diff --git a/django/db/models/query.py b/django/db/models/query.py
index 4163ce9e6d..d76057e9fb 100644
--- a/django/db/models/query.py
+++ b/django/db/models/query.py
@@ -937,10 +937,10 @@ class QuerySet(object):
                                              using=self.db)
 
     def _clone(self, klass=None, setup=False, **kwargs):
+        base_queryset_class = getattr(self, '_base_queryset_class', self.__class__)
         if klass is None:
             klass = self.__class__
-        elif not issubclass(self.__class__, klass):
-            base_queryset_class = getattr(self, '_base_queryset_class', self.__class__)
+        elif not (issubclass(base_queryset_class, klass) or issubclass(klass, base_queryset_class)):
             class_bases = (klass, base_queryset_class)
             class_dict = {
                 '_base_queryset_class': base_queryset_class,
diff --git a/docs/releases/1.8.5.txt b/docs/releases/1.8.5.txt
index 1141c2c798..5a19a50137 100644
--- a/docs/releases/1.8.5.txt
+++ b/docs/releases/1.8.5.txt
@@ -36,3 +36,6 @@ Bugfixes
 * Changed ``Count`` queries to execute ``COUNT(*)`` instead of ``COUNT('*')``
   as versions of Django before 1.8 did (:ticket:`25377`). This may fix a
   performance regression on some databases.
+
+* Fixed custom queryset chaining with ``values()`` and ``values_list()``
+  (:ticket:`20625`).
diff --git a/tests/custom_managers/tests.py b/tests/custom_managers/tests.py
index 7dc5552e41..b2fe9c51ab 100644
--- a/tests/custom_managers/tests.py
+++ b/tests/custom_managers/tests.py
@@ -76,6 +76,10 @@ class CustomManagerTests(TestCase):
             self.assertEqual(list(queryset), [six.text_type("Bugs")])
             self.assertEqual(queryset._filter_CustomQuerySet, True)
 
+            self.assertIsInstance(queryset.values(), CustomQuerySet)
+            self.assertIsInstance(queryset.values().values(), CustomQuerySet)
+            self.assertIsInstance(queryset.values_list().values(), CustomQuerySet)
+
     def test_init_args(self):
         """
         The custom manager __init__() argument has been set.