diff --git a/src/vs/base/node/encoding.ts b/src/vs/base/node/encoding.ts
index b8b6707cda7..6cffb28f020 100644
--- a/src/vs/base/node/encoding.ts
+++ b/src/vs/base/node/encoding.ts
@@ -8,6 +8,8 @@
 import stream = require('vs/base/node/stream');
 import iconv = require('iconv-lite');
 import { TPromise } from 'vs/base/common/winjs.base';
+import { isLinux, isMacintosh } from 'vs/base/common/platform';
+import { exec } from 'child_process';
 
 export const UTF8 = 'utf8';
 export const UTF8_with_bom = 'utf8bom';
@@ -165,3 +167,46 @@ export function toCanonicalName(enc: string): string {
 			return enc;
 	}
 }
+
+export function resolveTerminalEncoding(verbose?: boolean): TPromise<string> {
+	let rawEncodingPromise: TPromise<string>;
+
+	// Support a global environment variable to win over other mechanics
+	const cliEncodingEnv = process.env['VSCODE_CLI_ENCODING'];
+	if (cliEncodingEnv) {
+		rawEncodingPromise = TPromise.as(cliEncodingEnv);
+	}
+
+	// Linux/Mac: use "locale charmap" command
+	else if (isLinux || isMacintosh) {
+		rawEncodingPromise = new TPromise<string>(c => {
+			if (verbose) {
+				console.log('Running "locale charmap" to detect terminal encoding...');
+			}
+
+			exec('locale charmap', (err, stdout, stderr) => c(stdout));
+		});
+	}
+
+	// Windows: educated guess
+	else {
+		rawEncodingPromise = TPromise.as('cp850');
+	}
+
+	return rawEncodingPromise.then(rawEncoding => {
+		if (verbose) {
+			console.log(`Detected raw terminal encoding: ${rawEncoding}`);
+		}
+
+		if (!rawEncoding || rawEncoding.toLowerCase() === 'utf-8' || rawEncoding.toLowerCase() === UTF8) {
+			return UTF8;
+		}
+
+		const iconvEncoding = toIconvLiteEncoding(rawEncoding);
+		if (iconv.encodingExists(iconvEncoding)) {
+			return iconvEncoding;
+		}
+
+		return UTF8;
+	});
+}
diff --git a/src/vs/base/test/node/encoding/encoding.test.ts b/src/vs/base/test/node/encoding/encoding.test.ts
index ce229da6f90..7c5c56f7a9f 100644
--- a/src/vs/base/test/node/encoding/encoding.test.ts
+++ b/src/vs/base/test/node/encoding/encoding.test.ts
@@ -8,6 +8,7 @@
 import assert = require('assert');
 
 import encoding = require('vs/base/node/encoding');
+import { encodingExists } from 'vs/base/node/encoding';
 
 suite('Encoding', () => {
 	test('detectBOM UTF-8', (done: (err?: any) => void) => {
@@ -54,4 +55,21 @@ suite('Encoding', () => {
 			done();
 		}, done);
 	});
+
+	test('resolve terminal encoding (detect)', function (done: (err?: any) => void) {
+		encoding.resolveTerminalEncoding().then(encoding => {
+			assert.ok(encodingExists(encoding));
+			done();
+		}, done);
+	});
+
+	test('resolve terminal encoding (environment)', function (done: (err?: any) => void) {
+		process.env['VSCODE_CLI_ENCODING'] = 'utf16le';
+
+		encoding.resolveTerminalEncoding().then(encoding => {
+			assert.ok(encodingExists(encoding));
+			assert.equal(encoding, 'utf16le');
+			done();
+		}, done);
+	});
 });
diff --git a/src/vs/code/node/cli.ts b/src/vs/code/node/cli.ts
index c1d3e5c7537..4d34b406b07 100644
--- a/src/vs/code/node/cli.ts
+++ b/src/vs/code/node/cli.ts
@@ -15,6 +15,8 @@ import * as os from 'os';
 import * as fs from 'fs';
 import { whenDeleted } from 'vs/base/node/pfs';
 import { findFreePort } from 'vs/base/node/ports';
+import { resolveTerminalEncoding } from 'vs/base/node/encoding';
+import * as iconv from 'iconv-lite';
 
 function shouldSpawnCliProcess(argv: ParsedArgs): boolean {
 	return !!argv['install-source']
@@ -93,10 +95,13 @@ export async function main(argv: string[]): TPromise<any> {
 			let stdinFileError: Error;
 			stdinFilePath = paths.join(os.tmpdir(), `stdin-${Math.random().toString(36).replace(/[^a-z]+/g, '').substr(0, 6)}.txt`);
 			try {
+				const stdinFileStream = fs.createWriteStream(stdinFilePath);
+				resolveTerminalEncoding(verbose).done(encoding => {
 
-				// Pipe into tmp file
-				process.stdin.setEncoding('utf8');
-				process.stdin.pipe(fs.createWriteStream(stdinFilePath));
+					// Pipe into tmp file using terminals encoding
+					const converterStream = iconv.decodeStream(encoding);
+					process.stdin.pipe(converterStream).pipe(stdinFileStream);
+				});
 
 				// Make sure to open tmp file
 				argv.push(stdinFilePath);