diff --git a/core/src/main/java/org/acegisecurity/providers/dao/DaoAuthenticationProvider.java b/core/src/main/java/org/acegisecurity/providers/dao/DaoAuthenticationProvider.java
index a863be2387..8b1036c34a 100644
--- a/core/src/main/java/org/acegisecurity/providers/dao/DaoAuthenticationProvider.java
+++ b/core/src/main/java/org/acegisecurity/providers/dao/DaoAuthenticationProvider.java
@@ -194,8 +194,10 @@ public class DaoAuthenticationProvider implements AuthenticationProvider,
             }
         }
 
+        // Ensure we return the original credentials the user supplied,
+        // so subsequent attempts are successful even with encoded passwords
         return new UsernamePasswordAuthenticationToken(user.getUsername(),
-            user.getPassword(), user.getAuthorities());
+            authentication.getCredentials(), user.getAuthorities());
     }
 
     public boolean supports(Class authentication) {
diff --git a/core/src/test/java/org/acegisecurity/providers/dao/DaoAuthenticationProviderTests.java b/core/src/test/java/org/acegisecurity/providers/dao/DaoAuthenticationProviderTests.java
index 6941bc4d6d..8898aaf240 100644
--- a/core/src/test/java/org/acegisecurity/providers/dao/DaoAuthenticationProviderTests.java
+++ b/core/src/test/java/org/acegisecurity/providers/dao/DaoAuthenticationProviderTests.java
@@ -193,7 +193,9 @@ public class DaoAuthenticationProviderTests extends TestCase {
 
         UsernamePasswordAuthenticationToken castResult = (UsernamePasswordAuthenticationToken) result;
         assertEquals("marissa", castResult.getPrincipal());
-        assertEquals("koala{SYSTEM_SALT_VALUE}", castResult.getCredentials());
+
+        // We expect original credentials user submitted to be returned
+        assertEquals("koala", castResult.getCredentials());
         assertEquals("ROLE_ONE", castResult.getAuthorities()[0].getAuthority());
         assertEquals("ROLE_TWO", castResult.getAuthorities()[1].getAuthority());
     }
diff --git a/samples/contacts/etc/filter/applicationContext.xml b/samples/contacts/etc/filter/applicationContext.xml
index ddbb18a1ab..b5886c5b19 100644
--- a/samples/contacts/etc/filter/applicationContext.xml
+++ b/samples/contacts/etc/filter/applicationContext.xml
@@ -29,21 +29,29 @@
 		  </list>
 		</property>
 	</bean>
-
+	
+	<!-- Passwords encoded using MD5, NOT in Base64 format, with null as salt
+		 Encoded password for marissa is "koala"
+		 Encoded password for dianne is "emu"
+		 Encoded password for scott is "wombat"
+		 Encoded password for peter is "opal" -->
 	<bean id="inMemoryDaoImpl" class="net.sf.acegisecurity.providers.dao.memory.InMemoryDaoImpl">
   		<property name="userMap">
 			<value>
-				marissa=koala,ROLE_TELLER,ROLE_SUPERVISOR
-				dianne=emu,ROLE_TELLER
-				scott=wombat,ROLE_TELLER
-				peter=opal,disabled,ROLE_TELLER
+				marissa=a564de63c2d0da68cf47586ee05984d7,ROLE_TELLER,ROLE_SUPERVISOR
+				dianne=65d15fe9156f9c4bbffd98085992a44e,ROLE_TELLER
+				scott=2b58af6dddbd072ed27ffc86725d7d3a,ROLE_TELLER
+				peter=22b5c9accc6e1ba628cedc63a72d57f8,disabled,ROLE_TELLER
 			</value>
 		</property>
 	</bean>
+
+    <bean id="passwordEncoder" class="net.sf.acegisecurity.providers.encoding.Md5PasswordEncoder"/>
 	
 	<bean id="daoAuthenticationProvider" class="net.sf.acegisecurity.providers.dao.DaoAuthenticationProvider">
      	<property name="authenticationDao"><ref bean="inMemoryDaoImpl"/></property>
      	<property name="userCache"><ref bean="userCache"/></property>
+        <property name="passwordEncoder"><ref bean="passwordEncoder"/></property>
 	</bean>
 	
 	<bean id="userCache" class="net.sf.acegisecurity.providers.dao.cache.EhCacheBasedUserCache">