--- src/userauth.c	2012-04-18 23:24:04.000000000 +0300
+++ src/userauth.new.c	2013-04-17 15:51:03.275687538 +0300
@@ -280,9 +280,15 @@
                 return _libssh2_error(session, LIBSSH2_ERROR_EAGAIN,
                                       "Would block waiting");
             } else if (rc) {
-                session->userauth_pswd_state = libssh2_NB_state_idle;
-                return _libssh2_error(session, LIBSSH2_ERROR_TIMEOUT,
-                                      "Would block waiting");
+		if (rc == LIBSSH2_ERROR_SOCKET_DISCONNECT ) {
+		    session->userauth_pswd_state = libssh2_NB_state_idle;
+            	    return _libssh2_error(session, LIBSSH2_ERROR_SOCKET_DISCONNECT,
+                                      "Connection closed by server");
+		} else {
+            	    session->userauth_pswd_state = libssh2_NB_state_idle;
+            	    return _libssh2_error(session, LIBSSH2_ERROR_TIMEOUT,
+                	                  "Would block waiting");
+		}
             }
 
             if (session->userauth_pswd_data[0] == SSH_MSG_USERAUTH_SUCCESS) {