diff --git a/activesupport/CHANGELOG b/activesupport/CHANGELOG
index 81c5574dbff11610142025e53328a67e5baaf68a..b10c9614d8ba63a9bed33d32b993a429d1851a9d 100644
--- a/activesupport/CHANGELOG
+++ b/activesupport/CHANGELOG
@@ -1,5 +1,7 @@
 *SVN*
 
+* Time#in_time_zone handles Time.local instances correctly [Geoff Buesing]
+
 * Pruning unneeded Time#change_time_zone_to_current. Enhanced docs to #change_time_zone to explain the difference between this method and #in_time_zone [Geoff Buesing]
 
 * TimeZone#new method renamed #local; when used with Time.zone, constructor now reads: Time.zone.local() [Geoff Buesing]
diff --git a/activesupport/lib/active_support/core_ext/time/zones.rb b/activesupport/lib/active_support/core_ext/time/zones.rb
index 4705e93f27033bfc2aeab9135c317c14eb55ea6f..18af28edc87d59c5b54b4fd67ed7f5509367e066 100644
--- a/activesupport/lib/active_support/core_ext/time/zones.rb
+++ b/activesupport/lib/active_support/core_ext/time/zones.rb
@@ -42,15 +42,13 @@ def get_zone(time_zone)
             end
         end
         
-        # Returns the simultaneous time in the supplied zone. self is assumed to be in UTC regardless of constructor.
-        #
-        # Examples:
+        # Returns the simultaneous time in the supplied zone. Examples:
         #
         #   t = Time.utc(2000)        # => Sat Jan 01 00:00:00 UTC 2000
         #   t.in_time_zone('Alaska')  # => Fri, 31 Dec 1999 15:00:00 AKST -09:00
         #   t.in_time_zone('Hawaii')  # => Fri, 31 Dec 1999 14:00:00 HST -10:00
         def in_time_zone(zone)
-          ActiveSupport::TimeWithZone.new(self, get_zone(zone))
+          ActiveSupport::TimeWithZone.new(utc? ? self : getutc, get_zone(zone))
         end
 
         # Returns the simultaneous time in Time.zone
diff --git a/activesupport/test/core_ext/time_with_zone_test.rb b/activesupport/test/core_ext/time_with_zone_test.rb
index 3f0ec0720bec1f70085795c8afdff9e4d4eb4bbd..14a96169ddb7ecc81dce1837934db539027699e0 100644
--- a/activesupport/test/core_ext/time_with_zone_test.rb
+++ b/activesupport/test/core_ext/time_with_zone_test.rb
@@ -174,6 +174,15 @@ def test_in_time_zone
         end
       end
     end
+    
+    def test_in_time_zone_with_time_local_instance
+      silence_warnings do # silence warnings raised by tzinfo gem
+        with_env_tz 'US/Eastern' do
+          time = Time.local(1999, 12, 31, 19) # == Time.utc(2000)
+          assert_equal 'Fri, 31 Dec 1999 15:00:00 AKST -09:00', time.in_time_zone('Alaska').inspect
+        end
+      end
+    end
 
     def test_in_current_time_zone
       Time.use_zone 'Alaska' do
@@ -228,5 +237,13 @@ def test_time_zone_setter_is_thread_safe
         assert_equal TimeZone['Hawaii'], t2[:time_zone]
       end
     end
+    
+    protected
+      def with_env_tz(new_tz = 'US/Eastern')
+        old_tz, ENV['TZ'] = ENV['TZ'], new_tz
+        yield
+      ensure
+        old_tz ? ENV['TZ'] = old_tz : ENV.delete('TZ')
+      end
   end
 end