diff --git a/tests/packages/FSPkgUsesInitools/fspkg/__init__.py b/tests/packages/FSPkgUsesInitools/fspkg/__init__.py
new file mode 100644
index 00000000000..792d6005489
--- /dev/null
+++ b/tests/packages/FSPkgUsesInitools/fspkg/__init__.py
@@ -0,0 +1 @@
+#
diff --git a/tests/packages/FSPkgUsesInitools/setup.cfg b/tests/packages/FSPkgUsesInitools/setup.cfg
new file mode 100644
index 00000000000..01bb954499e
--- /dev/null
+++ b/tests/packages/FSPkgUsesInitools/setup.cfg
@@ -0,0 +1,3 @@
+[egg_info]
+tag_build = dev
+tag_svn_revision = true
diff --git a/tests/packages/FSPkgUsesInitools/setup.py b/tests/packages/FSPkgUsesInitools/setup.py
new file mode 100644
index 00000000000..59387ed007c
--- /dev/null
+++ b/tests/packages/FSPkgUsesInitools/setup.py
@@ -0,0 +1,25 @@
+from setuptools import setup, find_packages
+
+version = '0.1'
+
+setup(name='FSPkgUsesInitools',
+      version=version,
+      description="File system test package",
+      long_description="""\
+File system test package""",
+      classifiers=[], # Get strings from http://pypi.python.org/pypi?%3Aaction=list_classifiers
+      keywords='pip tests',
+      author='pip',
+      author_email='pip@openplans.org',
+      url='http://pip.openplans.org',
+      license='',
+      packages=find_packages(exclude=['ez_setup', 'examples', 'tests']),
+      include_package_data=True,
+      zip_safe=False,
+      install_requires=[
+        "INItools",
+      ],
+      entry_points="""
+      # -*- Entry points: -*-
+      """,
+      )
diff --git a/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/fspkg/__init__.py b/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/fspkg/__init__.py
new file mode 100644
index 00000000000..792d6005489
--- /dev/null
+++ b/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/fspkg/__init__.py
@@ -0,0 +1 @@
+#
diff --git a/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/setup.cfg b/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/setup.cfg
new file mode 100644
index 00000000000..01bb954499e
--- /dev/null
+++ b/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/setup.cfg
@@ -0,0 +1,3 @@
+[egg_info]
+tag_build = dev
+tag_svn_revision = true
diff --git a/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/setup.py b/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/setup.py
new file mode 100644
index 00000000000..59387ed007c
--- /dev/null
+++ b/tests/packages/FSPkgUsesNewishInitools/FSPkgUsesInitools/setup.py
@@ -0,0 +1,25 @@
+from setuptools import setup, find_packages
+
+version = '0.1'
+
+setup(name='FSPkgUsesInitools',
+      version=version,
+      description="File system test package",
+      long_description="""\
+File system test package""",
+      classifiers=[], # Get strings from http://pypi.python.org/pypi?%3Aaction=list_classifiers
+      keywords='pip tests',
+      author='pip',
+      author_email='pip@openplans.org',
+      url='http://pip.openplans.org',
+      license='',
+      packages=find_packages(exclude=['ez_setup', 'examples', 'tests']),
+      include_package_data=True,
+      zip_safe=False,
+      install_requires=[
+        "INItools",
+      ],
+      entry_points="""
+      # -*- Entry points: -*-
+      """,
+      )
diff --git a/tests/packages/FSPkgUsesNewishInitools/fspkg/__init__.py b/tests/packages/FSPkgUsesNewishInitools/fspkg/__init__.py
new file mode 100644
index 00000000000..792d6005489
--- /dev/null
+++ b/tests/packages/FSPkgUsesNewishInitools/fspkg/__init__.py
@@ -0,0 +1 @@
+#
diff --git a/tests/packages/FSPkgUsesNewishInitools/setup.cfg b/tests/packages/FSPkgUsesNewishInitools/setup.cfg
new file mode 100644
index 00000000000..01bb954499e
--- /dev/null
+++ b/tests/packages/FSPkgUsesNewishInitools/setup.cfg
@@ -0,0 +1,3 @@
+[egg_info]
+tag_build = dev
+tag_svn_revision = true
diff --git a/tests/packages/FSPkgUsesNewishInitools/setup.py b/tests/packages/FSPkgUsesNewishInitools/setup.py
new file mode 100644
index 00000000000..eea671ee792
--- /dev/null
+++ b/tests/packages/FSPkgUsesNewishInitools/setup.py
@@ -0,0 +1,25 @@
+from setuptools import setup, find_packages
+
+version = '0.1'
+
+setup(name='FSPkgUsesNewishInitools',
+      version=version,
+      description="File system test package",
+      long_description="""\
+File system test package""",
+      classifiers=[], # Get strings from http://pypi.python.org/pypi?%3Aaction=list_classifiers
