diff --git a/ChangeLog b/ChangeLog
index 44af8ec5de..aff869333c 100644
--- a/ChangeLog
+++ b/ChangeLog
@@ -1,3 +1,11 @@
+Changes in version 0.2.2.8-alpha - 2010-??-??
+  o Minor bugfixes:
+    - Ignore OutboundBindAddress when connecting to localhost.
+      Connections to localhost need to come _from_ localhost, or else
+      local servers (like DNS and outgoing HTTP/SOCKS proxies) will often
+      refuse to listen.
+
+
 Changes in version 0.2.1.23 - 2010-0?-??
   o Major bugfixes (performance):
     - We were selecting our guards uniformly at random, and then weighting
diff --git a/src/or/connection.c b/src/or/connection.c
index 6506cf81fd..eeb25c1828 100644
--- a/src/or/connection.c
+++ b/src/or/connection.c
@@ -1236,7 +1236,7 @@ connection_connect(connection_t *conn, const char *address,
     return -1;
   }
 
-  if (options->OutboundBindAddress) {
+  if (options->OutboundBindAddress && !tor_addr_is_loopback(addr)) {
     struct sockaddr_in ext_addr;
 
     memset(&ext_addr, 0, sizeof(ext_addr));
diff --git a/src/or/eventdns.c b/src/or/eventdns.c
index 83bff671aa..a504224c54 100644
--- a/src/or/eventdns.c
+++ b/src/or/eventdns.c
@@ -2238,6 +2238,21 @@ evdns_resume(void)
 	return 0;
 }
 
+static int
+sockaddr_is_loopback(const struct sockaddr *addr)
+{
+	static const char LOOPBACK_S6[16] =
+	    "\0\0\0\0\0\0\0\0\0\0\0\0\0\0\0\1";
+	if (addr->sa_family == AF_INET) {
+		struct sockaddr_in *sin = (struct sockaddr_in *)addr;
+		return (ntohl(sin->sin_addr.s_addr) & 0xff000000) == 0x7f000000;
+	} else if (addr->sa_family == AF_INET6) {
+		struct sockaddr_in6 *sin6 = (struct sockaddr_in6 *)addr;
+		return !memcmp(sin6->sin6_addr.s6_addr, LOOPBACK_S6, 16);
+	}
+	return 0;
+}
+
 static int
 _evdns_nameserver_add_impl(const struct sockaddr *address,
 						   socklen_t addrlen) {
@@ -2279,7 +2294,8 @@ _evdns_nameserver_add_impl(const struct sockaddr *address,
 	fcntl(ns->socket, F_SETFL, O_NONBLOCK);
 #endif
 
-	if (global_bind_addr_is_set) {
+	if (global_bind_addr_is_set &&
+	    !sockaddr_is_loopback((struct sockaddr*)&global_bind_address)) {
 		if (bind(ns->socket, (struct sockaddr *)&global_bind_address,
 				 global_bind_addrlen) < 0) {
 			log(EVDNS_LOG_DEBUG, "Couldn't bind to outgoing address.");