diff -r 06ce648ac6ac Doc/library/textwrap.rst
--- a/Doc/library/textwrap.rst	Mon Mar 17 19:22:59 2014 +0100
+++ b/Doc/library/textwrap.rst	Wed Mar 19 17:12:02 2014 +0200
@@ -182,13 +182,6 @@
          each tab character will be replaced by a single space, which is *not*
          the same as tab expansion.
 
-      .. note::
-
-         If :attr:`replace_whitespace` is false, newlines may appear in the
-         middle of a line and cause strange output. For this reason, text should
-         be split into paragraphs (using :meth:`str.splitlines` or similar)
-         which are wrapped separately.
-
 
    .. attribute:: drop_whitespace
 
diff -r 06ce648ac6ac Lib/test/test_textwrap.py
--- a/Lib/test/test_textwrap.py	Mon Mar 17 19:22:59 2014 +0100
+++ b/Lib/test/test_textwrap.py	Wed Mar 19 17:12:02 2014 +0200
@@ -429,6 +429,36 @@
         self.check_wrap(text, 7, ["aa \xe4\xe4-", "\xe4\xe4"])
 
 
+class WrapLineBreakTestCase(BaseTestCase):
+
+    def test_line_break(self):
+        text = 'one two\nthree four'
+        self.check_wrap(text, 14, ['one two', 'three four'],
+                        replace_whitespace=False)
+        self.check_wrap(text, 14, ['one two three', 'four'])
+        self.check_wrap(text, 5, ['one', 'two', 'three', 'four'])
+        self.check_wrap(text, 5, ['one', 'two', 'three', 'four'],
+                        replace_whitespace=False)
+        text = '''\
+aaaaa aaaaa aaaaa aaaaa aaaaa
+bbbbb bbbbb bbbbb bbbbb bbbbb
+ccccc ccccc ccccc ccccc ccccc
+ddddd ddddd ddddd ddddd ddddd
+eeeee eeeee eeeee eeeee eeeee'''
+        expected = ['aaaaa aaaaa aaaaa aaaaa aaaaa',
+                    'bbbbb bbbbb bbbbb bbbbb bbbbb',
+                    'ccccc ccccc ccccc ccccc ccccc',
+                    'ddddd ddddd ddddd ddddd ddddd',
+                    'eeeee eeeee eeeee eeeee eeeee']
+        self.check_wrap(text, 35, expected, replace_whitespace=False)
+        expected = ['aaaaa aaaaa aaaaa aaaaa aaaaa bbbbb',
+                    'bbbbb bbbbb bbbbb bbbbb ccccc ccccc',
+                    'ccccc ccccc ccccc ddddd ddddd ddddd',
+                    'ddddd ddddd eeeee eeeee eeeee eeeee',
+                    'eeeee']
+        self.check_wrap(text, 35, expected)
+
+
 class MaxLinesTestCase(BaseTestCase):
     text = "Hello there, how are you this fine day?  I'm glad to hear it!"
 
diff -r 06ce648ac6ac Lib/textwrap.py
--- a/Lib/textwrap.py	Mon Mar 17 19:22:59 2014 +0100
+++ b/Lib/textwrap.py	Wed Mar 19 17:12:02 2014 +0200
@@ -80,7 +80,7 @@
     #   Hello/ /there/ /--/ /you/ /goof-/ball,/ /use/ /the/ /-b/ /option!
     # (after stripping out empty strings).
     wordsep_re = re.compile(
-        r'(\s+|'                                  # any whitespace
+        r'(\n|(?:\s(?<!\n))+|'                    # any whitespace
         r'[^\s\w]*\w+[^0-9\W]-(?=\w+[^0-9\W])|'   # hyphenated words
         r'(?<=[\w\!\"\'\&\.\,\?])-{2,}(?=\w))')   # em-dash
 
@@ -88,7 +88,7 @@
     #   "Hello there -- you goof-ball, use the -b option!"
     # splits into
     #   Hello/ /there/ /--/ /you/ /goof-ball,/ /use/ /the/ /-b/ /option!/
-    wordsep_simple_re = re.compile(r'(\s+)')
+    wordsep_simple_re = re.compile(r'(\n|(?:\s(?<!\n))+)')
 
     # XXX this is not locale- or charset-aware -- string.lowercase
     # is US-ASCII only (and therefore English-only)
@@ -158,7 +158,7 @@
           'use', ' ', 'the', ' ', '-b', ' ', option!'
         otherwise.
         """
-        if self.break_on_hyphens is True:
+        if self.break_on_hyphens:
             chunks = self.wordsep_re.split(text)
         else:
             chunks = self.wordsep_simple_re.split(text)
@@ -266,6 +266,10 @@
                 del chunks[-1]
 
             while chunks:
+                if chunks[-1] == '\n':
+                    chunks.pop()
+                    break
+
                 l = len(chunks[-1])
 
                 # Can at least squeeze this chunk onto the current line.