diff -r a93efd445982 Objects/unicodeobject.c
--- a/Objects/unicodeobject.c	Tue Oct 09 13:45:10 2012 +0300
+++ b/Objects/unicodeobject.c	Wed Oct 10 18:34:04 2012 +0200
@@ -9881,6 +9881,92 @@ anylib_count(int kind, PyObject *sstr, v
     return 0;
 }
 
+static void
+replace_1char(PyObject *self, Py_ssize_t maxcount, Py_ssize_t pos, char *sbuf,
+              Py_UCS4 u1, Py_UCS4 u2, PyObject *u)
+{
+    Py_ssize_t index;
+    char *src;
+    Py_ssize_t len = PyUnicode_GET_LENGTH(self);
+    int skind = PyUnicode_KIND(self);
+    int rkind = PyUnicode_KIND(u);
+
+    if (skind == 1 && rkind == 1) {
+        char *sdata = PyUnicode_DATA(self);
+        char *udata = PyUnicode_DATA(u);
+        char *uend = udata + len;
+        char *pos;
+
+        memcpy(udata, sdata, len);
+
+#if 0
+/*
+# Replace 100%: 12.5x slower
+$ ./python -m timeit -s "a='a'; b='b'; text=a*100000" "text.replace(a, b)"
+1000 loops, best of 3: 771 usec per loop
+
+# Replace 50%: 3.3x slower
+$ ./python -m timeit -s "a='a'; b='b'; text=(a+' ')*(100000//2)" "text.replace(a, b)"
+1000 loops, best of 3: 392 usec per loop
+
+# Replace 0.001%: 10.4x faster
+$ ./python -m timeit -s "a='a'; b='b'; text=a+' '*100000+a" "text.replace(a, b)"
+100000 loops, best of 3: 8.65 usec per loop
+ */
+        while (udata < uend) {
+            pos = memchr(udata, u1, len);
+            if (pos == NULL)
+                return;
+            if (--maxcount < 0)
+                return;
+            *pos = u2;
+            pos++;
+            len -= (pos - udata);
+            udata = pos;
+        }
+#else
+/*
+# Replace 100%
+$ make && echo && ./python -m timeit -s "a='a'; b='b'; text=a+' '*100000+a" "text.replace(a, b)"
+10000 loops, best of 3: 61.4 usec per loop
+
+# Replace 50%
+$ ./python -m timeit -s "a='a'; b='b'; text=a*100000" "text.replace(a, b)"
+10000 loops, best of 3: 118 usec per loop
+
+# Replace 0.001%
+$ ./python -m timeit -s "a='a'; b='b'; text=(a+' ')*(100000//2)" "text.replace(a, b)"
+10000 loops, best of 3: 90 usec per loop
+*/
+        for (; udata < uend; udata++) {
+            if (*udata == u1) {
+                if (--maxcount < 0)
+                    return;
+                *udata = u2;
+            }
+        }
+#endif
+    }
+    else {
+        _PyUnicode_FastCopyCharacters(u, 0, self, 0, len);
+        PyUnicode_WRITE(rkind, PyUnicode_DATA(u), pos, u2);
+
+        index = 0;
+        src = sbuf;
+        while (--maxcount)
+        {
+            pos++;
+            src += pos * skind;
+            len -= pos;
+            index += pos;
+            pos = findchar(src, skind, len, u1, 1);
+            if (pos < 0)
+                break;
+            PyUnicode_WRITE(rkind, PyUnicode_DATA(u), index + pos, u2);
+        }
+    }
+}
+
 static PyObject *
 replace(PyObject *self, PyObject *str1,
         PyObject *str2, Py_ssize_t maxcount)
@@ -9924,9 +10010,7 @@ replace(PyObject *self, PyObject *str1,
         if (len1 == 1) {
             /* replace characters */
             Py_UCS4 u1, u2;
-            int rkind;
-            Py_ssize_t index, pos;
-            char *src;
+            Py_ssize_t pos;
 
             u1 = PyUnicode_READ_CHAR(str1, 0);
             pos = findchar(sbuf, PyUnicode_KIND(self), slen, u1, 1);
@@ -9936,23 +10020,8 @@ replace(PyObject *self, PyObject *str1,
             u = PyUnicode_New(slen, maxchar);
             if (!u)
                 goto error;
-            _PyUnicode_FastCopyCharacters(u, 0, self, 0, slen);
-            rkind = PyUnicode_KIND(u);
-
-            PyUnicode_WRITE(rkind, PyUnicode_DATA(u), pos, u2);
-            index = 0;
-            src = sbuf;
-            while (--maxcount)
-            {
-                pos++;
-                src += pos * PyUnicode_KIND(self);
-                slen -= pos;
-                index += pos;
-                pos = findchar(src, PyUnicode_KIND(self), slen, u1, 1);
-                if (pos < 0)
-                    break;
-                PyUnicode_WRITE(rkind, PyUnicode_DATA(u), index + pos, u2);
-            }
+
+            replace_1char(self, maxcount, pos, sbuf, u1, u2, u);
         }
         else {
             int rkind = skind;