diff --git a/src/os_unix.c b/src/os_unix.c
index b34c316..57ea4d9 100644
--- a/src/os_unix.c
+++ b/src/os_unix.c
@@ -4094,8 +4094,17 @@
 	    ++*argc;
 	    while (*p != NUL && (inquote || (*p != ' ' && *p != TAB)))
 	    {
-		if (*p == '"')
+		if (p[0] == '"')
 		    inquote = !inquote;
+		else if (p[0] == '\\' && p[1] != NUL)
+		{
+		    /* First pass: skip over "\ " and "\"".
+		     * Second pass: Remove the backslash. */
+		    if (i == 1)
+			mch_memmove(p, p + 1, STRLEN(p));
+		    else
+			++p;
+		}
 		++p;
 	    }
 	    if (*p == NUL)
diff --git a/src/testdir/test_terminal.vim b/src/testdir/test_terminal.vim
index a16f3d9..ce3fab7 100644
--- a/src/testdir/test_terminal.vim
+++ b/src/testdir/test_terminal.vim
@@ -293,6 +293,8 @@
   let size = term_getsize('')
   bwipe!
   call assert_equal([7, 27], size)
+
+  call delete('Xtext')
 endfunc
 
 func Test_terminal_curwin()
@@ -325,7 +327,7 @@
 
   split dummy
   bwipe!
-
+  call delete('Xtext')
 endfunc
 
 func Test_finish_open_close()
@@ -555,3 +557,19 @@
   call assert_equal('look here', term_getline(buf, 1))
   bwipe!
 endfunc
+
+func Test_terminal_special_chars()
+  " this file name only works on Unix
+  if !has('unix')
+    return
+  endif
+  call mkdir('Xdir with spaces')
+  call writefile(['x'], 'Xdir with spaces/quoted"file')
+  term ls Xdir\ with\ spaces/quoted\"file
+  call WaitFor('term_getline("", 1) =~ "quoted"')
+  call assert_match('quoted"file', term_getline('', 1))
+  call term_wait('')
+
+  call delete('Xdir with spaces', 'rf')
+  bwipe
+endfunc
diff --git a/src/version.c b/src/version.c
index 45537fe..fe316be 100644
--- a/src/version.c
+++ b/src/version.c
@@ -770,6 +770,8 @@
 static int included_patches[] =
 {   /* Add new patch number below this line */
 /**/
+    1051,
+/**/
     1050,
 /**/
     1049,