diff --git a/apps/openmw/mwrender/refraction.cpp b/apps/openmw/mwrender/refraction.cpp
index 85642bc08..05229da1d 100644
--- a/apps/openmw/mwrender/refraction.cpp
+++ b/apps/openmw/mwrender/refraction.cpp
@@ -6,6 +6,7 @@
 #include <OgreHardwarePixelBuffer.h>
 #include <OgreRenderTarget.h>
 #include <OgreViewport.h>
+#include <OgreRoot.h>
 
 #include "renderconst.hpp"
 
@@ -14,9 +15,13 @@ namespace MWRender
 
     Refraction::Refraction(Ogre::Camera *parentCamera)
         : mParentCamera(parentCamera)
+        , mRenderActive(false)
+        , mIsUnderwater(false)
     {
         mCamera = mParentCamera->getSceneManager()->createCamera("RefractionCamera");
 
+        mParentCamera->getSceneManager()->addRenderQueueListener(this);
+
         Ogre::TexturePtr texture = Ogre::TextureManager::getSingleton().createManual("WaterRefraction",
             Ogre::ResourceGroupManager::DEFAULT_RESOURCE_GROUP_NAME, Ogre::TEX_TYPE_2D, 512, 512, 0, Ogre::PF_R8G8B8, Ogre::TU_RENDERTARGET);
 
@@ -24,7 +29,7 @@ namespace MWRender
         Ogre::Viewport* vp = mRenderTarget->addViewport(mCamera);
         vp->setOverlaysEnabled(false);
         vp->setShadowsEnabled(false);
-        vp->setVisibilityMask(RV_Actors + RV_Misc + RV_Statics + RV_StaticsSmall + RV_Terrain);
+        vp->setVisibilityMask(RV_Actors + RV_Misc + RV_Statics + RV_StaticsSmall + RV_Terrain + RV_Sky);
         vp->setMaterialScheme("water_reflection");
         mRenderTarget->setAutoUpdated(true);
         mRenderTarget->addListener(this);
@@ -47,17 +52,42 @@ namespace MWRender
         mCamera->setAspectRatio(mParentCamera->getAspectRatio());
         mCamera->setFOVy(mParentCamera->getFOVy());
 
-        mCamera->enableCustomNearClipPlane(mNearClipPlane);
+        mRenderActive = true;
     }
 
     void Refraction::postRenderTargetUpdate(const Ogre::RenderTargetEvent& evt)
     {
-
+        mRenderActive = false;
     }
 
     void Refraction::setHeight(float height)
     {
         mNearClipPlane = Ogre::Plane( -Ogre::Vector3(0,1,0), -(height + 5));
+        mNearClipPlaneUnderwater = Ogre::Plane( Ogre::Vector3(0,1,0), height - 5);
+    }
+
+    void Refraction::setViewportBackground (Ogre::ColourValue colour)
+    {
+        mRenderTarget->getViewport (0)->setBackgroundColour (colour);
+    }
+
+    void Refraction::renderQueueStarted (Ogre::uint8 queueGroupId, const Ogre::String &invocation, bool &skipThisInvocation)
+    {
+        // We don't want the sky to get clipped by custom near clip plane (the water plane)
+        if (queueGroupId < 20 && mRenderActive)
+        {
+            mCamera->disableCustomNearClipPlane();
+            Ogre::Root::getSingleton().getRenderSystem()->_setProjectionMatrix(mCamera->getProjectionMatrixRS());
+        }
+    }
+
+    void Refraction::renderQueueEnded (Ogre::uint8 queueGroupId, const Ogre::String &invocation, bool &repeatThisInvocation)
+    {
+        if (queueGroupId < 20 && mRenderActive)
+        {
+            mCamera->enableCustomNearClipPlane(mIsUnderwater ? mNearClipPlaneUnderwater : mNearClipPlane);
+            Ogre::Root::getSingleton().getRenderSystem()->_setProjectionMatrix(mCamera->getProjectionMatrixRS());
+        }
     }
 
