new file mode 100644
--- /dev/null
+++ b/stream_proxy_next_upstream.t
@@ -0,0 +1,175 @@
+#!/usr/bin/perl
+
+# (C) Sergey Kandaurov
+# (C) Nginx, Inc.
+
+# Tests for stream proxy module, proxy_next_upstream directive and friends.
+
+###############################################################################
+
+use warnings;
+use strict;
+
+use Test::More;
+
+use IO::Select;
+
+BEGIN { use FindBin; chdir($FindBin::Bin); }
+
+use lib 'lib';
+use Test::Nginx;
+
+###############################################################################
+
+select STDERR; $| = 1;
+select STDOUT; $| = 1;
+
+my $t = Test::Nginx->new()->has(qw/stream/);
+
+$t->write_file_expand('nginx.conf', <<'EOF');
+
+%%TEST_GLOBALS%%
+
+daemon off;
+
+events {
+}
+
+stream {
+    upstream u {
+        server 127.0.0.1:8087 max_fails=0;
+        server 127.0.0.1:8088 max_fails=0;
+        server 127.0.0.1:8089 backup;
+    }
+
+    proxy_connect_timeout 2s;
+
+    server {
+        listen      127.0.0.1:8081;
+        proxy_pass  u;
+        proxy_next_upstream off;
+    }
+
+    server {
+        listen      127.0.0.1:8082;
+        proxy_pass  u;
+        proxy_next_upstream on;
+    }
+
+    server {
+        listen      127.0.0.1:8083;
+        proxy_pass  u;
+        proxy_next_upstream on;
+        proxy_next_upstream_tries 2;
+    }
+}
+
+EOF
+
+$t->run_daemon(\&stream_daemon);
+$t->try_run('no proxy_next_upstream')->plan(3);
+
+$t->waitforsocket('127.0.0.1:8089');
+
+###############################################################################
+
+is(stream_get('.', '127.0.0.1:8081'), '', 'next upstream off');
+is(stream_get('.', '127.0.0.1:8082'), 'SEE-THIS', 'next upstream on');
+
+# make sure backup is not tried
+
+is(stream_get('.', '127.0.0.1:8083'), '', 'next upstream tries');
+
+###############################################################################
+
+sub stream_get {
+	my ($data, $peer) = @_;
+
+	my $s = stream_connect($peer);
+	stream_write($s, $data);
+	my $r = stream_read($s);
+
+	$s->close;
+	return $r;
+}
+
+sub stream_connect {
+	my $peer = shift;
+	my $s = IO::Socket::INET->new(
+		Proto => 'tcp',
+		PeerAddr => $peer
+	)
+		or die "Can't connect to nginx: $!\n";
+
+	return $s;
+}
+
+sub stream_write {
+	my ($s, $message) = @_;
+
+	local $SIG{PIPE} = 'IGNORE';
+
+	$s->blocking(0);
+	while (IO::Select->new($s)->can_write(1.5)) {
+		my $n = $s->syswrite($message);
+		last unless $n;
+		$message = substr($message, $n);
+		last unless length $message;
+	}
+
+	if (length $message) {
+		$s->close();
+	}
+}
+
+sub stream_read {
+	my ($s) = @_;
+	my ($buf);
+
+	$s->blocking(0);
+	if (IO::Select->new($s)->can_read(3)) {
+		$s->sysread($buf, 1024);
+	};
+
+	log_in($buf);
+	return $buf;
+}
+
+###############################################################################
+
+sub stream_daemon {
+	my $server = IO::Socket::INET->new(
+		Proto => 'tcp',
+		LocalHost => '127.0.0.1:8089',
+		Listen => 5,
+		Reuse => 1
+	)
+		or die "Can't create listening socket: $!\n";
+
+	local $SIG{PIPE} = 'IGNORE';
+
+	while (my $client = $server->accept()) {
+		$client->autoflush(1);
+
+		log2c("(new connection $client)");
+
+		$client->sysread(my $buffer, 65536) or next;
+
+		log2i("$client $buffer");
+
+		$buffer = 'SEE-THIS';
+
+		log2o("$client $buffer");
+
+		$client->syswrite($buffer);
+
+	} continue {
+		close $client;
+	}
+}
+
+sub log2i { Test::Nginx::log_core('|| <<', @_); }
+sub log2o { Test::Nginx::log_core('|| >>', @_); }
+sub log2c { Test::Nginx::log_core('||', @_); }
+
+###############################################################################