diff --git a/mysql-test/r/sp-code.result b/mysql-test/r/sp-code.result
index d56ad426585..b2bcfff0fdb 100644
--- a/mysql-test/r/sp-code.result
+++ b/mysql-test/r/sp-code.result
@@ -620,6 +620,119 @@ SHOW PROCEDURE CODE p1;
 Pos	Instruction
 0	stmt 2 "CREATE INDEX idx ON t1 (c1)"
 DROP PROCEDURE p1;
+drop table if exists t1;
+drop procedure if exists proc_26977_broken;
+drop procedure if exists proc_26977_works;
+create table t1(a int unique);
+create procedure proc_26977_broken(v int)
+begin
+declare i int default 5;
+declare continue handler for sqlexception
+begin
+select 'caught something';
+retry:
+while i > 0 do
+begin
+set i = i - 1;
+select 'looping', i;
+end;
+end while retry;
+end;
+select 'do something';
+insert into t1 values (v);
+select 'do something again';
+insert into t1 values (v);
+end//
+create procedure proc_26977_works(v int)
+begin
+declare i int default 5;
+declare continue handler for sqlexception
+begin
+select 'caught something';
+retry:
+while i > 0 do
+begin
+set i = i - 1;
+select 'looping', i;
+end;
+end while retry;
+select 'optimizer: keep hreturn';
+end;
+select 'do something';
+insert into t1 values (v);
+select 'do something again';
+insert into t1 values (v);
+end//
+show procedure code proc_26977_broken;
+Pos	Instruction
+0	set i@1 5
+1	hpush_jump 8 2 CONTINUE
+2	stmt 0 "select 'caught something'"
+3	jump_if_not 7(7) (i@1 > 0)
+4	set i@1 (i@1 - 1)
+5	stmt 0 "select 'looping', i"
+6	jump 3
+7	hreturn 2
+8	stmt 0 "select 'do something'"
+9	stmt 5 "insert into t1 values (v)"
+10	stmt 0 "select 'do something again'"
+11	stmt 5 "insert into t1 values (v)"
+12	hpop 1
+show procedure code proc_26977_works;
+Pos	Instruction
+0	set i@1 5
+1	hpush_jump 9 2 CONTINUE
+2	stmt 0 "select 'caught something'"
+3	jump_if_not 7(7) (i@1 > 0)
+4	set i@1 (i@1 - 1)
+5	stmt 0 "select 'looping', i"
+6	jump 3
+7	stmt 0 "select 'optimizer: keep hreturn'"
+8	hreturn 2
+9	stmt 0 "select 'do something'"
+10	stmt 5 "insert into t1 values (v)"
+11	stmt 0 "select 'do something again'"
+12	stmt 5 "insert into t1 values (v)"
+13	hpop 1
+call proc_26977_broken(1);
+do something
+do something
+do something again
+do something again
+caught something
+caught something
+looping	i
+looping	4
+looping	i
+looping	3
+looping	i
+looping	2
+looping	i
+looping	1
+looping	i
+looping	0
+call proc_26977_works(2);
+do something
+do something
+do something again
+do something again
+caught something
+caught something
+looping	i
+looping	4
+looping	i
+looping	3
+looping	i
+looping	2
+looping	i
+looping	1
+looping	i
+looping	0
+optimizer: keep hreturn
+optimizer: keep hreturn
+drop table t1;
+drop procedure proc_26977_broken;
+drop procedure proc_26977_works;
 End of 5.0 tests.
 CREATE PROCEDURE p1() 
 BEGIN 
diff --git a/mysql-test/t/sp-code.test b/mysql-test/t/sp-code.test
index 1b33680cfaf..3bfa2ad74ea 100644
--- a/mysql-test/t/sp-code.test
+++ b/mysql-test/t/sp-code.test
@@ -446,6 +446,81 @@ SHOW PROCEDURE CODE p1;
 DROP PROCEDURE p1;
 
 
+#
+# Bug#26977 exception handlers never hreturn
+#
+--disable_warnings
+drop table if exists t1;
+drop procedure if exists proc_26977_broken;
+drop procedure if exists proc_26977_works;
+--enable_warnings
+
+create table t1(a int unique);
+
+delimiter //;
+
+create procedure proc_26977_broken(v int)
+begin
+  declare i int default 5;
+
+  declare continue handler for sqlexception
+  begin
+    select 'caught something';
+    retry:
+    while i > 0 do
+      begin
+        set i = i - 1;
+        select 'looping', i;
+      end;
+    end while retry;
+  end;
+
+  select 'do something';
+  insert into t1 values (v);
+  select 'do something again';
+  insert into t1 values (v);
+end//
+
+create procedure proc_26977_works(v int)
+begin
+  declare i int default 5;
+
+  declare continue handler for sqlexception
+  begin
+    select 'caught something';
+    retry:
+    while i > 0 do
+      begin
+        set i = i - 1;
+        select 'looping', i;
+      end;
+    end while retry;
+    select 'optimizer: keep hreturn';
+  end;
+
+  select 'do something';
+  insert into t1 values (v);
+  select 'do something again';
+  insert into t1 values (v);
+end//
+delimiter ;//
+
+show procedure code proc_26977_broken;
+
+show procedure code proc_26977_works;
+
+## This caust an error because of jump short cut
+## optimization.
+call proc_26977_broken(1);
+
+## This works
+call proc_26977_works(2);
+
+drop table t1;
+drop procedure proc_26977_broken;
+drop procedure proc_26977_works;
+
+
 --echo End of 5.0 tests.
 
 #
diff --git a/sql/sp_head.cc b/sql/sp_head.cc
index 89fcd80abcf..320595bd723 100644
--- a/sql/sp_head.cc
+++ b/sql/sp_head.cc
@@ -3047,10 +3047,20 @@ sp_instr_hreturn::print(String *str)
 uint
 sp_instr_hreturn::opt_mark(sp_head *sp, List<sp_instr> *leads)
 {
-  if (m_dest)
-    return sp_instr_jump::opt_mark(sp, leads);
-
   marked= 1;
+  
+  if (m_dest)
+  {
+    /*
+      This is an EXIT handler; next instruction step is in m_dest.
+     */
+    return m_dest;
+  }
+  
+  /*
+    This is a CONTINUE handler; next instruction step will come from
+    the handler stack and not from opt_mark.
+   */
   return UINT_MAX;
 }
 
diff --git a/sql/sp_head.h b/sql/sp_head.h
index 51ca529bed0..8ebba314ec5 100644
--- a/sql/sp_head.h
+++ b/sql/sp_head.h
@@ -992,6 +992,12 @@ public:
 
   virtual void print(String *str);
 
+  /* This instruction will not be short cut optimized. */
+  virtual uint opt_shortcut_jump(sp_head *sp, sp_instr *start)
+  {
+    return m_ip;
+  }
+
   virtual uint opt_mark(sp_head *sp, List<sp_instr> *leads);
 
 private: