diff --git a/configure.ac b/configure.ac
index f1f492694..852b53d50 100644
--- a/configure.ac
+++ b/configure.ac
@@ -624,6 +624,8 @@ tests/lib/Makefile
 tests/lib/mcconfig/Makefile
 tests/lib/search/Makefile
 tests/lib/vfs/Makefile
+tests/src/Makefile
+tests/src/filemanager/Makefile
 ])
 
 fi
diff --git a/lib/strutil/strescape.c b/lib/strutil/strescape.c
index 8068fdaf3..e99191c94 100644
--- a/lib/strutil/strescape.c
+++ b/lib/strutil/strescape.c
@@ -105,39 +105,51 @@ strutils_unescape (const char *src, gsize src_len, const char *unescaped_chars,
     if (*src == '\0')
         return strdup ("");
 
-    ret = g_string_new ("");
+    ret = g_string_sized_new (16);
 
-    if (src_len == (gsize) - 1)
+    if (src_len == (gsize) (-1))
         src_len = strlen (src);
+    src_len--;
 
-    for (curr_index = 0; curr_index < src_len - 1; curr_index++)
+    for (curr_index = 0; curr_index < src_len; curr_index++)
     {
         if (src[curr_index] != '\\')
         {
             g_string_append_c (ret, src[curr_index]);
             continue;
         }
+
         curr_index++;
-        if (unescape_non_printable)
+
+        if (unescaped_chars == ESCAPE_SHELL_CHARS && src[curr_index] == '$')
         {
-            switch (src[curr_index])
-            {
-            case 'n':
-                g_string_append_c (ret, '\n');
-                continue;
-            case 't':
-                g_string_append_c (ret, '\t');
-                continue;
-            case 'b':
-                g_string_append_c (ret, '\b');
-                continue;
-            case '0':
-                g_string_append (ret, '\0');
-                continue;
-            }
-        }
-        if (strchr (unescaped_chars, (int) src[curr_index]) == NULL)
+            /* special case: \$ is used to disallow variable substitution */
             g_string_append_c (ret, '\\');
+        }
+        else
+        {
+            if (unescape_non_printable)
+            {
+                switch (src[curr_index])
+                {
+                case 'n':
+                    g_string_append_c (ret, '\n');
+                    continue;
+                case 't':
+                    g_string_append_c (ret, '\t');
+                    continue;
+                case 'b':
+                    g_string_append_c (ret, '\b');
+                    continue;
+                case '0':
+                    g_string_append_c (ret, '\0');
+                    continue;
+                }
+            }
+
+            if (strchr (unescaped_chars, (int) src[curr_index]) == NULL)
+                g_string_append_c (ret, '\\');
+        }
 
         g_string_append_c (ret, src[curr_index]);
     }
diff --git a/lib/widget/input_complete.c b/lib/widget/input_complete.c
index 5fc030d46..05f1d7baa 100644
--- a/lib/widget/input_complete.c
+++ b/lib/widget/input_complete.c
@@ -875,7 +875,22 @@ try_complete (char *text, int *lc_start, int *lc_end, input_complete_t flags)
     if (flags & INPUT_COMPLETE_COMMANDS)
         p = strrchr (word, '`');
     if (flags & (INPUT_COMPLETE_COMMANDS | INPUT_COMPLETE_VARIABLES))
+    {
         q = strrchr (word, '$');
+
+        /* don't substitute variable in \$ case */
+        if (q != NULL && q != word && q[-1] == '\\')
+        {
+            size_t qlen;
+
+            qlen = strlen (q);
+            /* drop '\\' */
+            memmove (q - 1, q, qlen + 1);
+            /* adjust flags */
+            flags &= ~INPUT_COMPLETE_VARIABLES;
+            q = NULL;
+        }
+    }
     if (flags & INPUT_COMPLETE_HOSTNAMES)
         r = strrchr (word, '@');
     if (q && q[1] == '(' && (flags & INPUT_COMPLETE_COMMANDS))
diff --git a/src/filemanager/command.c b/src/filemanager/command.c
index 1b8eb1897..eed9affe1 100644
--- a/src/filemanager/command.c
+++ b/src/filemanager/command.c
@@ -80,88 +80,137 @@ WInput *cmdline;
  * they want the behavior they are used to in the shell.
  */
 
-static int
+static char *
 examine_cd (const char *_path)
 {
-    int result, qlen;
+    typedef enum { copy_sym, subst_var } state_t;
+
+    state_t state = copy_sym;
+    char *q;
+    size_t qlen;
     char *path_tilde, *path;
-    char *p, *q, *r, *s, c;
-    const char *t;
+    char *p, *r;
 
