diff --git a/mitogen/master.py b/mitogen/master.py
index d2fe66c8..e6a7a8ed 100644
--- a/mitogen/master.py
+++ b/mitogen/master.py
@@ -167,27 +167,22 @@ def write_all(fd, s):
     return written
 
 
-def read_with_deadline(fd, size, deadline):
-    timeout = deadline - time.time()
-    if timeout > 0:
-        rfds, _, _ = select.select([fd], [], [], timeout)
-        if rfds:
-            return os.read(fd, size)
-
-    raise mitogen.core.TimeoutError('read timed out')
+def iter_read(fd, deadline=None):
+    bits = []
+    timeout = None
 
+    while True:
+        if deadline is not None:
+            timeout = max(0, deadline - time.time())
+            if timeout == 0:
+                break
 
-def iter_read(fd, deadline):
-    if deadline is not None:
-        LOG.debug('Warning: iter_read(.., deadline=...) unimplemented')
+        rfds, _, _ = select.select([fd], [], [], timeout)
+        if not rfds:
+            continue
 
-    bits = []
-    while True:
         s, disconnected = mitogen.core.io_op(os.read, fd, 4096)
         if disconnected:
-            s = ''
-
-        if not s:
             raise mitogen.core.StreamError(
                 'EOF on stream; last 300 bytes received: %r' %
                 (''.join(bits)[-300:],)
@@ -196,6 +191,8 @@ def iter_read(fd, deadline):
         bits.append(s)
         yield s
 
+    raise mitogen.core.TimeoutError('read timed out')
+
 
 def discard_until(fd, s, deadline):
     for buf in iter_read(fd, deadline):
diff --git a/tests/data/iter_read_generator.sh b/tests/data/iter_read_generator.sh
new file mode 100755
index 00000000..3aa6d6ac
--- /dev/null
+++ b/tests/data/iter_read_generator.sh
@@ -0,0 +1,10 @@
+#!/bin/bash
+# I produce text every 100ms, for testing mitogen.core.iter_read()
+
+i=0
+
+while :; do
+    i=$(($i + 1))
+    echo "$i"
+    sleep 0.1
+done
diff --git a/tests/master_test.py b/tests/master_test.py
new file mode 100644
index 00000000..72318f46
--- /dev/null
+++ b/tests/master_test.py
@@ -0,0 +1,56 @@
+
+import subprocess
+import time
+import unittest
+
+import testlib
+import mitogen.master
+
+
+class IterReadTest(unittest.TestCase):
+    func = staticmethod(mitogen.master.iter_read)
+
+    def make_proc(self):
+        args = [testlib.data_path('iter_read_generator.sh')]
+        return subprocess.Popen(args, stdout=subprocess.PIPE)
+
+    def test_no_deadline(self):
+        proc = self.make_proc()
+        try:
+            reader = self.func(proc.stdout.fileno())
+            for i, chunk in enumerate(reader, 1):
+                assert i == int(chunk)
+                if i > 3:
+                    break
+        finally:
+            proc.terminate()
+
+    def test_deadline_exceeded_before_call(self):
+        proc = self.make_proc()
+        reader = self.func(proc.stdout.fileno(), 0)
+        try:
+            got = []
+            try:
+                for chunk in reader:
+                    got.append(chunk)
+                assert 0, 'TimeoutError not raised'
+            except mitogen.core.TimeoutError:
+                assert len(got) == 0
+        finally:
+            proc.terminate()
+
+    def test_deadline_exceeded_during_call(self):
+        proc = self.make_proc()
+        reader = self.func(proc.stdout.fileno(), time.time() + 0.4)
+        try:
+            got = []
+            try:
+                for chunk in reader:
+                    got.append(chunk)
+                assert 0, 'TimeoutError not raised'
+            except mitogen.core.TimeoutError:
+                # Give a little wiggle room in case of imperfect scheduling.
+                # Ideal number should be 9.
+                assert 3 < len(got) < 5
+        finally:
+            proc.terminate()