--- a/src/share/classes/sun/security/provider/PolicyFile.java	Mon May 16 12:58:48 2011 -0700
+++ b/src/share/classes/sun/security/provider/PolicyFile.java	Tue May 24 14:15:14 2011 -0700
@@ -1790,15 +1790,30 @@
 
         CodeSource canonCs = cs;
         URL u = cs.getLocation();
-        if (u != null && u.getProtocol().equals("file")) {
-            boolean isLocalFile = false;
-            String host = u.getHost();
-            isLocalFile = (host == null || host.equals("") ||
-                host.equals("~") || host.equalsIgnoreCase("localhost"));
+        if (u != null) {
+            if (u.getProtocol().equals("jar")) {
+                // unwrap url embedded inside jar url
+                String spec = u.getFile();
+                int separator = spec.indexOf("!/");
+                if (separator != -1) {
+                    try {
+                        u = new URL(spec.substring(0, separator));
+                    } catch (MalformedURLException e) {
+                        // Fail silently. In this case, url stays what
+                        // it was above
+                    }
+                }
+            }
+            if (u.getProtocol().equals("file")) {
+                boolean isLocalFile = false;
+                String host = u.getHost();
+                isLocalFile = (host == null || host.equals("") ||
+                    host.equals("~") || host.equalsIgnoreCase("localhost"));
 
-            if (isLocalFile) {
-                path = u.getFile().replace('/', File.separatorChar);
-                path = ParseUtil.decode(path);
+                if (isLocalFile) {
+                    path = u.getFile().replace('/', File.separatorChar);
+                    path = ParseUtil.decode(path);
+                }
             }
         }
 

--- /dev/null	Thu Jan 01 00:00:00 1970 +0000
+++ b/test/java/security/Policy/GetPermissions/JarURL.java	Tue May 24 14:15:14 2011 -0700
@@ -0,0 +1,49 @@
+/*
+ * Copyright (c) 2011, Oracle and/or its affiliates. All rights reserved.
+ * DO NOT ALTER OR REMOVE COPYRIGHT NOTICES OR THIS FILE HEADER.
+ *
+ * This code is free software; you can redistribute it and/or modify it
+ * under the terms of the GNU General Public License version 2 only, as
+ * published by the Free Software Foundation.
+ *
+ * This code is distributed in the hope that it will be useful, but WITHOUT
+ * ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or
+ * FITNESS FOR A PARTICULAR PURPOSE.  See the GNU General Public License
+ * version 2 for more details (a copy is included in the LICENSE file that
+ * accompanied this code).
+ *
+ * You should have received a copy of the GNU General Public License version
+ * 2 along with this work; if not, write to the Free Software Foundation,
+ * Inc., 51 Franklin St, Fifth Floor, Boston, MA 02110-1301 USA.
+ *
+ * Please contact Oracle, 500 Oracle Parkway, Redwood Shores, CA 94065 USA
+ * or visit www.oracle.com if you need additional information or have any
+ * questions.
+ */
+
+/*
+ * @test
+ * @bug 7044443
+ * @summary Permissions resolved incorrectly for jar protocol
+ */
+
+import java.net.URL;
+import java.security.AllPermission;
+import java.security.CodeSource;
+import java.security.PermissionCollection;
+import java.security.Policy;
+import java.security.cert.Certificate;
+
+public class JarURL {
+    public static void main(String[] args) throws Exception {
+        URL codeSourceURL
+            = new URL("jar:file:"
+                      + System.getProperty("java.ext.dirs").split(":")[0]
+                      + "/foo.jar!/");
+        CodeSource cs = new CodeSource(codeSourceURL, new Certificate[0]);
+        PermissionCollection perms = Policy.getPolicy().getPermissions(cs);
+        if (!perms.implies(new AllPermission()))
+            throw new Exception("FAILED: " + codeSourceURL
+                                + " not granted AllPermission");
+    }
+}