diff --git a/iso.c b/iso.c
index d3dcd2a..4991582 100644
--- a/iso.c
+++ b/iso.c
@@ -22,6 +22,7 @@
 #include "rdesktop.h"
 
 extern RD_BOOL g_encryption;
+extern RD_BOOL g_encryption_initial;
 extern RDP_VERSION g_rdp_version;
 extern RD_BOOL g_use_password_as_pin;
 
@@ -370,5 +371,6 @@ iso_disconnect(void)
 void
 iso_reset_state(void)
 {
+	g_encryption = g_encryption_initial;
 	tcp_reset_state();
 }
diff --git a/rdesktop.c b/rdesktop.c
index 3f8a700..14a2204 100644
--- a/rdesktop.c
+++ b/rdesktop.c
@@ -90,6 +90,7 @@ RD_BOOL g_bitmap_cache_persist_enable = False;
 RD_BOOL g_bitmap_cache_precache = True;
 RD_BOOL g_use_ctrl = True;
 RD_BOOL g_encryption = True;
+RD_BOOL g_encryption_initial = True;
 RD_BOOL g_packet_encryption = True;
 RD_BOOL g_desktop_save = True;	/* desktop save order */
 RD_BOOL g_polygon_ellipse_orders = True;	/* polygon / ellipse orders */
@@ -683,7 +684,7 @@ main(int argc, char *argv[])
 				break;
 
 			case 'e':
-				g_encryption = False;
+				g_encryption_initial = g_encryption = False;
 				break;
 			case 'E':
 				g_packet_encryption = False;
@@ -1126,7 +1127,7 @@ main(int argc, char *argv[])
 		/* By setting encryption to False here, we have an encrypted login 
 		   packet but unencrypted transfer of other packets */
 		if (!g_packet_encryption)
-			g_encryption = False;
+			g_encryption_initial = g_encryption = False;
 
 
 		DEBUG(("Connection successful.\n"));