diff --git a/src/core/server-rec.h b/src/core/server-rec.h
index 871cb80a..7cdc66e5 100644
--- a/src/core/server-rec.h
+++ b/src/core/server-rec.h
@@ -36,6 +36,7 @@ char *last_invite; /* channel where you were last invited */
 unsigned int server_operator:1;
 unsigned int usermode_away:1;
 unsigned int banned:1; /* not allowed to connect to this server */
+unsigned int dns_error:1; /* DNS said the host doesn't exist */
 
 time_t lag_sent; /* 0 or time when last lag query was sent to server */
 time_t lag_last_check; /* last time we checked lag */
diff --git a/src/core/server-setup-rec.h b/src/core/server-setup-rec.h
index b528e570..4352bef7 100644
--- a/src/core/server-setup-rec.h
+++ b/src/core/server-setup-rec.h
@@ -16,5 +16,6 @@ time_t last_connect; /* to avoid reconnecting too fast.. */
 unsigned int autoconnect:1;
 unsigned int last_failed:1; /* if last connection attempt failed */
 unsigned int banned:1; /* if we're banned from this server */
+unsigned int dns_error:1; /* DNS said the host doesn't exist */
 
 GHashTable *module_data;
diff --git a/src/core/servers-reconnect.c b/src/core/servers-reconnect.c
index 0f50ad75..2aee772a 100644
--- a/src/core/servers-reconnect.c
+++ b/src/core/servers-reconnect.c
@@ -158,15 +158,19 @@ server_connect_copy_skeleton(SERVER_CONNECT_REC *src, int connect_info)
 }
 
 #define server_should_reconnect(server) \
-	((server)->connection_lost && \
-	((server)->connrec->chatnet != NULL || !(server)->banned))
+	((server)->connection_lost && ((server)->connrec->chatnet != NULL || \
+				(!(server)->banned && !(server)->dns_error)))
+
+#define sserver_connect_ok(rec, net) \
+	(!(rec)->banned && !(rec)->dns_error && (rec)->chatnet != NULL && \
+	g_strcasecmp((rec)->chatnet, (net)) == 0)
 
 static void sig_reconnect(SERVER_REC *server)
 {
 	SERVER_CONNECT_REC *conn;
 	SERVER_SETUP_REC *sserver;
 	GSList *tmp;
-	int found, through;
+	int use_next, through;
 	time_t now;
 
 	g_return_if_fail(IS_SERVER(server));
@@ -192,7 +196,8 @@ static void sig_reconnect(SERVER_REC *server)
 		sserver->last_connect = server->connect_time == 0 ?
 			time(NULL) : server->connect_time;
 		sserver->last_failed = !server->connected;
-                if (server->banned) sserver->banned = TRUE;
+		if (server->banned) sserver->banned = TRUE;
+                if (server->dns_error) sserver->dns_error = TRUE;
 	}
 
 	if (sserver == NULL || conn->chatnet == NULL) {
@@ -222,9 +227,9 @@ static void sig_reconnect(SERVER_REC *server)
 	for (tmp = setupservers; tmp != NULL; tmp = tmp->next) {
 		SERVER_SETUP_REC *rec = tmp->data;
 
-		if (rec->chatnet != NULL && g_strcasecmp(conn->chatnet, rec->chatnet) == 0 &&
-		    !rec->banned && (!rec->last_connect || !rec->last_failed ||
-				     rec->last_connect < now-FAILED_RECONNECT_WAIT)) {
+		if (sserver_connect_ok(rec, conn->chatnet) &&
+		    (!rec->last_connect || !rec->last_failed ||
+		     rec->last_connect < now-FAILED_RECONNECT_WAIT)) {
 			if (rec == sserver)
                                 conn->port = server->connrec->port;
 			sserver_connect(rec, conn);
@@ -233,15 +238,14 @@ static void sig_reconnect(SERVER_REC *server)
 	}
 
 	/* just try the next server in list */
-	found = through = FALSE;
+	use_next = through = FALSE;
 	for (tmp = setupservers; tmp != NULL; ) {
 		SERVER_SETUP_REC *rec = tmp->data;
 
-		if (!found && g_strcasecmp(rec->address, server->connrec->address) == 0 &&
-		    server->connrec->port == rec->port)
-			found = TRUE;
-		else if (found && !rec->banned && rec->chatnet != NULL &&
-			 g_strcasecmp(conn->chatnet, rec->chatnet) == 0) {
+		if (!use_next && server->connrec->port == rec->port &&
+		    g_strcasecmp(rec->address, server->connrec->address) == 0)
+			use_next = TRUE;
+		else if (use_next && sserver_connect_ok(rec, conn->chatnet)) {
 			if (rec == sserver)
                                 conn->port = server->connrec->port;
 			sserver_connect(rec, conn);
@@ -261,7 +265,7 @@ static void sig_reconnect(SERVER_REC *server)
 		}
 
 		tmp = setupservers;
-		found = through = TRUE;
+		use_next = through = TRUE;
 	}
 }
 
diff --git a/src/core/servers.c b/src/core/servers.c
index 4b91f846..cc9d0890 100644
--- a/src/core/servers.c
+++ b/src/core/servers.c
@@ -28,7 +28,6 @@
 #include "rawlog.h"
 #include "settings.h"
 
-
 #include "chat-protocols.h"
 #include "servers.h"
 #include "servers-reconnect.h"
@@ -196,13 +195,10 @@ static void server_connect_callback_readpipe(SERVER_REC *server)
 	handle = ip == NULL ? NULL : net_connect_ip(ip, port, own_ip);
 	if (handle == NULL) {
 		/* failed */
-		if (iprec.error == 0 || !net_hosterror_notfound(iprec.error)) {
-			/* reconnect back only if either
-                            1) connect() failed
-                            2) host name lookup failed not because the host
-                               wasn't found, but because there was some
-                               other error in nameserver */
-			server->connection_lost = TRUE;
+		if (iprec.error != 0 && net_hosterror_notfound(iprec.error)) {
+			/* IP wasn't found for the host, don't try to reconnect
+			   back to this server */
+			server->dns_error = TRUE;
 		}
 
 		if (iprec.error == 0) {
@@ -213,6 +209,7 @@ static void server_connect_callback_readpipe(SERVER_REC *server)
 			errormsg = iprec.errorstr != NULL ? iprec.errorstr :
 				"Host lookup failed";
 		}
+		server->connection_lost = TRUE;
 		server_connect_failed(server, errormsg);
 		g_free_not_null(iprec.errorstr);
 		return;