diff --git a/Lib/test/test_exceptions.py b/Lib/test/test_exceptions.py
index 8fa466cc888..5a0039e168a 100644
--- a/Lib/test/test_exceptions.py
+++ b/Lib/test/test_exceptions.py
@@ -6,13 +6,21 @@
 import pickle, cPickle
 
 from test.test_support import (TESTFN, unlink, run_unittest,
-                                catch_warning)
+                                catch_warning, captured_output)
 from test.test_pep352 import ignore_message_warning
 
 # XXX This is not really enough, each *operation* should be tested!
 
 class ExceptionTests(unittest.TestCase):
 
+    def test00(self):
+        try:
+            sys.exit(ValueError('aaa'))
+        except SystemExit:
+            pass
+        finally:
+            pass
+
     def testReload(self):
         # Reloading the built-in exceptions module failed prior to Py2.2, while it
         # should act the same as reloading built-in sys.
@@ -344,6 +352,31 @@ def testUnicodeStrUsage(self):
         self.failUnless(unicode(Exception(u'a')))
         self.failUnless(unicode(Exception(u'\xe1')))
 
+    def test_badisinstance(self):
+        # Bug #2542: if issubclass(e, MyException) raises an exception,
+        # it should be ignored
+        class Meta(type):
+            def __subclasscheck__(cls, subclass):
+                raise ValueError()
+
+        class MyException(Exception):
+            __metaclass__ = Meta
+            pass
+
+        with captured_output("stderr") as stderr:
+            try:
+                raise KeyError()
+            except MyException, e:
+                self.fail("exception should not be a MyException")
+            except KeyError:
+                pass
+            except:
+                self.fail("Should have raised TypeError")
+            else:
+                self.fail("Should have raised TypeError")
+        self.assertEqual(stderr.getvalue(),
+                         "Exception ValueError: ValueError() in "
+                         "<type 'exceptions.KeyError'> ignored\n")
 
 def test_main():
     run_unittest(ExceptionTests)
diff --git a/Misc/NEWS b/Misc/NEWS
index d1b5778064c..e93b5fea8ee 100644
--- a/Misc/NEWS
+++ b/Misc/NEWS
@@ -12,6 +12,9 @@ What's New in Python 2.6 beta 3?
 Core and Builtins
 -----------------
 
+- Issue #2542: Now that issubclass() may call arbitrary code, ensure that
+  PyErr_ExceptionMatches returns 0 when an exception occurs there.
+
 - Issue #1819: function calls with several named parameters are now on
   average 35% faster (as measured by pybench).
 
diff --git a/Python/errors.c b/Python/errors.c
index 8951d579354..5d9cab5a4c1 100644
--- a/Python/errors.c
+++ b/Python/errors.c
@@ -106,9 +106,18 @@ PyErr_GivenExceptionMatches(PyObject *err, PyObject *exc)
 		err = PyExceptionInstance_Class(err);
 
 	if (PyExceptionClass_Check(err) && PyExceptionClass_Check(exc)) {
-		/* problems here!?  not sure PyObject_IsSubclass expects to
-		   be called with an exception pending... */
-		return PyObject_IsSubclass(err, exc);
+		int res = 0;
+		PyObject *exception, *value, *tb;
+		PyErr_Fetch(&exception, &value, &tb);
+		res = PyObject_IsSubclass(err, exc);
+		/* This function must not fail, so print the error here */
+		if (res == -1) {
+			PyErr_WriteUnraisable(err);
+			/* issubclass did not succeed */
+			res = 0;
+		}
+		PyErr_Restore(exception, value, tb);
+		return res;
 	}
 
 	return err == exc;