diff --git a/source/org/jivesoftware/smack/PacketReader.java b/source/org/jivesoftware/smack/PacketReader.java
index c1af2723d..bab35ff11 100644
--- a/source/org/jivesoftware/smack/PacketReader.java
+++ b/source/org/jivesoftware/smack/PacketReader.java
@@ -316,8 +316,15 @@ class PacketReader {
                         resetParser();
                     }
                     else if (parser.getName().equals("failure")) {
-                        // TLS negotiation has failed so close the connection.
-                        throw new Exception("TLS negotiation has failed");
+                        if ("urn:ietf:params:xml:ns:xmpp-tls".equals(parser.getNamespace(null))) {
+                            // TLS negotiation has failed. The server will close the connection
+                            throw new Exception("TLS negotiation has failed");
+                        }
+                        else {
+                            // SASL authentication has failed. The server may close the connection
+                            // depending on the number of retries
+                            connection.getSASLAuthentication().authenticationFailed();
+                        }
                     }
                     else if (parser.getName().equals("challenge")) {
                         // The server is challenging the SASL authentication made by the client
diff --git a/source/org/jivesoftware/smack/SASLAuthentication.java b/source/org/jivesoftware/smack/SASLAuthentication.java
index 1715409ce..a3e9e65ac 100644
--- a/source/org/jivesoftware/smack/SASLAuthentication.java
+++ b/source/org/jivesoftware/smack/SASLAuthentication.java
@@ -69,6 +69,11 @@ public class SASLAuthentication implements UserAuthentication {
      * Boolean indicating if SASL negotiation has finished and was successful.
      */
     private boolean saslNegotiated = false;
+    /**
+     * Boolean indication if SASL authentication has failed. When failed the server may end
+     * the connection.
+     */
+    private boolean saslFailed = false;
     private boolean resourceBinded = false;
     private boolean sessionSupported = false;
 
@@ -186,12 +191,20 @@ public class SASLAuthentication implements UserAuthentication {
 
                 // Wait until SASL negotiation finishes
                 synchronized (this) {
-                    try {
-                        wait(30000);
-                    } catch (InterruptedException e) {
+                    if (!saslNegotiated && !saslFailed) {
+                        try {
+                            wait(30000);
+                        } catch (InterruptedException e) {
+                        }
                     }
                 }
 
+                if (saslFailed) {
+                    // SASL authentication failed and the server may have closed the connection
+                    // so throw an exception
+                    throw new XMPPException("SASL authentication failed");
+                }
+
                 if (saslNegotiated) {
                     // We now need to bind a resource for the connection
                     // Open a new stream and wait for the response
@@ -249,8 +262,11 @@ public class SASLAuthentication implements UserAuthentication {
                     return new NonSASLAuthentication(connection)
                             .authenticate(username, password, resource);
                 }
-
-            } catch (Exception e) {
+            }
+            catch (XMPPException e) {
+                throw e;
+            }
+            catch (Exception e) {
                 e.printStackTrace();
                 // SASL authentication failed so try a Non-SASL authentication
                 return new NonSASLAuthentication(connection)
@@ -280,7 +296,7 @@ public class SASLAuthentication implements UserAuthentication {
 
             // Wait until SASL negotiation finishes
             synchronized (this) {
-                if (!saslNegotiated) {
+                if (!saslNegotiated && !saslFailed) {
                     try {
                         wait(5000);
                     } catch (InterruptedException e) {
@@ -288,6 +304,12 @@ public class SASLAuthentication implements UserAuthentication {
                 }
             }
 
+            if (saslFailed) {
+                // SASL authentication failed and the server may have closed the connection
+                // so throw an exception
+                throw new XMPPException("SASL authentication failed");
+            }
+
             if (saslNegotiated) {
                 // Bind a resource for this connection and
                 return bindResourceAndEstablishSession(null);
@@ -366,6 +388,15 @@ public class SASLAuthentication implements UserAuthentication {
         this.serverMechanisms = mechanisms;
     }
 
+    /**
+     * Returns true if the user was able to authenticate with the server usins SASL.
+     *
+     * @return true if the user was able to authenticate with the server usins SASL.
+     */
+    public boolean isAuthenticated() {
+        return saslNegotiated;
+    }
+
     /**
      * The server is challenging the SASL authentication we just sent. Forward the challenge
      * to the current SASLMechanism we are using. The SASLMechanism will send a response to
@@ -391,6 +422,18 @@ public class SASLAuthentication implements UserAuthentication {
         }
     }
 
+    /**
+     * Notification message saying that SASL authentication has failed. The server may have
+     * closed the connection depending on the number of possible retries.
+     */
+    void authenticationFailed() {
+        synchronized (this) {
+            saslFailed = true;
+            // Wake up the thread that is waiting in the #authenticate method
+            notify();
+        }
+    }
+
     /**
      * Notification message saying that the server requires the client to bind a
      * resource to the stream.
diff --git a/test/org/jivesoftware/smack/LoginTest.java b/test/org/jivesoftware/smack/LoginTest.java
index 3850177d5..f69a75592 100644
--- a/test/org/jivesoftware/smack/LoginTest.java
+++ b/test/org/jivesoftware/smack/LoginTest.java
@@ -12,6 +12,7 @@
 package org.jivesoftware.smack;
 
 import org.jivesoftware.smack.test.SmackTestCase;
+import org.jivesoftware.smack.util.StringUtils;
 
 /**
  * Includes set of login tests. 
@@ -38,8 +39,10 @@ public class LoginTest extends SmackTestCase {
                 fail("Invalid user was able to log into the server");
             }
             catch (XMPPException e) {
-                assertEquals("Incorrect error code while login with an invalid user", 401,
-                        e.getXMPPError().getCode());
+                if (e.getXMPPError() != null) {
+                    assertEquals("Incorrect error code while login with an invalid user", 401,
+                            e.getXMPPError().getCode());
+                }
             }
             // Wait here while trying tests with exodus
             //Thread.sleep(300);
@@ -91,7 +94,16 @@ public class LoginTest extends SmackTestCase {
                 }
             }
             conn.login("user_1", "user_1", null);
-            fail("User with no resource was able to log into the server");
+            if (conn.getSASLAuthentication().isAuthenticated()) {
+                // Check that the server assigned a resource
+                assertNotNull("JID assigned by server is missing", conn.getUser());
+                assertNotNull("JID assigned by server does not have a resource",
+                        StringUtils.parseResource(conn.getUser()));
+                conn.close();
+            }
+            else {
+                fail("User with no resource was able to log into the server");
+            }
 
         } catch (XMPPException e) {
             assertEquals("Wrong error code returned", 406, e.getXMPPError().getCode());