diff --git a/NEWS b/NEWS
index 796da625d..8fc16d407 100644
--- a/NEWS
+++ b/NEWS
@@ -28,6 +28,7 @@ available: Guile is now always configured in "maintainer mode".
 
 ** `symbol->string' now returns a read-only string, as per R5RS
 ** Literal strings as returned by `read' are now read-only, as per R5RS
+** Fix incorrect handling of the FLAGS argument of `fold-matches'
 ** `guile-config link' now prints `-L$libdir' before `-lguile'
 ** Fix memory corruption involving GOOPS' `class-redefinition'
 ** Fix possible deadlock in `mutex-lock'
diff --git a/ice-9/regex.scm b/ice-9/regex.scm
index 21beb1665..61937d04f 100644
--- a/ice-9/regex.scm
+++ b/ice-9/regex.scm
@@ -1,4 +1,4 @@
-;;;; 	Copyright (C) 1997, 1999, 2001, 2004, 2005, 2006 Free Software Foundation, Inc.
+;;;; 	Copyright (C) 1997, 1999, 2001, 2004, 2005, 2006, 2008 Free Software Foundation, Inc.
 ;;;;
 ;;;; This library is free software; you can redistribute it and/or
 ;;;; modify it under the terms of the GNU Lesser General Public
@@ -178,7 +178,7 @@
 
 (define (fold-matches regexp string init proc . flags)
   (let ((regexp (if (regexp? regexp) regexp (make-regexp regexp)))
-	(flags (if (null? flags) 0 flags)))
+	(flags (if (null? flags) 0 (car flags))))
     (let loop ((start 0)
 	       (value init)
 	       (abuts #f))		; True if start abuts a previous match.
diff --git a/test-suite/tests/regexp.test b/test-suite/tests/regexp.test
index 3050af39b..0ca0203b6 100644
--- a/test-suite/tests/regexp.test
+++ b/test-suite/tests/regexp.test
@@ -1,7 +1,7 @@
 ;;;; regexp.test --- test Guile's regular expression functions -*- scheme -*-
 ;;;; Jim Blandy <jimb@red-bean.com> --- September 1999
 ;;;;
-;;;; 	Copyright (C) 1999, 2004, 2006, 2007 Free Software Foundation, Inc.
+;;;; 	Copyright (C) 1999, 2004, 2006, 2007, 2008 Free Software Foundation, Inc.
 ;;;; 
 ;;;; This program is free software; you can redistribute it and/or modify
 ;;;; it under the terms of the GNU General Public License as published by
@@ -102,6 +102,29 @@
     (let ((re (make-regexp "ab+")))
       (regexp-exec re "aaaabbbb" 0 'bogus-flags-arg))))      
 
+;;;
+;;; fold-matches
+;;;
+
+(with-test-prefix "fold-matches"
+
+  (pass-if "without flags"
+    (equal? '("hello")
+            (fold-matches "^[a-z]+$" "hello" '()
+                          (lambda (match result)
+                            (cons (match:substring match)
+                                  result)))))
+
+  (pass-if "with flags"
+    ;; Prior to 1.8.6, passing an additional flag would not work.
+    (null?
+     (fold-matches "^[a-z]+$" "hello" '()
+                   (lambda (match result)
+                     (cons (match:substring match)
+                           result))
+                   (logior regexp/notbol regexp/noteol)))))
+
+
 ;;;
 ;;; regexp-quote
 ;;;