diff --git a/shell/ash.c b/shell/ash.c
index 267493708..578b3dc22 100644
--- a/shell/ash.c
+++ b/shell/ash.c
@@ -5651,6 +5651,10 @@ rmescapes(char *str, int flag)
 		}
 		if ((unsigned char)*p == CTLESC) {
 			p++;
+#if DEBUG
+			if (*p == '\0')
+				ash_msg_and_raise_error("CTLESC at EOL (shouldn't happen)");
+#endif
 			if (protect_against_glob) {
 				*q++ = '\\';
 			}
@@ -11302,20 +11306,24 @@ readtoken1(int c, int syntax, char *eofmark, int striptabs)
 			USTPUTC(c, out);
 			break;
 		case CCTL:
-			if (eofmark == NULL || dblquote)
-				USTPUTC(CTLESC, out);
 #if ENABLE_ASH_BASH_COMPAT
 			if (c == '\\' && bash_dollar_squote) {
 				c = decode_dollar_squote();
+				if (c == '\0') {
+					/* skip $'\000', $'\x00' (like bash) */
+					break;
+				}
 				if (c & 0x100) {
-					USTPUTC('\\', out);
-					if (eofmark == NULL || dblquote)
-						/* Or else this SEGVs: $'\<0x82>' */
-						USTPUTC(CTLESC, out);
+					/* Unknown escape. Encode as '\z' */
 					c = (unsigned char)c;
+					if (eofmark == NULL || dblquote)
+						USTPUTC(CTLESC, out);
+					USTPUTC('\\', out);
 				}
 			}
 #endif
+			if (eofmark == NULL || dblquote)
+				USTPUTC(CTLESC, out);
 			USTPUTC(c, out);
 			break;
 		case CBACK:     /* backslash */
diff --git a/shell/ash_test/ash-quoting/dollar_squote_bash2.right b/shell/ash_test/ash-quoting/dollar_squote_bash2.right
new file mode 100644
index 000000000..f7a1731dd
--- /dev/null
+++ b/shell/ash_test/ash-quoting/dollar_squote_bash2.right
@@ -0,0 +1,6 @@
+strstrstrstrstrstrstrstrstrstrstrstrstrstrstrstrstr
+strstrstrstrstrstrstrstrstrstrstrstrstrstrstrstrstr
+80:\�
+81:\�
+82:\�
+Done:0
diff --git a/shell/ash_test/ash-quoting/dollar_squote_bash2.tests b/shell/ash_test/ash-quoting/dollar_squote_bash2.tests
new file mode 100755
index 000000000..449772813
--- /dev/null
+++ b/shell/ash_test/ash-quoting/dollar_squote_bash2.tests
@@ -0,0 +1,10 @@
+# Embedded NULs
+echo $'str\x00'strstrstrstrstrstrstrstrstrstrstrstrstrstrstrstr
+echo $'str\000'strstrstrstrstrstrstrstrstrstrstrstrstrstrstrstr
+
+# The chars after '\' are hex 0x80,81,82...
+echo 80:$'\�'
+echo 81:$'\�'
+echo 82:$'\�'
+
+echo Done:$?