diff --git a/lib/timers.js b/lib/timers.js
index 076503e601..db4f5bd972 100644
--- a/lib/timers.js
+++ b/lib/timers.js
@@ -113,9 +113,15 @@ function listOnTimeout() {
         threw = false;
       } finally {
         if (threw) {
+          // We need to continue processing after domain error handling
+          // is complete, but not by using whatever domain was left over
+          // when the timeout threw its exception.
+          var oldDomain = process.domain;
+          process.domain = null;
           process.nextTick(function() {
             list.ontimeout();
           });
+          process.domain = oldDomain;
         }
       }
     }
diff --git a/test/simple/test-domain-exit-dispose-again.js b/test/simple/test-domain-exit-dispose-again.js
new file mode 100644
index 0000000000..22928f2604
--- /dev/null
+++ b/test/simple/test-domain-exit-dispose-again.js
@@ -0,0 +1,76 @@
+// Copyright Joyent, Inc. and other Node contributors.
+//
+// Permission is hereby granted, free of charge, to any person obtaining a
+// copy of this software and associated documentation files (the
+// "Software"), to deal in the Software without restriction, including
+// without limitation the rights to use, copy, modify, merge, publish,
+// distribute, sublicense, and/or sell copies of the Software, and to permit
+// persons to whom the Software is furnished to do so, subject to the
+// following conditions:
+//
+// The above copyright notice and this permission notice shall be included
+// in all copies or substantial portions of the Software.
+//
+// THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS
+// OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF
+// MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN
+// NO EVENT SHALL THE AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM,
+// DAMAGES OR OTHER LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR
+// OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE
+// USE OR OTHER DEALINGS IN THE SOFTWARE.
+
+var common = require('../common.js');
+var assert = require('assert');
+var domain = require('domain');
+var disposalFailed = false;
+
+// no matter what happens, we should increment a 10 times.
+var a = 0;
+log();
+function log(){
+  console.log(a++, process.domain);
+  if (a < 10) setTimeout(log, 20);
+}
+
+var secondTimerRan = false;
+
+// in 50ms we'll throw an error.
+setTimeout(err, 50);
+setTimeout(secondTimer, 50);
+function err(){
+  var d = domain.create();
+  d.on('error', handle);
+  d.run(err2);
+
+  function err2() {
+    // this timeout should never be called, since the domain gets
+    // disposed when the error happens.
+    setTimeout(function() {
+      console.error('This should not happen.');
+      disposalFailed = true;
+      process.exit(1);
+    });
+
+    // this function doesn't exist, and throws an error as a result.
+    err3();
+  }
+
+  function handle(e) {
+    // this should clean up everything properly.
+    d.dispose();
+    console.error(e);
+    console.error('in handler', process.domain, process.domain === d);
+  }
+}
+
+function secondTimer() {
+  console.log('In second timer');
+  secondTimerRan = true;
+}
+
+process.on('exit', function() {
+  assert.equal(a, 10);
+  assert.equal(disposalFailed, false);
+  assert(secondTimerRan);
+  console.log('ok');
+});