diff --git a/_pytest/assertion/rewrite.py b/_pytest/assertion/rewrite.py
index e964ea9f8..8f51c30f3 100644
--- a/_pytest/assertion/rewrite.py
+++ b/_pytest/assertion/rewrite.py
@@ -215,11 +215,17 @@ def _rewrite_test(state, fn):
         if (not source.startswith(BOM_UTF8) and
             (not cookie_re.match(source[0:end1]) or
             not cookie_re.match(source[end1:end2]))):
+            if hasattr(state, "_indecode"):
+                return None  # encodings imported us again, we don't rewrite
+            state._indecode = True
             try:
-                source.decode("ascii")
-            except UnicodeDecodeError:
-                # Let it fail in real import.
-                return None
+                try:
+                    source.decode("ascii")
+                except UnicodeDecodeError:
+                    # Let it fail in real import.
+                    return None
+            finally:
+                del state._indecode
     # On Python versions which are not 2.7 and less than or equal to 3.1, the
     # parser expects *nix newlines.
     if REWRITE_NEWLINES:
diff --git a/testing/test_assertion.py b/testing/test_assertion.py
index 02199ef43..ff633b534 100644
--- a/testing/test_assertion.py
+++ b/testing/test_assertion.py
@@ -320,3 +320,17 @@ def test_warn_missing(testdir):
     result.stderr.fnmatch_lines([
         "*WARNING*assert statements are not executed*",
     ])
+
+def test_recursion_source_decode(testdir):
+    testdir.makepyfile("""
+        def test_something():
+            pass
+    """)
+    testdir.makeini("""
+        [pytest]
+        python_files = *.py
+    """)
+    result = testdir.runpytest("--collectonly")
+    result.stdout.fnmatch_lines("""
+        <Module*>
+    """)