diff --git a/src/ng/location.js b/src/ng/location.js
index ba3901b2fd67..40d39282e53f 100644
--- a/src/ng/location.js
+++ b/src/ng/location.js
@@ -69,7 +69,7 @@ function stripFile(url) {
   return url.substr(0, stripHash(url).lastIndexOf('/') + 1);
 }
 
-/* return the server only */
+/* return the server only (scheme://host:port) */
 function serverBase(url) {
   return url.substring(0, url.indexOf('/', url.indexOf('//') + 2));
 }
@@ -497,12 +497,12 @@ function $LocationProvider(){
       function( $rootScope,   $browser,   $sniffer,   $rootElement) {
     var $location,
         LocationMode,
-        baseHref = $browser.baseHref(),
+        baseHref = $browser.baseHref(), // if base[href] is undefined, it defaults to ''
         initialUrl = $browser.url(),
         appBase;
 
     if (html5Mode) {
-      appBase = baseHref ? serverBase(initialUrl) + baseHref : initialUrl;
+      appBase = serverBase(initialUrl) + (baseHref || '/');
       LocationMode = $sniffer.history ? LocationHtml5Url : LocationHashbangInHtml5Url;
     } else {
       appBase = stripHash(initialUrl);
diff --git a/test/ng/locationSpec.js b/test/ng/locationSpec.js
index 2bce3e643647..df8043a31772 100644
--- a/test/ng/locationSpec.js
+++ b/test/ng/locationSpec.js
@@ -635,6 +635,19 @@ describe('$location', function() {
         }
       );
     });
+
+
+    it('should set appBase to serverBase if base[href] is missing', function() {
+      initService(true, '!', true);
+      inject(
+          initBrowser('http://domain.com/my/view1#anchor1', ''),
+          function($rootScope, $location, $browser) {
+            expect($browser.url()).toBe('http://domain.com/my/view1#anchor1');
+            expect($location.path()).toBe('/my/view1');
+            expect($location.hash()).toBe('anchor1');
+          }
+      );
+    });
   });