diff --git a/conf.c b/conf.c
index 778c422..a07a80e 100644
--- a/conf.c
+++ b/conf.c
@@ -63,6 +63,7 @@ static void parse_deny(char *);
 static void parse_fallbackdrift(char *);
 static void parse_include(char *);
 static void parse_initstepslew(char *);
+static void parse_leapsecmode(char *);
 static void parse_local(char *);
 static void parse_log(char *);
 static void parse_mailonchange(char *);
@@ -193,6 +194,9 @@ static double tempcomp_T0, tempcomp_k0, tempcomp_k1, tempcomp_k2;
 static int sched_priority = 0;
 static int lock_memory = 0;
 
+/* Leap second handling mode */
+static REF_LeapMode leapsec_mode = REF_LeapModeSystem;
+
 /* Name of a system timezone containing leap seconds occuring at midnight */
 static char *leapsec_tz = NULL;
 
@@ -440,6 +444,8 @@ CNF_ParseLine(const char *filename, int number, char *line)
     parse_initstepslew(p);
   } else if (!strcasecmp(command, "keyfile")) {
     parse_string(p, &keys_file);
+  } else if (!strcasecmp(command, "leapsecmode")) {
+    parse_leapsecmode(p);
   } else if (!strcasecmp(command, "leapsectz")) {
     parse_string(p, &leapsec_tz);
   } else if (!strcasecmp(command, "linux_freq_scale")) {
@@ -830,6 +836,23 @@ parse_initstepslew(char *line)
 
 /* ================================================== */
 
+static void
+parse_leapsecmode(char *line)
+{
+  if (!strcasecmp(line, "system"))
+    leapsec_mode = REF_LeapModeSystem;
+  else if (!strcasecmp(line, "slew"))
+    leapsec_mode = REF_LeapModeSlew;
+  else if (!strcasecmp(line, "step"))
+    leapsec_mode = REF_LeapModeStep;
+  else if (!strcasecmp(line, "ignore"))
+    leapsec_mode = REF_LeapModeIgnore;
+  else
+    command_parse_error();
+}
+
+/* ================================================== */
+
 static void
 parse_clientloglimit(char *line)
 {
@@ -1664,6 +1687,14 @@ CNF_GetPidFile(void)
 
 /* ================================================== */
 
+REF_LeapMode
+CNF_GetLeapSecMode(void)
+{
+  return leapsec_mode;
+}
+
+/* ================================================== */
+
 char *
 CNF_GetLeapSecTimezone(void)
 {
diff --git a/conf.h b/conf.h
index f9b27b1..ab415fa 100644
--- a/conf.h
+++ b/conf.h
@@ -29,6 +29,7 @@
 #define GOT_CONF_H
 
 #include "addressing.h"
+#include "reference.h"
 
 extern void CNF_Initialise(int restarted);
 extern void CNF_Finalise(void);
@@ -75,6 +76,7 @@ extern void CNF_GetBindAddress(int family, IPAddr *addr);
 extern void CNF_GetBindAcquisitionAddress(int family, IPAddr *addr);
 extern void CNF_GetBindCommandAddress(int family, IPAddr *addr);
 extern char *CNF_GetPidFile(void);
+extern REF_LeapMode CNF_GetLeapSecMode(void);
 extern char *CNF_GetLeapSecTimezone(void);
 
 /* Value returned in ppm, as read from file */
diff --git a/local.c b/local.c
index c7b742a..8715782 100644
--- a/local.c
+++ b/local.c
@@ -506,6 +506,20 @@ LCL_NotifyExternalTimeStep(struct timeval *raw, struct timeval *cooked,
 
 /* ================================================== */
 
+void
+LCL_NotifyLeap(int leap)
+{
+  struct timeval raw, cooked;
+
+  LCL_ReadRawTime(&raw);
+  LCL_CookTime(&raw, &cooked, NULL);
+
+  /* Dispatch to all handlers as if the clock was stepped */
+  invoke_parameter_change_handlers(&raw, &cooked, 0.0, -leap, LCL_ChangeStep);
+}
+
+/* ================================================== */
+
 void
 LCL_AccumulateFrequencyAndOffset(double dfreq, double doffset, double corr_rate)
 {
@@ -599,7 +613,7 @@ LCL_MakeStep(void)
 /* ================================================== */
 
 void
-LCL_SetLeap(int leap)
+LCL_SetSystemLeap(int leap)
 {
   if (drv_set_leap) {
     (drv_set_leap)(leap);
diff --git a/local.h b/local.h
index f0c3516..2b17114 100644
--- a/local.h
+++ b/local.h
@@ -166,6 +166,10 @@ extern void LCL_ApplyStepOffset(double offset);
 extern void LCL_NotifyExternalTimeStep(struct timeval *raw, struct timeval *cooked,
     double offset, double dispersion);
 
