Index: lib/net/http/response.rb
===================================================================
--- lib/net/http/response.rb	(revision 35779)
+++ lib/net/http/response.rb	(working copy)
@@ -275,11 +275,37 @@ class Net::HTTPResponse
 
   private
 
+  ##
+  # Checks for a supported Content-Encoding header and returns the Inflate
+  # wrapper for this response's socket when zlib is present.  If the
+  # Content-Encoding is unsupported or zlib is missing the plain socket is
+  # returned.
+
+  def inflater # :nodoc:
+    return @socket unless Net::HTTP::HAVE_ZLIB
+
+    case self['content-encoding']
+    when 'deflate', 'gzip', 'x-gzip' then
+      self.delete 'content-encoding'
+
+      Inflater.new @socket
+    when 'none', 'identity' then
+      self.delete 'content-encoding'
+
+      @socket
+    else
+      @socket
+    end
+  end
+
   def read_body_0(dest)
     if chunked?
-      read_chunked dest
+      read_chunked dest, inflater
       return
     end
+
+    @socket = inflater
+
     clen = content_length()
     if clen
       @socket.read clen, dest, true   # ignore EOF
@@ -291,9 +317,11 @@ class Net::HTTPResponse
       return
     end
     @socket.read_all dest
+  ensure
+    @socket.finish if Inflater === @socket
   end
 
-  def read_chunked(dest)
+  def read_chunked(dest, inflater)
     len = nil
     total = 0
     while true
@@ -303,7 +331,7 @@ class Net::HTTPResponse
       len = hexlen.hex
       break if len == 0
       begin
-        @socket.read len, dest
+        inflater.read len, dest
       ensure
         total += len
         @socket.read 2   # \r\n
@@ -319,8 +347,8 @@ class Net::HTTPResponse
   end
 
   def procdest(dest, block)
-    raise ArgumentError, 'both arg and block given for HTTP method' \
-        if dest and block
+    raise ArgumentError, 'both arg and block given for HTTP method' if
+      dest and block
     if block
       Net::ReadAdapter.new(block)
     else
@@ -328,5 +356,52 @@ class Net::HTTPResponse
     end
   end
 
+  ##
+  # Inflater is a wrapper around Net::BufferedIO that transparently inflates
+  # zlib and gzip streams.
+
+  class Inflater # :nodoc:
+
+    ##
+    # Creates a new Inflater wrapping +socket+
+
+    def initialize socket
+      @socket = socket
+      # zlib with automatic gzip detection
+      @inflate = Zlib::Inflate.new(32 + Zlib::MAX_WBITS)
+    end
+
+    ##
+    # Reads +clen+ bytes from the socket, inflates them, then writes them to
+    # +dest+.  +ignore_eof+ is passed down to Net::BufferedIO#read
+
+    def read clen, dest, ignore_eof = false
+      temp_dest = ''
+
+      @socket.read clen, temp_dest, ignore_eof
+
+      dest << @inflate.inflate(temp_dest)
+    end
+
+    ##
+    # Reads the rest of the socket, inflates it, then writes it to +dest+.
+
+    def read_all dest
+      temp_dest = ''
+      
+      @socket.read_all temp_dest
+
+      dest << @inflate.inflate(temp_dest)
+    end
+
+    ##
+    # Finishes the inflate stream.
+
+    def finish
+      @inflate.finish
+    end
+
+  end
+
 end
 
Index: lib/net/http.rb
===================================================================
--- lib/net/http.rb	(revision 35779)
+++ lib/net/http.rb	(working copy)
@@ -590,7 +590,6 @@ module Net   #:nodoc:
       @use_ssl = false
       @ssl_context = nil
       @enable_post_connection_check = true
-      @compression = nil
       @sspi_enabled = false
       SSL_IVNAMES.each do |ivname|
         instance_variable_set ivname, nil
@@ -1034,28 +1033,10 @@ module Net   #:nodoc:
           initheader = initheader.merge({
             "accept-encoding" => "gzip;q=1.0,deflate;q=0.6,identity;q=0.3"
           })
-          @compression = true
         end
       end
       request(Get.new(path, initheader)) {|r|
-        if r.key?("content-encoding") and @compression
-          @compression = nil # Clear it till next set.
-          the_body = r.read_body dest, &block
-          case r["content-encoding"]
-          when "gzip"
-            r.body= Zlib::GzipReader.new(StringIO.new(the_body), encoding: "ASCII-8BIT").read
-            r.delete("content-encoding")
-          when "deflate"
-            r.body= Zlib::Inflate.inflate(the_body);
-            r.delete("content-encoding")
-          when "identity"
-            ; # nothing needed
-          else
-            ; # Don't do anything dramatic, unless we need to later
-          end
-        else
-          r.read_body dest, &block
-        end
+        r.read_body dest, &block
         res = r
       }
       res
Index: test/net/http/test_httpresponse.rb
===================================================================
--- test/net/http/test_httpresponse.rb	(revision 35779)
+++ test/net/http/test_httpresponse.rb	(working copy)
@@ -4,7 +4,7 @@ require 'stringio'
 
