diff --git a/mongo.py b/mongo.py
index 8e07eb0e9..1909ae843 100644
--- a/mongo.py
+++ b/mongo.py
@@ -197,6 +197,31 @@ class Mongo(object):
             raise TypeError("cannot dereference a %s" % type(dbref))
         return self[dbref.collection()].find_one(dbref.id())
 
+    def _fix(self, son):
+        """Fixes an object coming out of the database.
+
+        Used to do things like auto dereferencing, if the option is enabled.
+
+        Arguments:
+        - `son`: a SON object coming out of the database
+        """
+        if not self.__auto_dereference:
+            return son
+
+        def fix_value(value):
+            if isinstance(value, DBRef):
+                return self._fix(self.dereference(value))
+            elif isinstance(value, (SON, types.DictType)):
+                return self._fix(value)
+            elif isinstance(value, types.ListType):
+                return [fix_value(v) for v in value]
+            return value
+
+        for (key, value) in son.items():
+            son[key] = fix_value(value)
+
+        return son
+
 class Collection(object):
     """A Mongo collection.
     """
@@ -644,9 +669,9 @@ class Cursor(object):
 
     def next(self):
         if len(self.__data):
-            return self.__data.pop(0)
+            return self.__collection.database()._fix(self.__data.pop(0))
         if self._refresh():
-            return self.__data.pop(0)
+            return self.__collection.database()._fix(self.__data.pop(0))
         raise StopIteration
 
 class TestMongo(unittest.TestCase):
@@ -1007,5 +1032,28 @@ class TestMongo(unittest.TestCase):
         key = db.test.save(obj)
         self.assertEqual(obj, db.dereference(DBRef("test", key)))
 
+    def test_auto_deref(self):
+        db = Mongo("test", self.host, self.port)
+        db.test.remove({})
+        db.mike.remove({})
+
+        a = {"hello": u"world"}
+        key = db.mike.save(a)
+        dbref = DBRef("mike", key)
+
+        self.assertEqual(db.dereference(dbref), a)
+
+        b = {"mike_obj": dbref}
+        db.test.save(b)
+        self.assertEqual(dbref, db.test.find_one()["mike_obj"])
+        self.assertEqual(a, db.dereference(db.test.find_one()["mike_obj"]))
+
+        db = Mongo("test", self.host, self.port, {"auto_dereference": False})
+        self.assertEqual(dbref, db.test.find_one()["mike_obj"])
+
+        db = Mongo("test", self.host, self.port, {"auto_dereference": True})
+        self.assertNotEqual(dbref, db.test.find_one()["mike_obj"])
+        self.assertEqual(a, db.test.find_one()["mike_obj"])
+
 if __name__ == "__main__":
     unittest.main()