+/* Routine to invoke notify handlers on leap second when the system clock
+   doesn't correct itself */
+extern void LCL_NotifyLeap(int leap);
+
 /* Perform the combination of modifying the frequency and applying
    a slew, in one easy step */
 extern void LCL_AccumulateFrequencyAndOffset(double dfreq, double doffset, double corr_rate);
@@ -194,10 +198,10 @@ extern void LCL_Finalise(void);
    to a timezone problem. */
 extern int LCL_MakeStep(void);
 
-/* Routine to schedule a leap second. Leap second will be inserted
-   at the end of the day if argument is positive, deleted if negative,
-   and zero cancels scheduled leap second. */
-extern void LCL_SetLeap(int leap);
+/* Routine to set the system clock to correct itself for a leap second if
+   supported.  Leap second will be inserted at the end of the day if the
+   argument is positive, deleted if negative, and zero resets the setting. */
+extern void LCL_SetSystemLeap(int leap);
 
 /* Routine to set a frequency correction (in ppm) that should be applied
    to local clock to compensate for temperature changes.  A positive
diff --git a/reference.c b/reference.c
index e6b4bd5..b5ac335 100644
--- a/reference.c
+++ b/reference.c
@@ -98,6 +98,17 @@ static double drift_file_age;
 
 static void update_drift_file(double, double);
 
+/* Leap second handling mode */
+static REF_LeapMode leap_mode;
+
+/* Flag indicating the clock was recently corrected for leap second and it may
+   not have correct time yet (missing 23:59:60 in the UTC time scale) */
+static int leap_in_progress;
+
+/* Timer for the leap second handler */
+static int leap_timer_running;
+static SCH_TimeoutID leap_timeout_id;
+
 /* Name of a system timezone containing leap seconds occuring at midnight */
 static char *leap_tzname;
 static time_t last_tz_leap_check;
@@ -136,6 +147,7 @@ static double last_ref_update_interval;
 /* ================================================== */
 
 static NTP_Leap get_tz_leap(time_t when);
+static void update_leap_status(NTP_Leap leap, time_t now, int reset);
 
 /* ================================================== */
 
@@ -148,6 +160,7 @@ handle_slew(struct timeval *raw,
             void *anything)
 {
   double delta;
+  struct timeval now;
 
   if (change_type == LCL_ChangeUnknownStep) {
     last_ref_update.tv_sec = 0;
@@ -155,6 +168,13 @@ handle_slew(struct timeval *raw,
   } else if (last_ref_update.tv_sec) {
     UTI_AdjustTimeval(&last_ref_update, cooked, &last_ref_update, &delta, dfreq, doffset);
   }
+
+  /* When the clock was stepped, check if that doesn't change our leap status
+     and also reset the leap timeout to undo the shift in the scheduler */
+  if (change_type != LCL_ChangeAdjust && our_leap_sec && !leap_in_progress) {
+    LCL_ReadRawTime(&now);
+    update_leap_status(our_leap_status, now.tv_sec, 1);
+  }
 }
 
 /* ================================================== */
@@ -217,6 +237,10 @@ REF_Initialise(void)
 
   enable_local_stratum = CNF_AllowLocalReference(&local_stratum);
 
+  leap_timer_running = 0;
+  leap_in_progress = 0;
+  leap_mode = CNF_GetLeapSecMode();
+
   leap_tzname = CNF_GetLeapSecTimezone();
   if (leap_tzname) {
     /* Check that the timezone has good data for Jun 30 2008 and Dec 31 2008 */
@@ -263,9 +287,7 @@ REF_Initialise(void)
 void
 REF_Finalise(void)
 {
-  if (our_leap_sec) {
-    LCL_SetLeap(0);
-  }
+  update_leap_status(LEAP_Unsynchronised, 0, 0);
 
   if (drift_file) {
     update_drift_file(LCL_ReadAbsoluteFrequency(), our_skew);
@@ -657,7 +679,72 @@ get_tz_leap(time_t when)
 /* ================================================== */
 