     /* Tilde expansion */
     path = strutils_shell_unescape (_path);
     path_tilde = tilde_expand (path);
+    g_free (path);
 
     /* Leave space for further expansion */
     qlen = strlen (path_tilde) + MC_MAXPATHLEN;
     q = g_malloc (qlen);
 
     /* Variable expansion */
-    for (p = path_tilde, r = q; *p && r < q + MC_MAXPATHLEN;)
+    for (p = path_tilde, r = q; *p != '\0' && r < q + MC_MAXPATHLEN;)
     {
-        if (*p != '$' || (p[1] == '[' || p[1] == '('))
-            *(r++) = *(p++);
-        else
+
+        switch (state)
         {
-            p++;
-            if (*p == '{')
+        case copy_sym:
+            if (p[0] == '\\' && p[1] == '$')
             {
+                /* skip backslash */
                 p++;
-                s = strchr (p, '}');
+                /* copy dollar */
+                *(r++) = *(p++);
             }
+            else if (p[0] != '$' || p[1] == '[' || p[1] == '(')
+                *(r++) = *(p++);
             else
-                s = NULL;
-            if (s == NULL)
-                s = strchr (p, PATH_SEP);
-            if (s == NULL)
-                s = strchr (p, 0);
-            c = *s;
-            *s = 0;
-            t = getenv (p);
-            *s = c;
-            if (t == NULL)
+                state = subst_var;
+            break;
+
+        case subst_var:
             {
-                *(r++) = '$';
-                if (*(p - 1) != '$')
-                    *(r++) = '{';
-            }
-            else
-            {
-                if (r + strlen (t) < q + MC_MAXPATHLEN)
-                {
-                    strcpy (r, t);
-                    r = strchr (r, 0);
-                }
-                if (*s == '}')
-                    p = s + 1;
+                char *s;
+                char c;
+                const char *t;
+
+                /* skip dollar */
+                p++;
+
+                if (p[0] != '{')
+                    s = NULL;
                 else
+                {
+                    p++;
+                    s = strchr (p, '}');
+                }
+                if (s == NULL)
+                    s = strchr (p, PATH_SEP);
+                if (s == NULL)
+                    s = strchr (p, '\0');
+                c = *s;
+                *s = '\0';
+                t = getenv (p);
+                *s = c;
+                if (t == NULL)
+                {
+                    *(r++) = '$';
+                    if (p[-1] != '$')
+                        *(r++) = '{';
+                }
+                else
+                {
+                    size_t tlen;
+
+                    tlen = strlen (t);
+
+                    if (r + tlen < q + MC_MAXPATHLEN)
+                    {
+                        strncpy (r, t, tlen + 1);
+                        r += tlen;
+                    }
                     p = s;
+                    if (*s == '}')
+                        p++;
+                }
+
+                state = copy_sym;
+                break;
             }
         }
     }
-    *r = 0;
 
-    result = do_cd (q, cd_parse_command);
+    g_free (path_tilde);
+
+    *r = '\0';
+
+    return q;
+}
+
+/* --------------------------------------------------------------------------------------------- */
+
+/* CDPATH handling */
+static gboolean
+handle_cdpath (const char *path)
+{
+    gboolean result = FALSE;
 
     /* CDPATH handling */
-    if (*q != PATH_SEP && !result)
+    if (*path != PATH_SEP)
     {
-        char *const cdpath = g_strdup (getenv ("CDPATH"));
+        char *cdpath, *p;
+        char c;
+
+        cdpath = g_strdup (getenv ("CDPATH"));
         p = cdpath;
-        if (p == NULL)
-            c = 0;
-        else
-            c = ':';
+        c = (p == NULL) ? '\0' : ':';
+
         while (!result && c == ':')
         {
+            char *s;
+
             s = strchr (p, ':');
             if (s == NULL)
-                s = strchr (p, 0);
+                s = strchr (p, '\0');
             c = *s;
-            *s = 0;
-            if (*p)
+            *s = '\0';
+            if (*p != '\0')
             {
-                r = concat_dir_and_file (p, q);
+                char *r;
+
+                r = mc_build_filename (p, path, (char *) NULL);
                 result = do_cd (r, cd_parse_command);
                 g_free (r);
             }
@@ -170,9 +219,7 @@ examine_cd (const char *_path)
         }
         g_free (cdpath);
     }
-    g_free (q);
-    g_free (path_tilde);
-    g_free (path);
+
     return result;
 }
 
