diff --git a/lodash.js b/lodash.js
index 39e6223b3..b0aea215f 100644
--- a/lodash.js
+++ b/lodash.js
@@ -2313,7 +2313,8 @@
           srcValue = source[key];
 
       while (length--) {
-        if (stackA[length] == srcValue) {
+        var stacked = stackA[length];
+        if (stacked == srcValue || stacked == oldValue) {
           assignMergeValue(object, key, stackB[length]);
           return;
         }
@@ -4073,15 +4074,12 @@
      * @returns {*} Returns the value to assign to the destination object.
      */
     function mergeDefaults(objectValue, sourceValue, key, object, source, stackA, stackB) {
-      if (objectValue === undefined) {
-        return sourceValue;
-      }
       if (isObject(objectValue)) {
         stackA.push(objectValue);
         stackB.push(objectValue);
-        return baseMerge(objectValue, sourceValue, mergeDefaults, stackA, stackB);
+        baseMerge(objectValue, sourceValue, mergeDefaults, stackA, stackB);
       }
-      return objectValue;
+      return objectValue === undefined ? sourceValue : objectValue;
     }
 
     /**
diff --git a/test/test.js b/test/test.js
index a8237a40d..7c688293a 100644
--- a/test/test.js
+++ b/test/test.js
@@ -3023,6 +3023,26 @@
 
       strictEqual(actual.a.b, 2);
     });
+
+    test('should merge sources containing circular references', 1, function() {
+      var object = {
+        'foo': { 'b': { 'c': { 'd': {} } } },
+        'bar': { 'a': 2 }
+      };
+
+      var source = {
+        'foo': { 'b': { 'c': { 'd': {} } } },
+        'bar': {}
+      };
+
+      object.foo.b.c.d = object;
+      source.foo.b.c.d = source;
+      source.bar.b = source.foo.b;
+
+      var actual = _.defaultsDeep(object, source);
+      console.log(actual.bar.b === actual.foo.b , actual.foo.b.c.d === actual.foo.b.c.d.foo.b.c.d);
+      ok(actual.bar.b === source.foo.b && actual.foo.b.c.d === actual.foo.b.c.d.foo.b.c.d);
+    });
   }());
 
   /*--------------------------------------------------------------------------*/