diff -r 7f43b10449df jython/Lib/test/test_str_jy.py
--- a/jython/Lib/test/test_str_jy.py	Tue Jun 10 17:05:31 2008 -0400
+++ b/jython/Lib/test/test_str_jy.py	Thu Jun 12 16:18:00 2008 -0400
@@ -4,11 +4,11 @@ class WrappedStrCmpTest(unittest.TestCas
 class WrappedStrCmpTest(unittest.TestCase):
 
     def testWrappedWorksAsKey(self):
-        '''Test for http://jython.org/bugs/1816134
+        """Test for http://jython.org/bugs/1816134
 
         PyString's equal used to check for str explicitly, so Wrapper's __cmp__ wasn't used
         and a KeyError would be raised by the lookup on ABC.
-        '''
+        """
         class Wrapper(object):
             def __init__(self, content):
                 self.content = content
@@ -69,6 +69,27 @@ class FormatTest(unittest.TestCase):
             s = '%d%d' % (1,)
         except TypeError, e:
             self.failUnless("not enough arguments for format string" in str(e))
+
+    def test_unicode_arg(self):
+        # When the right-side operand is a unicode, the result should be unicode
+        # too
+        self.assertEquals("%s" % u"foo", u"foo")
+        self.assertEquals("%s" % u"\u00e7", u"\u00e7")
+
+    def test_unicode_in_args(self):
+        # When at least one of the right-side operands is a unicode, the result
+        # should be unicode too
+        self.assertEquals("%s %s" % (u"foo", "bar"), u"foo bar")
+        self.assertEquals("%s %s" % ("foo", u"bar"), u"foo bar")
+
+        class S(object):
+            def __str__(self): return "str"
+            def __unicode__(self): return "unicode"
+
+        # Also, once a unicode has been found, next args should be __unicode__'d
+        self.assertEquals("%s %s %s" % ("foo", u"bar", S()), u"foo bar unicode")
+        # But, args found before the first unicode should not be __unicode__'d
+        self.assertEquals("%s %s %s" % (S(), u"bar", S()), u"str bar unicode")
 
 class DisplayTest(unittest.TestCase):
 
diff -r 7f43b10449df jython/src/org/python/core/PyString.java
--- a/jython/src/org/python/core/PyString.java	Tue Jun 10 17:05:31 2008 -0400
+++ b/jython/src/org/python/core/PyString.java	Thu Jun 12 16:18:00 2008 -0400
@@ -2418,7 +2418,7 @@ final class StringFormatter
     public PyString format(PyObject args) {
         PyObject dict = null;
         this.args = args;
-        boolean needUnicode = false;
+        boolean needUnicode = unicodeCoercion;
         if (args instanceof PyTuple) {
             argIndex = 0;
         } else {
@@ -2512,9 +2512,12 @@ final class StringFormatter
             switch(c) {
             case 's':
             case 'r':
+                if (arg instanceof PyUnicode) {
+                    needUnicode = true;
+                }
                 fill = ' ';
                 if (c == 's')
-                    if (unicodeCoercion)
+                    if (needUnicode)
                         string = arg.__unicode__().toString();
                     else
                         string = arg.__str__().toString();
@@ -2522,9 +2525,6 @@ final class StringFormatter
                     string = arg.__repr__().toString();
                 if (precision >= 0 && string.length() > precision) {
                     string = string.substring(0, precision);
-                }
-                if (arg instanceof PyUnicode) {
-                    needUnicode = true;
                 }
                 break;
             case 'i':