diff --git a/mysql-test/r/rpl_auto_increment.result b/mysql-test/r/rpl_auto_increment.result
index 9eca51ad2d9..ea4815e5e64 100644
--- a/mysql-test/r/rpl_auto_increment.result
+++ b/mysql-test/r/rpl_auto_increment.result
@@ -183,3 +183,47 @@ a
 32
 42
 drop table t1;
+create table t1 (a tinyint not null auto_increment primary key) engine=myisam;
+insert into t1 values(103);
+set auto_increment_increment=11;
+set auto_increment_offset=4;
+insert into t1 values(null);
+insert into t1 values(null);
+insert into t1 values(null);
+ERROR 23000: Duplicate entry '125' for key 1
+select a, mod(a-@@auto_increment_offset,@@auto_increment_increment) from t1 order by a;
+a	mod(a-@@auto_increment_offset,@@auto_increment_increment)
+103	0
+114	0
+125	0
+create table t2 (a tinyint unsigned not null auto_increment primary key) engine=myisam;
+set auto_increment_increment=10;
+set auto_increment_offset=1;
+set insert_id=1000;
+insert into t2 values(null);
+Warnings:
+Warning	1264	Out of range value adjusted for column 'a' at row 1
+select a, mod(a-@@auto_increment_offset,@@auto_increment_increment) from t2 order by a;
+a	mod(a-@@auto_increment_offset,@@auto_increment_increment)
+251	0
+create table t3 like t1;
+set auto_increment_increment=1000;
+set auto_increment_offset=700;
+insert into t3 values(null);
+Warnings:
+Warning	1264	Out of range value adjusted for column 'a' at row 1
+select * from t3 order by a;
+a
+127
+select * from t1 order by a;
+a
+103
+114
+125
+select * from t2 order by a;
+a
+251
+select * from t3 order by a;
+a
+127
+drop table t1,t2,t3;
diff --git a/mysql-test/t/rpl_auto_increment.test b/mysql-test/t/rpl_auto_increment.test
index 71032404307..caa2b79feb5 100644
--- a/mysql-test/t/rpl_auto_increment.test
+++ b/mysql-test/t/rpl_auto_increment.test
@@ -96,9 +96,47 @@ select * from t1;
 
 sync_slave_with_master;
 select * from t1;
+
+# Test for BUG#20524 "auto_increment_* not observed when inserting
+# a too large value". When an autogenerated value was bigger than the
+# maximum possible value of the field, it was truncated to that max
+# possible value, without being "rounded down" to still honour
+# auto_increment_* variables.
+
+connection master;
+drop table t1;
+create table t1 (a tinyint not null auto_increment primary key) engine=myisam;
+insert into t1 values(103);
+set auto_increment_increment=11;
+set auto_increment_offset=4;
+insert into t1 values(null);
+insert into t1 values(null);
+--error 1062
+insert into t1 values(null);
+select a, mod(a-@@auto_increment_offset,@@auto_increment_increment) from t1 order by a;
+
+# same but with a larger value
+create table t2 (a tinyint unsigned not null auto_increment primary key) engine=myisam;
+set auto_increment_increment=10;
+set auto_increment_offset=1;
+set insert_id=1000;
+insert into t2 values(null);
+select a, mod(a-@@auto_increment_offset,@@auto_increment_increment) from t2 order by a;
+
+# An offset so big that even first value does not fit
+create table t3 like t1;
+set auto_increment_increment=1000;
+set auto_increment_offset=700;
+insert into t3 values(null);
+select * from t3 order by a;
+sync_slave_with_master;
+select * from t1 order by a;
+select * from t2 order by a;
+select * from t3 order by a;
+
 connection master;
 
-drop table t1;
+drop table t1,t2,t3;
 
 # End cleanup
 sync_slave_with_master;
diff --git a/sql/handler.cc b/sql/handler.cc
index b40934ea194..9259bc85aa0 100644
--- a/sql/handler.cc
+++ b/sql/handler.cc
@@ -1471,6 +1471,46 @@ next_insert_id(ulonglong nr,struct system_variables *variables)
 }
 
 
+/*
+  Computes the largest number X:
+  - smaller than or equal to "nr"
+  - of the form: auto_increment_offset + N * auto_increment_increment
+  where N>=0.
+
+  SYNOPSIS
+    prev_insert_id
+      nr            Number to "round down"
+      variables     variables struct containing auto_increment_increment and
+                    auto_increment_offset
+
+  RETURN
+    The number X if it exists, "nr" otherwise.
+*/
+
+inline ulonglong
+prev_insert_id(ulonglong nr, struct system_variables *variables)
+{
+  if (unlikely(nr < variables->auto_increment_offset))
+  {
+    /*
+      There's nothing good we can do here. That is a pathological case, where
+      the offset is larger than the column's max possible value, i.e. not even
+      the first sequence value may be inserted. User will receive warning.
+    */
+    DBUG_PRINT("info",("auto_increment: nr: %lu cannot honour "
+                       "auto_increment_offset: %lu",
+                       nr, variables->auto_increment_offset));
+    return nr;
+  }
+  if (variables->auto_increment_increment == 1)
+    return nr; // optimization of the formula below
+  nr= (((nr - variables->auto_increment_offset)) /
+       (ulonglong) variables->auto_increment_increment);
+  return (nr * (ulonglong) variables->auto_increment_increment +
+          variables->auto_increment_offset);
+}
+
+
 /*
   Update the auto_increment field if necessary
 
@@ -1580,10 +1620,19 @@ bool handler::update_auto_increment()
   /* Mark that we should clear next_insert_id before next stmt */
   thd->clear_next_insert_id= 1;
 
-  if (!table->next_number_field->store((longlong) nr, TRUE))
+  if (likely(!table->next_number_field->store((longlong) nr, TRUE)))
     thd->insert_id((ulonglong) nr);
   else
-    thd->insert_id(table->next_number_field->val_int());
+  {
+    /*
+      overflow of the field; we'll use the max value, however we try to
+      decrease it to honour auto_increment_* variables:
+    */
+    nr= prev_insert_id(table->next_number_field->val_int(), variables);
+    thd->insert_id(nr);
+    if (unlikely(table->next_number_field->store((longlong) nr, TRUE)))
+      thd->insert_id(nr= table->next_number_field->val_int());
+  }
 
   /*
     We can't set next_insert_id if the auto-increment key is not the