diff -r a9c9e4054f3f Lib/test/test_capi.py
--- a/Lib/test/test_capi.py	Mon Feb 08 09:26:57 2016 +0200
+++ b/Lib/test/test_capi.py	Mon Feb 08 15:03:34 2016 +0200
@@ -236,6 +236,9 @@ class CAPITest(unittest.TestCase):
                              'return_result_with_error.* '
                              'returned a result with an error set')
 
+    def test_buildvalue_N(self):
+        _testcapi.test_buildvalue_N()
+
 
 @unittest.skipUnless(threading, 'Threading required for this test.')
 class TestPendingCalls(unittest.TestCase):
diff -r a9c9e4054f3f Modules/_testcapimodule.c
--- a/Modules/_testcapimodule.c	Mon Feb 08 09:26:57 2016 +0200
+++ b/Modules/_testcapimodule.c	Mon Feb 08 15:03:34 2016 +0200
@@ -872,6 +872,84 @@ test_L_code(PyObject *self)
 
 #endif  /* ifdef HAVE_LONG_LONG */
 
+static int
+test_buildvalue_N_error(const char *fmt)
+{
+    PyObject *arg, *res;
+
+    arg = PyList_New(0);
+    if (arg == NULL) {
+        return -1;
+    }
+
+    Py_INCREF(arg);
+    res = Py_BuildValue(fmt, "a", arg);
+    if (res == NULL) {
+        return -1;
+    }
+    Py_DECREF(res);
+    if (Py_REFCNT(arg) != 1) {
+        PyErr_Format(TestError, "test_buildvalue_N: "
+                     "arg was not decrefed in successful "
+                     "Py_BuildValue(\"%s\")", fmt);
+        return -1;
+    }
+
+    Py_INCREF(arg);
+    res = Py_BuildValue(fmt, "\x80", arg);
+    if (res != NULL || !PyErr_Occurred()) {
+        PyErr_Format(TestError, "test_buildvalue_N: "
+                     "Py_BuildValue(\"%s\") didn't complain", fmt);
+        return -1;
+    }
+    PyErr_Clear();
+    if (Py_REFCNT(arg) != 1) {
+        PyErr_Format(TestError, "test_buildvalue_N: "
+                     "arg was not decrefed in failed "
+                     "Py_BuildValue(\"%s\")", fmt);
+        return -1;
+    }
+    Py_DECREF(arg);
+    return 0;
+}
+
+static PyObject *
+test_buildvalue_N(PyObject *self, PyObject *args)
+{
+    PyObject *arg, *res;
+    
+    arg = PyList_New(0);
+    Py_INCREF(arg);
+    res = Py_BuildValue("N", arg);
+    if (res == NULL) {
+        return NULL;
+    }
+    if (res != arg) {
+        return raiseTestError("test_buildvalue_N",
+                              "Py_BuildValue(\"N\") returned wrong result");
+    }
+    if (Py_REFCNT(arg) != 2) {
+        return raiseTestError("test_buildvalue_N",
+                              "arg was not decrefed in Py_BuildValue(\"N\")");
+    }
+    Py_DECREF(res);
+    Py_DECREF(arg);
+
+    if (test_buildvalue_N_error("sN") < 0)
+        return NULL;
+    if (test_buildvalue_N_error("(sN)") < 0)
+        return NULL;
+    if (test_buildvalue_N_error("[sN]") < 0)
+        return NULL;
+    if (test_buildvalue_N_error("{sN}") < 0)
+        return NULL;
+    if (test_buildvalue_N_error("{()s(())N}") < 0)
+        return NULL;
+
+    Py_RETURN_NONE;
+}
+
+
 /* Test tuple argument processing */
 static PyObject *
 getargs_tuple(PyObject *self, PyObject *args)
@@ -3653,6 +3731,7 @@ static PyMethodDef TestMethods[] = {
     {"test_pep3118_obsolete_write_locks", (PyCFunction)test_pep3118_obsolete_write_locks, METH_NOARGS},
 #endif
     {"getbuffer_with_null_view", getbuffer_with_null_view, METH_O},
+    {"test_buildvalue_N",       test_buildvalue_N,               METH_VARARGS},
     {"getargs_tuple",           getargs_tuple,                   METH_VARARGS},
     {"getargs_keywords", (PyCFunction)getargs_keywords,
       METH_VARARGS|METH_KEYWORDS},
diff -r a9c9e4054f3f Python/modsupport.c
--- a/Python/modsupport.c	Mon Feb 08 09:26:57 2016 +0200
+++ b/Python/modsupport.c	Mon Feb 08 15:03:34 2016 +0200
@@ -71,40 +71,60 @@ do_mkdict(const char **p_format, va_list
     int itemfailed = 0;
     if (n < 0)
         return NULL;
-    if ((d = PyDict_New()) == NULL)
-        return NULL;
     /* Note that we can't bail immediately on error as this will leak
        refcounts on any 'N' arguments. */
+    if ((d = PyDict_New()) == NULL) {
+        itemfailed = 1;
+    }
     for (i = 0; i < n; i+= 2) {
         PyObject *k, *v;
-        int err;
-        k = do_mkvalue(p_format, p_va, flags);
+
+        if (itemfailed) {
+            PyObject *exception, *value, *tb;
+            PyErr_Fetch(&exception, &value, &tb);
+            k = do_mkvalue(p_format, p_va, flags);
+            PyErr_Restore(exception, value, tb);
+        }
+        else {
+            k = do_mkvalue(p_format, p_va, flags);
+        }
         if (k == NULL) {
             itemfailed = 1;
             Py_INCREF(Py_None);
             k = Py_None;
         }
-        v = do_mkvalue(p_format, p_va, flags);
+        if (itemfailed) {
+            PyObject *exception, *value, *tb;
+            PyErr_Fetch(&exception, &value, &tb);
+            v = do_mkvalue(p_format, p_va, flags);
+            PyErr_Restore(exception, value, tb);
+        }
+        else {
+            v = do_mkvalue(p_format, p_va, flags);
+        }
         if (v == NULL) {
             itemfailed = 1;
             Py_INCREF(Py_None);
             v = Py_None;
         }
-        err = PyDict_SetItem(d, k, v);
+        if (d != NULL && PyDict_SetItem(d, k, v) < 0) {
+            itemfailed = 1;
+        }
         Py_DECREF(k);
         Py_DECREF(v);
-        if (err < 0 || itemfailed) {
-            Py_DECREF(d);
-            return NULL;
-        }
     }
-    if (d != NULL && **p_format != endchar) {
+    if (itemfailed) {
+        /* Error was set when itemfailed was set to 1 */
+        Py_XDECREF(d);
+        return NULL;
+    }
+    if (**p_format != endchar) {
         Py_DECREF(d);
-        d = NULL;
         PyErr_SetString(PyExc_SystemError,
                         "Unmatched paren in format");
+        return NULL;
     }
-    else if (endchar)
+    if (endchar)
         ++*p_format;
     return d;
 }
@@ -117,24 +137,40 @@ do_mklist(const char **p_format, va_list
     int itemfailed = 0;
     if (n < 0)
         return NULL;
-    v = PyList_New(n);
-    if (v == NULL)
-        return NULL;
     /* Note that we can't bail immediately on error as this will leak
        refcounts on any 'N' arguments. */
+    v = PyList_New(n);
+    if (v == NULL) {
+        itemfailed = 1;
+    }
     for (i = 0; i < n; i++) {
-        PyObject *w = do_mkvalue(p_format, p_va, flags);
+        PyObject *w;
+
+        if (itemfailed) {
+            PyObject *exception, *value, *tb;
+            PyErr_Fetch(&exception, &value, &tb);
+            w = do_mkvalue(p_format, p_va, flags);
+            PyErr_Restore(exception, value, tb);
+        }
+        else {
+            w = do_mkvalue(p_format, p_va, flags);
+        }
         if (w == NULL) {
             itemfailed = 1;
             Py_INCREF(Py_None);
             w = Py_None;
         }
-        PyList_SET_ITEM(v, i, w);
+        if (v != NULL) {
+            PyList_SET_ITEM(v, i, w);
+        }
+        else {
+            Py_DECREF(w);
+        }
     }
 
