--- a/src/misc1.c
+++ b/src/misc1.c
@@ -303,10 +303,18 @@ set_indent(size, flags)
 	ml_replace(curwin->w_cursor.lnum, newline, FALSE);
 	if (flags & SIN_CHANGED)
 	    changed_bytes(curwin->w_cursor.lnum, 0);
-	/* Correct saved cursor position if it's after the indent. */
-	if (saved_cursor.lnum == curwin->w_cursor.lnum
-				&& saved_cursor.col >= (colnr_T)(p - oldline))
-	    saved_cursor.col += ind_len - (colnr_T)(p - oldline);
+	/* Correct saved cursor position if it is in this line. */
+	if (saved_cursor.lnum == curwin->w_cursor.lnum)
+	{
+	    if (saved_cursor.col >= (colnr_T)(p - oldline))
+		/* cursor was after the indent, adjust for the number of
+		 * bytes added/removed */
+		saved_cursor.col += ind_len - (colnr_T)(p - oldline);
+	    else if (saved_cursor.col >= (colnr_T)(s - newline))
+		/* cursor was in the indent, and is now after it, put it back
+		 * at the start of the indent (replacing spaces with TAB) */
+		saved_cursor.col = (colnr_T)(s - newline);
+	}
 	retval = TRUE;
     }
     else
@@ -1581,9 +1589,9 @@ theend:
 
 #if defined(FEAT_COMMENTS) || defined(PROTO)
 /*
- * get_leader_len() returns the length of the prefix of the given string
- * which introduces a comment.	If this string is not a comment then 0 is
- * returned.
+ * get_leader_len() returns the length in bytes of the prefix of the given
+ * string which introduces a comment.  If this string is not a comment then
+ * 0 is returned.
  * When "flags" is not NULL, it is set to point to the flags of the recognized
  * comment leader.
  * "backward" must be true for the "O" command.