diff --git a/NEWS b/NEWS
index 214bb4172..518004d46 100644
--- a/NEWS
+++ b/NEWS
@@ -6,6 +6,10 @@ NEWS file for Transmission <http://www.transmissionbt.com/>
    + Leopard: Group dividers
    + Use the file icon as the per-torrent action button
 
+1.03 (2008/xx/yy)
+- All Platforms:
+   + Fix handshake bug with peers that support LTEP
+
 1.02 (2008/01/22)
 - All Platforms:
    + Fix 1.00 bug that choked some models of routers
diff --git a/libtransmission/peer-msgs.c b/libtransmission/peer-msgs.c
index 3c484b2bd..fa2bd63a8 100644
--- a/libtransmission/peer-msgs.c
+++ b/libtransmission/peer-msgs.c
@@ -849,10 +849,11 @@ parseLtepHandshake( tr_peermsgs * msgs, int len, struct evbuffer * inbuf )
                                       : ENCRYPTION_PREFERENCE_NO;
 
     /* check supported messages for utorrent pex */
+    msgs->peerSupportsPex = 0;
     if(( sub = tr_bencDictFindType( &val, "m", TYPE_DICT ))) {
         if(( sub = tr_bencDictFindType( sub, "ut_pex", TYPE_INT ))) {
-            msgs->peerSupportsPex = 1;
             msgs->ut_pex_id = (uint8_t) sub->val.i;
+            msgs->peerSupportsPex = msgs->ut_pex_id == 0 ? 0 : 1;
             dbgmsg( msgs, "msgs->ut_pex is %d", (int)msgs->ut_pex_id );
         }
     }