diff --git a/hibernate-core/src/main/java/org/hibernate/dialect/DB2Dialect.java b/hibernate-core/src/main/java/org/hibernate/dialect/DB2Dialect.java
index 04da5a447c..bbc6d3ccee 100644
--- a/hibernate-core/src/main/java/org/hibernate/dialect/DB2Dialect.java
+++ b/hibernate-core/src/main/java/org/hibernate/dialect/DB2Dialect.java
@@ -64,7 +64,8 @@ public class DB2Dialect extends Dialect {
 		registerColumnType( Types.DATE, "date" );
 		registerColumnType( Types.TIME, "time" );
 		registerColumnType( Types.TIMESTAMP, "timestamp" );
-		registerColumnType( Types.VARBINARY, "varchar($l) for bit data" );
+		registerColumnType( Types.VARBINARY, "blob($l)" );
+		registerColumnType( Types.VARBINARY, 32766, "varchar($l) for bit data" );
 		registerColumnType( Types.NUMERIC, "numeric($p,$s)" );
 		registerColumnType( Types.BLOB, "blob($l)" );
 		registerColumnType( Types.CLOB, "clob($l)" );
diff --git a/hibernate-core/src/test/java/org/hibernate/test/annotations/type/TypeCapacityTest.java b/hibernate-core/src/test/java/org/hibernate/test/annotations/type/TypeCapacityTest.java
new file mode 100644
index 0000000000..eaaff8d661
--- /dev/null
+++ b/hibernate-core/src/test/java/org/hibernate/test/annotations/type/TypeCapacityTest.java
@@ -0,0 +1,122 @@
+/* 
+ * Hibernate, Relational Persistence for Idiomatic Java
+ * 
+ * JBoss, Home of Professional Open Source
+ * Copyright 2012 Red Hat Inc. and/or its affiliates and other contributors
+ * as indicated by the @authors tag. All rights reserved.
+ * See the copyright.txt in the distribution for a
+ * full listing of individual contributors.
+ *
+ * This copyrighted material is made available to anyone wishing to use,
+ * modify, copy, or redistribute it subject to the terms and conditions
+ * of the GNU Lesser General Public License, v. 2.1.
+ * This program is distributed in the hope that it will be useful, but WITHOUT A
+ * WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS FOR A
+ * PARTICULAR PURPOSE.  See the GNU Lesser General Public License for more details.
+ * You should have received a copy of the GNU Lesser General Public License,
+ * v.2.1 along with this distribution; if not, write to the Free Software
+ * Foundation, Inc., 51 Franklin Street, Fifth Floor, Boston,
+ * MA  02110-1301, USA.
+ */
+package org.hibernate.test.annotations.type;
+
+import static org.junit.Assert.assertEquals;
+import static org.junit.Assert.assertNotNull;
+
+import java.util.Iterator;
+
+import javax.persistence.Entity;
+import javax.persistence.GeneratedValue;
+import javax.persistence.Id;
+
+import org.hibernate.annotations.Type;
+import org.hibernate.dialect.DB2Dialect;
+import org.hibernate.mapping.Column;
+import org.hibernate.testing.RequiresDialect;
+import org.hibernate.testing.TestForIssue;
+import org.hibernate.testing.junit4.BaseCoreFunctionalTestCase;
+import org.junit.Test;
+
+/**
+ * @author Brett Meyer
+ */
+// TODO: May eventually test other dialects.
+@RequiresDialect( DB2Dialect.class )
+public class TypeCapacityTest extends BaseCoreFunctionalTestCase {
+	
+	/**
+	 * Dialects use different SQL types based on max capacities.  Ensure
+	 * DB2 VARBINARY uses varchar for < 32766 and blob for > 32766;
+	 */
+	@Test
+	@TestForIssue( jiraKey="HHH-4098" )
+	public void testVarbinaryCapacity() {
+		Column varbinary = getColumn( "varbinary" );
+		assertNotNull(varbinary);
+		assertEquals(varbinary.getSqlType(), "varchar(32765) for bit data");
+		
+		Column varbinaryBlob = getColumn( "varbinaryBlob" );
+		assertNotNull(varbinaryBlob);
+		assertEquals(varbinaryBlob.getSqlType(), "blob(32767)");
+		
+	}
+	
+	private Column getColumn( String name) {
+		Iterator iter = configuration().createMappings().getTable( 
+				null, null, "TypeCapacityTest$TypeCapacityEntity" )
+						.getColumnIterator();
+		
+		while ( iter.hasNext() ) {
+			Column c = (Column) iter.next();
+			if (c.getName().equals( name )) {
+				return c;
+			}
+		}
+		return null;
+	}
+
+	@Override
+	protected Class<?>[] getAnnotatedClasses() {
+		return new Class[] { TypeCapacityEntity.class };
+	}
+	
+	@Entity
+	public class TypeCapacityEntity {
+		
+		@Id
+		@GeneratedValue
+		private Long id;
+		
+		@Type( type="org.hibernate.type.BinaryType" )
+		@javax.persistence.Column( length = 32765)
+		private byte[] varbinary;
+		
+		@Type( type="org.hibernate.type.BinaryType" )
+		@javax.persistence.Column( length = 32767)
+		private byte[] varbinaryBlob;
+
+		public Long getId() {
+			return id;
+		}
+
+		public void setId(Long id) {
+			this.id = id;
+		}
+
+		public byte[] getVarbinary() {
+			return varbinary;
+		}
+
+		public void setVarbinary(byte[] varbinary) {
+			this.varbinary = varbinary;
+		}
+
+		public byte[] getVarbinaryBlob() {
+			return varbinaryBlob;
+		}
+
+		public void setVarbinaryBlob(byte[] varbinaryBlob) {
+			this.varbinaryBlob = varbinaryBlob;
+		}
+	}
+}