diff --git a/lib/client.js b/lib/client.js
index 014a8e7..241ab9d 100644
--- a/lib/client.js
+++ b/lib/client.js
@@ -20,6 +20,7 @@ function sendCommand(command, callback) {
       }
       return;
     }
+    socket.setEncoding('utf8');
     socket.on('data', write);
     socket.end(`${token} ${command}`, () => {
       if (typeof callback === 'function') {
@@ -56,6 +57,7 @@ function invoke(socket, token, args, text) {
     args = ['--no-color'].concat(args);
   }
 
+  socket.setEncoding('utf8');
   let buf = '';
   socket.on('data', (chunk) => {
     buf += chunk;
diff --git a/lib/server.js b/lib/server.js
index 47b2e48..4d72619 100644
--- a/lib/server.js
+++ b/lib/server.js
@@ -47,6 +47,7 @@ exports.start = function () {
   const server = net.createServer({
     allowHalfOpen: true
   }, (con) => {
+    con.setEncoding('utf8');
     let data = '';
     con.on('data', (chunk) => {
       data += chunk;
diff --git a/test/client-test.js b/test/client-test.js
index 097b81d..7850e3f 100644
--- a/test/client-test.js
+++ b/test/client-test.js
@@ -29,6 +29,7 @@ describe('client', () => {
   beforeEach(() => {
     socket = new EventEmitter();
     socket.end = sinon.fake();
+    socket.setEncoding = sinon.fake();
     sinon.replace(out, 'write', sinon.fake());
     sinon.replace(out, 'writeError', sinon.fake());
   });
diff --git a/test/server-test.js b/test/server-test.js
index 442044f..4b74318 100644
--- a/test/server-test.js
+++ b/test/server-test.js
@@ -13,6 +13,7 @@ function createConnection() {
   const connection = new EventEmitter();
   connection.write = sinon.fake();
   connection.end = sinon.fake();
+  connection.setEncoding = sinon.fake();
   return connection;
 }
 
diff --git a/test/unicode-test.js b/test/unicode-test.js
new file mode 100644
index 0000000..4bf3f01
--- /dev/null
+++ b/test/unicode-test.js
@@ -0,0 +1,143 @@
+'use strict';
+
+const net = require('net');
+const crypto = require('crypto');
+const { assert, refute, sinon } = require('@sinonjs/referee-sinon');
+const server = require('../lib/server');
+const portfile = require('../lib/portfile');
+const service = require('./fixture/service');
+
+describe('unicode handling', () => {
+  let srv;
+  let port;
+  let token;
+
+  beforeEach((done) => {
+    token = crypto.randomBytes(8).toString('hex');
+    sinon.restore();
+    sinon.replace(crypto, 'randomBytes', () => Buffer.from(token, 'hex'));
+    sinon.replace(service, 'invoke', (_, __, text, cb) => cb(null, text));
+    sinon.replace(portfile, 'write', () => {});
+    srv = server.start();
+    srv.listen(0, '127.0.0.1', () => {
+      port = srv.address().port;
+      // Give server a moment to be ready for connections
+      setTimeout(done, 50);
+    });
+  });
+
+  afterEach((done) => {
+    if (srv) {
+      // First try to gracefully close
+      srv.close((_err) => {
+        srv = null;
+        // Give extra time for cleanup to prevent hanging processes
+        setTimeout(done, 100);
+      });
+
+      // Force close after timeout if needed
+      const forceTimeout = setTimeout(() => {
+        if (srv) {
+          srv.unref(); // Allow process to exit even if server is still running
+          srv = null;
+        }
+      }, 1000);
+
+      srv.on('close', () => {
+        clearTimeout(forceTimeout);
+      });
+    } else {
+      done();
+    }
+  });
+
+  /*eslint require-await: 0*/
+  async function makeRequest(text) {
+    const json = {
+      cwd: '/test',
+      args: ['--test'],
+      text
+    };
+
+    async function tryConnect(attempts = 10, delay = 200) {
+      const serverPort = port; // Capture port value to avoid ESLint no-loop-func warning
+      for (let i = 0; i < attempts; i++) {
+        try {
+          const client = await new Promise((resolve, reject) => {
+            const conn = net.connect({ port: serverPort, host: '127.0.0.1' });
+            conn.setEncoding('utf8');
+
+            const timeout = setTimeout(() => {
+              conn.removeAllListeners();
+              conn.destroy();
+              reject(new Error('Connection timeout'));
+            }, 1000);
+
+            conn.on('connect', () => {
+              clearTimeout(timeout);
+              resolve(conn);
+            });
+
+            conn.on('error', (err) => {
+              clearTimeout(timeout);
+              conn.removeAllListeners();
+              reject(err);
+            });
+          });
+          return client;
+        } catch (err) {
+          if (i === attempts - 1) { throw err; }
+          await new Promise(resolve => setTimeout(resolve, delay));
+        }
+      }
+      return null; // Satisfies consistent-return
+    }
+
+    const client = await tryConnect();
+    let response = '';
+
+    return new Promise((resolve, reject) => {
+      const timeout = setTimeout(() => {
+        client.removeAllListeners(); // Remove all listeners to prevent memory leaks
+        client.destroy();
+        reject(new Error('Request timeout'));
+      }, 4000);
+
+      client.on('data', (chunk) => {
+        response += chunk;
+      });
+
+      client.on('error', (err) => {
+        clearTimeout(timeout);
+        client.removeAllListeners();
+        reject(err);
+      });
+
+      client.on('end', () => {
+        clearTimeout(timeout);
+        client.removeAllListeners();
+        resolve(response);
+      });
+
+      client.end(`${token} ${JSON.stringify(json)}`);
+    });
+  }
+
+  // This test demonstrates a bug when sending large amount of UTF-8 text
+  // (around 100 KB) through the server. The text gets corrupted due to
+  // incorrect handling of partial UTF-8 characters, and the corruption
+  // manifests itself as UTF-8 replacement characters (U+FFFD).
+  it('should not corrupt large UTF-8 data', async function() {
+    this.timeout(5000);
+
+    const alphabet = 'абвгдеёжзийклмнопрстуфхцчшщъыьэюя';
+    const times = Math.ceil(100000 / alphabet.length);
+    const text = alphabet.repeat(times);
+    const response = await makeRequest(text);
+
+    // Before the fix this assertion would fail:
+    refute(response.includes('\ufffd'), 'Server corrupted UTF-8 data');
+    assert.equals(response, text, 'Server returned wrong data');
+  });
+});
+