 static void
-update_leap_status(NTP_Leap leap, time_t now)
+leap_end_timeout(void *arg)
+{
+  leap_timer_running = 0;
+  leap_in_progress = 0;
+}
+
+/* ================================================== */
+
+static void
+leap_start_timeout(void *arg)
+{
+  leap_in_progress = 1;
+
+  switch (leap_mode) {
+    case REF_LeapModeSlew:
+      LCL_NotifyLeap(our_leap_sec);
+      LCL_AccumulateOffset(our_leap_sec, 0.0);
+      LOG(LOGS_WARN, LOGF_Reference, "Adjusting system clock for leap second");
+      break;
+    case REF_LeapModeStep:
+      LCL_NotifyLeap(our_leap_sec);
+      LCL_ApplyStepOffset(our_leap_sec);
+      LOG(LOGS_WARN, LOGF_Reference, "System clock was stepped for leap second");
+      break;
+    case REF_LeapModeIgnore:
+      LOG(LOGS_WARN, LOGF_Reference, "Ignoring leap second");
+      break;
+    default:
+      break;
+  }
+
+  /* Wait until the leap second is over with some extra room to be safe */
+  leap_timeout_id = SCH_AddTimeoutByDelay(2.0, leap_end_timeout, NULL);
+}
+
+/* ================================================== */
+
+static void
+set_leap_timeout(time_t now)
+{
+  struct timeval when;
+
+  /* Stop old timer if there is one */
+  if (leap_timer_running) {
+    SCH_RemoveTimeout(leap_timeout_id);
+    leap_timer_running = 0;
+    leap_in_progress = 0;
+  }
+
+  if (!our_leap_sec)
+    return;
+
+  /* Insert leap second at 0:00:00 UTC, delete at 23:59:59 UTC */
+  when.tv_sec = (now / (24 * 3600) + 1) * (24 * 3600);
+  when.tv_usec = 0;
+  if (our_leap_sec < 0)
+    when.tv_sec--;
+
+  leap_timeout_id = SCH_AddTimeout(&when, leap_start_timeout, NULL);
+  leap_timer_running = 1;
+}
+
+/* ================================================== */
+
+static void
+update_leap_status(NTP_Leap leap, time_t now, int reset)
 {
   int leap_sec;
 
@@ -680,9 +767,22 @@ update_leap_status(NTP_Leap leap, time_t now)
     }
   }
   
-  if (leap_sec != our_leap_sec && !REF_IsLeapSecondClose()) {
-    LCL_SetLeap(leap_sec);
+  if (reset || (leap_sec != our_leap_sec && !REF_IsLeapSecondClose())) {
     our_leap_sec = leap_sec;
+
+    switch (leap_mode) {
+      case REF_LeapModeSystem:
+        LCL_SetSystemLeap(our_leap_sec);
+        break;
+      case REF_LeapModeSlew:
+      case REF_LeapModeStep:
+      case REF_LeapModeIgnore:
+        set_leap_timeout(now);
+        break;
+      default:
+        assert(0);
+        break;
+    }
   }
 
   our_leap_status = leap;
@@ -920,7 +1020,7 @@ REF_SetReference(int stratum,
     our_residual_freq = frequency;
   }
 
-  update_leap_status(leap, raw_now.tv_sec);
+  update_leap_status(leap, raw_now.tv_sec, 0);
   maybe_log_offset(our_offset, raw_now.tv_sec);
 
   if (step_offset != 0.0) {
@@ -1015,7 +1115,7 @@ REF_SetUnsynchronised(void)
     schedule_fb_drift(&now);
   }
 
-  update_leap_status(LEAP_Unsynchronised, 0);
+  update_leap_status(LEAP_Unsynchronised, 0, 0);
   are_we_synchronised = 0;
 
   LCL_SetSyncStatus(0, 0.0, 0.0);
diff --git a/reference.h b/reference.h
index 287a4c1..d7f4874 100644
--- a/reference.h
+++ b/reference.h
@@ -35,6 +35,14 @@
 #include "ntp.h"
 #include "reports.h"
 
+/* Leap second handling modes */
+typedef enum {
+  REF_LeapModeSystem,
+  REF_LeapModeSlew,
+  REF_LeapModeStep,
+  REF_LeapModeIgnore,
+} REF_LeapMode;
+
 /* Init function */
 extern void REF_Initialise(void);