 }
diff --git a/apps/openmw/mwrender/refraction.hpp b/apps/openmw/mwrender/refraction.hpp
index e3777d9cf..6b3c487c1 100644
--- a/apps/openmw/mwrender/refraction.hpp
+++ b/apps/openmw/mwrender/refraction.hpp
@@ -3,6 +3,7 @@
 
 #include <OgrePlane.h>
 #include <OgreRenderTargetListener.h>
+#include <OgreRenderQueueListener.h>
 
 namespace Ogre
 {
@@ -13,7 +14,7 @@ namespace Ogre
 namespace MWRender
 {
 
-    class Refraction : public Ogre::RenderTargetListener
+    class Refraction : public Ogre::RenderTargetListener, public Ogre::RenderQueueListener
     {
 
     public:
@@ -23,12 +24,20 @@ namespace MWRender
         void setHeight (float height);
         void preRenderTargetUpdate(const Ogre::RenderTargetEvent& evt);
         void postRenderTargetUpdate(const Ogre::RenderTargetEvent& evt);
+        void setViewportBackground(Ogre::ColourValue colour);
+        void setUnderwater(bool underwater) {mIsUnderwater = underwater;}
+
+        void renderQueueStarted (Ogre::uint8 queueGroupId, const Ogre::String &invocation, bool &skipThisInvocation);
+        void renderQueueEnded (Ogre::uint8 queueGroupId, const Ogre::String &invocation, bool &repeatThisInvocation);
 
     private:
         Ogre::Camera* mParentCamera;
         Ogre::Camera* mCamera;
         Ogre::RenderTarget* mRenderTarget;
         Ogre::Plane mNearClipPlane;
+        Ogre::Plane mNearClipPlaneUnderwater;
+        bool mRenderActive;
+        bool mIsUnderwater;
     };
 
 }
diff --git a/apps/openmw/mwrender/water.cpp b/apps/openmw/mwrender/water.cpp
index 867829564..f31dca08c 100644
--- a/apps/openmw/mwrender/water.cpp
+++ b/apps/openmw/mwrender/water.cpp
@@ -124,8 +124,8 @@ void PlaneReflection::renderQueueEnded (Ogre::uint8 queueGroupId, const Ogre::St
 {
     if (queueGroupId < 20 && mRenderActive)
     {
-        if (!mIsUnderwater)
-            mCamera->enableCustomNearClipPlane(mErrorPlane);
+        // this trick does not seem to work well for extreme angles
+        mCamera->enableCustomNearClipPlane(mIsUnderwater ? mErrorPlaneUnderwater : mErrorPlane);
         Root::getSingleton().getRenderSystem()->_setProjectionMatrix(mCamera->getProjectionMatrixRS());
     }
 }
@@ -159,6 +159,7 @@ void PlaneReflection::setHeight (float height)
 {
     mWaterPlane = Plane(Ogre::Vector3(0,1,0), height);
     mErrorPlane = Plane(Ogre::Vector3(0,1,0), height - 5);
+    mErrorPlaneUnderwater = Plane(Ogre::Vector3(0,-1,0), -height - 5);
 }
 
 void PlaneReflection::setActive (bool active)
@@ -348,6 +349,8 @@ Water::updateUnderwater(bool underwater)
 
     if (mReflection)
         mReflection->setUnderwater (mIsUnderwater);
+    if (mRefraction)
+        mRefraction->setUnderwater (mIsUnderwater);
 
     updateVisible();
 }
@@ -377,6 +380,8 @@ void Water::setViewportBackground(const ColourValue& bg)
 {
     if (mReflection)
         mReflection->setViewportBackground(bg);
+    if (mRefraction)
+        mRefraction->setViewportBackground(bg);
 }
 
 void Water::updateVisible()
diff --git a/apps/openmw/mwrender/water.hpp b/apps/openmw/mwrender/water.hpp
index cf181674a..9aa18f008 100644
--- a/apps/openmw/mwrender/water.hpp
+++ b/apps/openmw/mwrender/water.hpp
@@ -89,6 +89,7 @@ namespace MWRender {
         SkyManager* mSky;
         Ogre::Plane mWaterPlane;
         Ogre::Plane mErrorPlane;
+        Ogre::Plane mErrorPlaneUnderwater;
         bool mRenderActive;
     };