Index: Lib/test/test_str2unicode.py
===================================================================
--- Lib/test/test_str2unicode.py	(revision 3131)
+++ Lib/test/test_str2unicode.py	(working copy)
@@ -2,18 +2,26 @@
 
 class TestStrReturnsUnicode(unittest.TestCase):
     def test_join(self):
-	self.assertEquals(unicode, type(''.join([u'blah'])))
+        self.assertEquals(unicode, type(''.join([u'blah'])))
 
     def test_replace(self):
-	self.assertEquals(unicode, type('hello'.replace('o', u'o')))
+        self.assertEquals(unicode, type('hello'.replace('o', u'o')))
 
+    def test_string_formatting(self):
+        self.assertEquals(unicode, type('%s' % u'x'))
+        self.assertEquals(unicode, type('%s %s' % (u'x', 'y')))
 
 class TestStrReturnsStr(unittest.TestCase):
     def test_join(self):
-	self.assertEquals(str, type(''.join(['blah'])))
+        self.assertEquals(str, type(''.join(['blah'])))
 
     def test_replace(self):
-	self.assertEquals(str, type('hello'.replace('o', 'oo')))
+        self.assertEquals(str, type('hello'.replace('o', 'oo')))
 
+    def test_string_formatting(self):
+        self.assertEquals(str, type('%s' % 'x'))
+        self.assertEquals(str, type('%s %s' % ('x', 'y')))
+
+
 if __name__ == '__main__':
     unittest.main()
Index: src/org/python/core/PyString.java
===================================================================
--- src/org/python/core/PyString.java	(revision 3131)
+++ src/org/python/core/PyString.java	(working copy)
@@ -2044,8 +2044,20 @@
     }
     
     public PyObject str___mod__(PyObject other){
-        StringFormatter fmt = new StringFormatter(string);
-        return createInstance(fmt.format(other));
+        String result = new StringFormatter(string).format(other);
+        if (other instanceof PyUnicode) {
+            return new PyUnicode(result);
+        }
+        if (!(other instanceof PyString)) {
+            PyObject iter = other.__iter__();
+            PyObject obj = null;
+            for (int i = 0; (obj = iter.__iternext__()) != null; i++) {
+                if (obj instanceof PyUnicode) {
+                    return new PyUnicode(result);
+                }
+            }
+        }
+        return new PyString(result);
     }
 
     public PyObject __int__() {