@@ -359,12 +406,26 @@ do_cd_command (char *orig_cmd)
             g_free (new);
         }
     }
-    else if (!examine_cd (&cmd[operand_pos]))
+    else
     {
-        char *d = strip_password (g_strdup (&cmd[operand_pos]), 1);
-        message (D_ERROR, MSG_ERROR, _("Cannot chdir to \"%s\"\n%s"), d, unix_error_string (errno));
-        g_free (d);
-        return;
+        char *path;
+        gboolean ok;
+
+        path = examine_cd (&cmd[operand_pos]);
+        ok = do_cd (path, cd_parse_command);
+        if (!ok)
+            ok = handle_cdpath (path);
+
+        if (!ok)
+        {
+            char *d;
+
+            d = strip_password (path, 1);
+            message (D_ERROR, MSG_ERROR, _("Cannot chdir to \"%s\"\n%s"), d,
+                     unix_error_string (errno));
+        }
+
+        g_free (path);
     }
 }
 
diff --git a/src/main.c b/src/main.c
index 0346acdc5..58a03f681 100644
--- a/src/main.c
+++ b/src/main.c
@@ -258,7 +258,7 @@ init_sigchld (void)
 /*** public functions ****************************************************************************/
 /* --------------------------------------------------------------------------------------------- */
 
-int
+gboolean
 do_cd (const char *new_dir, enum cd_enum exact)
 {
     gboolean res;
@@ -284,7 +284,7 @@ do_cd (const char *new_dir, enum cd_enum exact)
     }
 #endif /* HAVE_CHARSET */
 
-    return res ? 1 : 0;
+    return res;
 }
 
 /* --------------------------------------------------------------------------------------------- */
diff --git a/src/main.h b/src/main.h
index 6f0e9f8b1..b24ff2759 100644
--- a/src/main.h
+++ b/src/main.h
@@ -89,7 +89,7 @@ gboolean do_load_prompt (void);
 int load_prompt (int fd, void *unused);
 #endif
 
-int do_cd (const char *new_dir, enum cd_enum cd_type);
+gboolean do_cd (const char *new_dir, enum cd_enum cd_type);
 void update_xterm_title_path (void);
 