 class HTTPResponseTest < Test::Unit::TestCase
   def test_singleline_header
-    io = dummy_io(<<EOS.gsub(/\n/, "\r\n"))
+    io = dummy_io(<<EOS)
 HTTP/1.1 200 OK
 Content-Length: 5
 Connection: close
@@ -17,7 +17,7 @@ EOS
   end
 
   def test_multiline_header
-    io = dummy_io(<<EOS.gsub(/\n/, "\r\n"))
+    io = dummy_io(<<EOS)
 HTTP/1.1 200 OK
 X-Foo: XXX
    YYY
@@ -32,9 +32,140 @@ EOS
     assert_equal('XXX YYY', res.header['x-bar'])
   end
 
+  def test_read_body
+    io = dummy_io(<<EOS)
+HTTP/1.1 200 OK
+Connection: close
+Content-Length: 5
+
+hello
+EOS
+
+    res = Net::HTTPResponse.read_new(io)
+
+    body = nil
+
+    res.reading_body io, true do
+      body = res.read_body
+    end
+
+    assert_equal 'hello', body
+  end
+
+  def test_read_body_block
+    io = dummy_io(<<EOS)
+HTTP/1.1 200 OK
+Connection: close
+Content-Length: 5
+
+hello
+EOS
+
+    res = Net::HTTPResponse.read_new(io)
+
+    body = ''
+
+    res.reading_body io, true do
+      res.read_body do |chunk|
+        body << chunk
+      end
+    end
+
+    assert_equal 'hello', body
+  end
+
+  def test_read_body_content_encoding_deflate
+    io = dummy_io(<<EOS)
+HTTP/1.1 200 OK
+Connection: close
+Content-Encoding: deflate
+Content-Length: 13
+
+x\x9C\xCBH\xCD\xC9\xC9\a\x00\x06,\x02\x15
+EOS
+
+    res = Net::HTTPResponse.read_new(io)
+
+    body = nil
+
+    res.reading_body io, true do
+      body = res.read_body
+    end
+
+    assert_equal 'hello', body
+  end
+
+  def test_read_body_content_encoding_deflate_chunked
+    io = dummy_io(<<EOS)
+HTTP/1.1 200 OK
+Connection: close
+Content-Encoding: deflate
+Transfer-Encoding: chunked
+
+6
+x\x9C\xCBH\xCD\xC9
+7
+\xC9\a\x00\x06,\x02\x15
+0
+
+EOS
+
+    res = Net::HTTPResponse.read_new(io)
+
+    body = nil
+
+    res.reading_body io, true do
+      body = res.read_body
+    end
+
+    assert_equal 'hello', body
+  end
+
+  def test_read_body_content_encoding_deflate_no_length
+    io = dummy_io(<<EOS)
+HTTP/1.1 200 OK
+Connection: close
+Content-Encoding: deflate
+
+x\x9C\xCBH\xCD\xC9\xC9\a\x00\x06,\x02\x15
+EOS
+
+    res = Net::HTTPResponse.read_new(io)
+
+    body = nil
+
+    res.reading_body io, true do
+      body = res.read_body
+    end
+
+    assert_equal 'hello', body
+  end
+
+  def test_read_body_string
+    io = dummy_io(<<EOS)
+HTTP/1.1 200 OK
+Connection: close
+Content-Length: 5
+
+hello
+EOS
+
+    res = Net::HTTPResponse.read_new(io)
+
+    body = ''
+
+    res.reading_body io, true do
+      res.read_body body
+    end
+
+    assert_equal 'hello', body
+  end
+
 private
 
   def dummy_io(str)
+    str = str.gsub(/\n/, "\r\n")
+
     Net::BufferedIO.new(StringIO.new(str))
   end
 end