diff --git a/development/FORMAT b/development/FORMAT
index e585c847c6..75b69a8adc 100644
--- a/development/FORMAT
+++ b/development/FORMAT
@@ -78,8 +78,9 @@ LyX file-format changes
 	encoding of the LyX file:
 
 	\inputencoding       LyX file encoding
-	auto                 as determined by the document language
-	default              latin1
+	auto                 as determined by the document language(s)
+	default              unspecified 8bit (treated as latin1 internally,
+	                     see comment in bufferparams.h)
 	everything else      as determined by \inputencoding
 
 2006-07-03  Georg Baum  <Georg.Baum@post.rwth-aachen.de>
diff --git a/src/bufferparams.C b/src/bufferparams.C
index d81ca7036d..6c6ebacf31 100644
--- a/src/bufferparams.C
+++ b/src/bufferparams.C
@@ -1468,11 +1468,18 @@ Encoding const & BufferParams::encoding() const
 {
 	if (inputenc == "auto")
 		return *(language->encoding());
-	Encoding const * const enc = encodings.getFromLaTeXName(inputenc);
+	Encoding const * const enc = (inputenc == "default") ?
+		encodings.getFromLyXName("iso8859-1") :
+		encodings.getFromLaTeXName(inputenc);
 	if (enc)
 		return *enc;
-	lyxerr << "Unknown inputenc value `" << inputenc
-	       << "'. Using `auto' instead." << endl;
+	if (inputenc == "default")
+		lyxerr << "Could not find iso8859-1 encoding for inputenc "
+		          "value `default'. Using inputenc `auto' instead."
+		       << endl;
+	else
+		lyxerr << "Unknown inputenc value `" << inputenc
+		       << "'. Using `auto' instead." << endl;
 	return *(language->encoding());
 }
 
diff --git a/src/bufferparams.h b/src/bufferparams.h
index 036a8efbca..28599a93ac 100644
--- a/src/bufferparams.h
+++ b/src/bufferparams.h
@@ -180,7 +180,10 @@ public:
 	 * The input encoding for LaTeX. This can be one of
 	 * - auto: find out the input encoding from the used languages
 	 * - default: Don't load the inputenc package and hope that it will
-	 *   work (unlikely)
+	 *   work (unlikely). The encoding is an unspecified 8bit encoding,
+	 *   the interpretation is up to the LaTeX compiler. Because we need
+	 *   a rule how to create this from our internal UCS4 encoded
+	 *   document contents we treat this as latin1 internally.
 	 * - any encoding supported by the inputenc package
 	 * The encoding of the LyX file is always utf8 and has nothing to
 	 * do with this setting.