diff --git a/storage/smiles/src/main/java/org/openscience/cdk/smiles/CxSmilesParser.java b/storage/smiles/src/main/java/org/openscience/cdk/smiles/CxSmilesParser.java
index d41a19a156a..73496ebed51 100644
--- a/storage/smiles/src/main/java/org/openscience/cdk/smiles/CxSmilesParser.java
+++ b/storage/smiles/src/main/java/org/openscience/cdk/smiles/CxSmilesParser.java
@@ -77,8 +77,24 @@ private static boolean processAtomLabels(final CharIter iter, final Map<Integer,
                 return true;
             } else {
                 final int beg = iter.pos - 1;
+                int rollback = beg;
                 while (iter.hasNext()) {
-                    if (iter.curr() == ';' || iter.curr() == '$')
+
+                    // correct step over of escaped label
+                    if (iter.curr() == '&') {
+                        rollback = iter.pos;
+                        if (iter.nextIf('&') && iter.nextIf('#') && iter.nextIfDigit()) {
+                            while (iter.nextIfDigit()){} // more digits
+                            if (!iter.nextIf(';'))
+                                iter.pos = rollback;
+                        } else {
+                            iter.pos = rollback;
+                        }
+                    }
+
+                    if (iter.curr() == ';')
+                        break;
+                    if (iter.curr() == '$')
                         break;
                     iter.next();
                 }
@@ -584,6 +600,13 @@ boolean nextIf(char c) {
             return true;
         }
 
+        boolean nextIfDigit() {
+            if (!hasNext() || !isDigit(str.charAt(pos)))
+                return false;
+            pos++;
+            return true;
+        }
+
         /**
          * If the next sequence of characters matches the prefix the iterator
          * is progressed to character following the prefix.
diff --git a/storage/smiles/src/test/java/org/openscience/cdk/smiles/CxSmilesParserTest.java b/storage/smiles/src/test/java/org/openscience/cdk/smiles/CxSmilesParserTest.java
index 7010907e40d..9868a2a4ab7 100644
--- a/storage/smiles/src/test/java/org/openscience/cdk/smiles/CxSmilesParserTest.java
+++ b/storage/smiles/src/test/java/org/openscience/cdk/smiles/CxSmilesParserTest.java
@@ -46,6 +46,13 @@ public void atomLabels() {
         assertThat(state.atomLabels, hasEntry(8, "A"));
     }
 
+    @Test
+    public void escapedAtomLabels() {
+        CxSmilesState state = new CxSmilesState();
+        assertThat(CxSmilesParser.processCx("|$R&#39;;;;;;;$|", state), is(not(-1)));
+        assertThat(state.atomLabels, hasEntry(0, "R'"));
+    }
+
     @Test
     public void atomValues() {
         CxSmilesState state = new CxSmilesState();