     if (itemfailed) {
-        /* do_mkvalue() should have already set an error */
-        Py_DECREF(v);
+        /* Error was set when itemfailed was set to 1 */
+        Py_XDECREF(v);
         return NULL;
     }
     if (**p_format != endchar) {
@@ -156,10 +192,11 @@ do_mktuple(const char **p_format, va_lis
     int itemfailed = 0;
     if (n < 0)
         return NULL;
-    if ((v = PyTuple_New(n)) == NULL)
-        return NULL;
     /* Note that we can't bail immediately on error as this will leak
        refcounts on any 'N' arguments. */
+    if ((v = PyTuple_New(n)) == NULL) {
+        itemfailed = 1;
+    }
     for (i = 0; i < n; i++) {
         PyObject *w;
 
@@ -177,11 +214,16 @@ do_mktuple(const char **p_format, va_lis
             Py_INCREF(Py_None);
             w = Py_None;
         }
-        PyTuple_SET_ITEM(v, i, w);
+        if (v != NULL) {
+            PyTuple_SET_ITEM(v, i, w);
+        }
+        else {
+            Py_DECREF(w);
+        }
     }
     if (itemfailed) {
-        /* do_mkvalue() should have already set an error */
-        Py_DECREF(v);
+        /* Error was set when itemfailed was set to 1 */
+        Py_XDECREF(v);
         return NULL;
     }
     if (**p_format != endchar) {