+      keywords='pip tests',
+      author='pip',
+      author_email='pip@openplans.org',
+      url='http://pip.openplans.org',
+      license='',
+      packages=find_packages(exclude=['ez_setup', 'examples', 'tests']),
+      include_package_data=True,
+      zip_safe=False,
+      install_requires=[
+        "INItools>=0.3",
+      ],
+      entry_points="""
+      # -*- Entry points: -*-
+      """,
+      )
diff --git a/tests/test_upgrade.py b/tests/test_upgrade.py
index 24449aec076..e813b6f27fd 100644
--- a/tests/test_upgrade.py
+++ b/tests/test_upgrade.py
@@ -1,5 +1,5 @@
 import textwrap
-from os.path import join
+from os.path import abspath, join
 from nose.tools import nottest
 from tests.test_pip import (here, reset_env, run_pip, assert_all_changes,
                             write_file, pyversion, _create_test_package,
@@ -56,6 +56,79 @@ def test_upgrade_with_newest_already_installed():
     assert 'already up-to-date' in result.stdout
 
 
+def test_upgrade_without_unneeded_recursive_upgrades():
+    """
+    When upgrading a single package, that package's own dependencies should not be
+    upgraded unnecessarily if the user doesn't explicitly ask for them to be upgraded.
+    """
+    env = reset_env()
+    run_pip('install', 'INITools==0.2')
+
+    to_install = abspath(join(here, 'packages', 'FSPkgUsesInitools'))
+    result = run_pip('install', to_install)
+
+    result = run_pip('install', '--upgrade', to_install)
+
+    assert env.site_packages/ 'initools'/'__init__.py' not in result.files_updated, 'pip install --upgrade upgraded recursive dependency INITools when it should not have'
+
+
+def test_upgrade_with_needed_recursive_upgrades():
+    """
+    When upgrading a single package A, that package's own dependencies should be
+    upgraded if the installed versions no longer satisfy A's requirements, even if
+    the user doesn't explicitly ask for them to be upgraded, 
+    """
+    env = reset_env()
+    to_install = abspath(join(here, 'packages', 'FSPkgUsesNewishInitools'))
+    result = run_pip('install', to_install)
+    run_pip('install', 'INITools==0.2')
+
+    result = run_pip('install', '--upgrade', to_install)
+
+    assert env.site_packages/ 'initools'/'configparser.py' in result.files_created, 'pip install --upgrade failed to upgrade recursive dependency INITools when it should have'
+
+
+def test_upgrade_with_unneeded_recursive_upgrades_explicitly_requested():
+    """
+    When upgrading a single package A with --upgrade-recursive, all of A's
+    dependencies should be upgraded as well, even if the installed versions
+    already satisfy A's requirements.
+    """
+    env = reset_env()
+    run_pip('install', 'INITools==0.2')
+
+    to_install = abspath(join(here, 'packages', 'FSPkgUsesInitools'))
+    result = run_pip('install', to_install)
+
+    result = run_pip('install', '--upgrade-recursive', to_install)
+
+    assert env.site_packages/ 'initools'/'__init__.py' in result.files_updated, 'pip install --upgrade failed to upgrade recursive dependency INITools when it was asked to'
+
+
+def test_upgrade_reqs_file_without_unneeded_recursive_upgrades():
+    """
+    When running non-recursive --upgrade against a requirements file, every package
+    explicitly listed in the requirements file should be upgraded; but any recursive
+    dependencies should not be upgraded.
+    """
+    env = reset_env()
+    run_pip('install', 'INITools==0.2')
+    run_pip('install', 'PyLogo==0.1')
+
+    to_install = abspath(join(here, 'packages', 'FSPkgUsesInitools'))
+    result = run_pip('install', to_install)
+
+    write_file('test-req.txt', textwrap.dedent("""\
+        %(FSPkgUsesInitools)s
+        PyLogo
+        """ % {'FSPkgUsesInitools': to_install}))
+
+    result = run_pip('install', '--upgrade', '-r', env.scratch_path/ 'test-req.txt')
+
+    assert env.site_packages/ 'initools'/'__init__.py' not in result.files_updated, 'pip install --upgrade upgraded recursive dependency INITools when it should not have'
+    assert env.site_packages/ 'pylogo'/'__init__.py' in result.files_updated, 'pip install --upgrade failed to upgrade explicit dependency PyLogo when it should have'
+
+
 def test_upgrade_force_reinstall_newest():
     """
     Force reinstallation of a package even if it is already at its newest