 /*** inline functions ****************************************************************************/
diff --git a/tests/Makefile.am b/tests/Makefile.am
index 0262e4ddc..45996340f 100644
--- a/tests/Makefile.am
+++ b/tests/Makefile.am
@@ -1 +1 @@
-SUBDIRS = lib
+SUBDIRS = lib src
diff --git a/tests/src/Makefile.am b/tests/src/Makefile.am
new file mode 100644
index 000000000..c2c82a497
--- /dev/null
+++ b/tests/src/Makefile.am
@@ -0,0 +1 @@
+SUBDIRS = filemanager
diff --git a/tests/src/filemanager/Makefile.am b/tests/src/filemanager/Makefile.am
new file mode 100644
index 000000000..0fafa1c19
--- /dev/null
+++ b/tests/src/filemanager/Makefile.am
@@ -0,0 +1,10 @@
+AM_CFLAGS = $(GLIB_CFLAGS) -I$(top_srcdir) @CHECK_CFLAGS@
+LIBS=@CHECK_LIBS@  $(top_builddir)/lib/libmc.la
+
+TESTS = \
+	examine_cd
+
+check_PROGRAMS = $(TESTS)
+
+examine_cd_SOURCES = \
+	examine_cd.c
diff --git a/tests/src/filemanager/examine_cd.c b/tests/src/filemanager/examine_cd.c
new file mode 100644
index 000000000..4e758f8ab
--- /dev/null
+++ b/tests/src/filemanager/examine_cd.c
@@ -0,0 +1,186 @@
+/*
+   src/filemanager - examine_cd() function testing
+
+   Copyright (C) 2012
+   The Free Software Foundation, Inc.
+
+   Written by:
+   Andrew Borodin <aborodin@vmail.ru>, 2012
+
+   This file is part of the Midnight Commander.
+
+   The Midnight Commander is free software: you can redistribute it
+   and/or modify it under the terms of the GNU General Public License as
+   published by the Free Software Foundation, either version 3 of the License,
+   or (at your option) any later version.
+
+   The Midnight Commander is distributed in the hope that it will be useful,
+   but WITHOUT ANY WARRANTY; without even the implied warranty of
+   MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+   GNU General Public License for more details.
+
+   You should have received a copy of the GNU General Public License
+   along with this program.  If not, see <http://www.gnu.org/licenses/>.
+*/
+
+#define TEST_SUITE_NAME "/src/filemanager"
+
+#include <config.h>
+
+#include <check.h>
+
+#include <stdio.h>
+
+#include "src/filemanager/layout.h"
+#include "src/filemanager/midnight.h"
+#include "src/filemanager/tree.h"
+#ifdef HAVE_SUBSHELL_SUPPORT
+#include "src/subshell.h"
+#endif /* HAVE_SUBSHELL_SUPPORT */
+
+#include "src/filemanager/command.c"
+
+/* --------------------------------------------------------------------------------------------- */
+
+gboolean command_prompt = FALSE;
+#ifdef HAVE_SUBSHELL_SUPPORT
+enum subshell_state_enum subshell_state = INACTIVE;
+#endif /* HAVE_SUBSHELL_SUPPORT */
+int quit = 0;
+WPanel *current_panel = NULL;
+
+panel_view_mode_t
+get_current_type (void)
+{
+    return view_listing;
+}
+
+gboolean
+do_cd (const char *new_dir, enum cd_enum cd_type)
+{
+    (void) new_dir;
+    (void) cd_type;
+
+    return TRUE;
+}
+
+gboolean
+quiet_quit_cmd (void)
+{
+    return FALSE;
+}
+
+char *
+expand_format (struct WEdit *edit_widget, char c, gboolean do_quote)
+{
+    (void) edit_widget;
+    (void) c;
+    (void) do_quote;
+
+    return NULL;
+}
+
+#ifdef HAVE_SUBSHELL_SUPPORT
+void
+init_subshell (void)
+{
+}
+
+gboolean
+do_load_prompt (void)
+{
+    return TRUE;
+}
+#endif /* HAVE_SUBSHELL_SUPPORT */
+
+void
+shell_execute (const char *command, int flags)
+{
+    (void) command;
+    (void) flags;
+}
+
+void
+sync_tree (const char *pathname)
+{
+    (void) pathname;
+}
+
+/* --------------------------------------------------------------------------------------------- */
+
+static void
+setup (void)
+{
+}
+
+static void
+teardown (void)
+{
+}
+
+/* --------------------------------------------------------------------------------------------- */
+#define check_examine_cd(input, etalon) \
+{ \
+    result = examine_cd (input); \
+    fail_unless (strcmp (result, etalon) == 0, \
+    "\ninput (%s)\nactial (%s) not equal to\netalon (%s)", input, result, etalon); \
+    g_free (result); \
+}
+
+START_TEST (test_examine_cd)
+{
+    char *result;
+
+    g_setenv ("AAA", "aaa", TRUE);
+
+    check_examine_cd ("/test/path", "/test/path");
+
+    check_examine_cd ("/test/path/$AAA", "/test/path/aaa");
+    check_examine_cd ("/test/path/$AAA/test2", "/test/path/aaa/test2");
+    check_examine_cd ("/test/path/test1$AAA/test2", "/test/path/test1aaa/test2");
+
+    check_examine_cd ("/test/path/${AAA}", "/test/path/aaa");
+    check_examine_cd ("/test/path/${AAA}/test2", "/test/path/aaa/test2");
+    check_examine_cd ("/test/path/${AAA}test2", "/test/path/aaatest2");
+    check_examine_cd ("/test/path/test1${AAA}", "/test/path/test1aaa");
+    check_examine_cd ("/test/path/test1${AAA}test2", "/test/path/test1aaatest2");
+
+    check_examine_cd ("/test/path/\\$AAA", "/test/path/$AAA");
+    check_examine_cd ("/test/path/\\$AAA/test2", "/test/path/$AAA/test2");
+    check_examine_cd ("/test/path/test1\\$AAA", "/test/path/test1$AAA");
+
+    check_examine_cd ("/test/path/\\${AAA}", "/test/path/${AAA}");
+    check_examine_cd ("/test/path/\\${AAA}/test2", "/test/path/${AAA}/test2");
+    check_examine_cd ("/test/path/\\${AAA}test2", "/test/path/${AAA}test2");
+    check_examine_cd ("/test/path/test1\\${AAA}test2", "/test/path/test1${AAA}test2");
+}
+END_TEST
+
+/* --------------------------------------------------------------------------------------------- */
+
+int
+main (void)
+{
+    int number_failed;
+
+    Suite *s = suite_create (TEST_SUITE_NAME);
+    TCase *tc_core = tcase_create ("Core");
+    SRunner *sr;
+
+    tcase_add_checked_fixture (tc_core, setup, teardown);
+
+    /* Add new tests here: *************** */
+    tcase_add_test (tc_core, test_examine_cd);
+    /* *********************************** */
+
+    suite_add_tcase (s, tc_core);
+    sr = srunner_create (s);
+    srunner_set_log (sr, "examine_cd.log");
+    srunner_run_all (sr, CK_NORMAL);
+    number_failed = srunner_ntests_failed (sr);
+    srunner_free (sr);
+
+    return (number_failed == 0) ? 0 : 1;
+}
+
+/* --------------------------------------------------------------------------------------------- */