = ", peer prefers azureus";
+                extmsgs = 0;
+                break;
+            case HANDSHAKE_EXTPREF_FORCE_AZ:
+                dbgwant = ", peer forces azureus";
+                extmsgs = 0;
+                break;
+        }
+    }
+    assert( !extmsgs || !azproto );
+
+    if( extmsgs )
     {
         peer->status = PEER_STATUS_CONNECTED;
         peer->extStatus = EXTENDED_SUPPORTED;
-        peer_dbg( "GET  handshake, ok (%s) extended messaging supported",
-                  tr_peerClient( peer ) );
     }
-    else if( HANDSHAKE_HAS_AZPROTO( peer->buf + HANDSHAKE_FLAGS_OFF ) )
+    else if( azproto )
     {
         peer->status  = PEER_STATUS_AZ_GIVER;
         peer->azproto = 1;
         peer->date    = tr_date();
-        peer_dbg( "GET  handshake, ok (%s) will use azureus protocol",
-                  tr_peerClient( peer ) );
     }
     else
     {
         peer->status = PEER_STATUS_CONNECTED;
-        peer_dbg( "GET  handshake, ok (%s)", tr_peerClient( peer ) );
     }
+    peer_dbg( "GET  handshake, ok (%s)%s%s",
+              tr_peerClient( peer ), dbgsup, dbgwant );
 
     return TR_OK;
 }