diff --git a/paramiko/proxy.py b/paramiko/proxy.py
index 218b76e..3f5c8bb 100644
--- a/paramiko/proxy.py
+++ b/paramiko/proxy.py
@@ -20,10 +20,13 @@
 L{ProxyCommand}.
 """
 
+from datetime import datetime
 import os
 from shlex import split as shlsplit
 import signal
 from subprocess import Popen, PIPE
+from select import select
+import socket
 
 from paramiko.ssh_exception import ProxyCommandFailure
 
@@ -48,6 +51,8 @@ class ProxyCommand(object):
         """
         self.cmd = shlsplit(command_line)
         self.process = Popen(self.cmd, stdin=PIPE, stdout=PIPE, stderr=PIPE)
+        self.timeout = None
+        self.buffer = []
 
     def send(self, content):
         """
@@ -64,7 +69,7 @@ class ProxyCommand(object):
             # died and we can't proceed. The best option here is to
             # raise an exception informing the user that the informed
             # ProxyCommand is not working.
-            raise BadProxyCommand(' '.join(self.cmd), e.strerror)
+            raise ProxyCommandFailure(' '.join(self.cmd), e.strerror)
         return len(content)
 
     def recv(self, size):
@@ -78,14 +83,30 @@ class ProxyCommand(object):
         @rtype: int
         """
         try:
-            return os.read(self.process.stdout.fileno(), size)
+            start = datetime.now()
+            while len(self.buffer) < size:
+                if self.timeout is not None:
+                    elapsed = (datetime.now() - start).microseconds
+                    timeout = self.timeout * 1000 * 1000 # to microseconds
+                    if elapsed >= timeout:
+                        raise socket.timeout()
+                r, w, x = select([self.process.stdout], [], [], 0.0)
+                if r and r[0] == self.process.stdout:
+                    b = os.read(self.process.stdout.fileno(), 1)
+                    # Store in class-level buffer for persistence across
+                    # timeouts; this makes us act more like a real socket
+                    # (where timeouts don't actually drop data.)
+                    self.buffer.append(b)
+            result = ''.join(self.buffer)
+            self.buffer = []
+            return result
+        except socket.timeout:
+            raise # socket.timeout is a subclass of IOError
         except IOError, e:
-            raise BadProxyCommand(' '.join(self.cmd), e.strerror)
+            raise ProxyCommandFailure(' '.join(self.cmd), e.strerror)
 
     def close(self):
         os.kill(self.process.pid, signal.SIGTERM)
 
     def settimeout(self, timeout):
-        # Timeouts are meaningless for this implementation, but are part of the
-        # spec, so must be present.
-        pass
+        self.timeout = timeout
diff --git a/paramiko/transport.py b/paramiko/transport.py
index 9dbfa81..0c16834 100644
--- a/paramiko/transport.py
+++ b/paramiko/transport.py
@@ -1553,10 +1553,6 @@ class Transport (threading.Thread):
         # containers.
         Random.atfork()
 
-        # Hold reference to 'sys' so we can test sys.modules to detect
-        # interpreter shutdown.
-        self.sys = sys
-
         # active=True occurs before the thread is launched, to avoid a race
         _active_threads.append(self)
         if self.server_mode:
@@ -1626,7 +1622,10 @@ class Transport (threading.Thread):
                 self.saved_exception = e
             except socket.error, e:
                 if type(e.args) is tuple:
-                    emsg = '%s (%d)' % (e.args[1], e.args[0])
+                    if e.args:
+                        emsg = '%s (%d)' % (e.args[1], e.args[0])
+                    else: # empty tuple, e.g. socket.timeout
+                        emsg = str(e) or repr(e)
                 else:
                     emsg = e.args
                 self._log(ERROR, 'Socket exception: ' + emsg)
diff --git a/sites/www/changelog.rst b/sites/www/changelog.rst
index 1b82c63..664cf94 100644
--- a/sites/www/changelog.rst
+++ b/sites/www/changelog.rst
@@ -4,6 +4,13 @@ Changelog
 
 * :feature:`58` Allow client code to access the stored SSH server banner via
   ``Transport.get_banner()``. Thanks to ``@Jhoanor`` for the patch.
+* :bug:`252` (`Fabric #1020 <https://github.com/fabric/fabric/issues/1020>`_)
+  Enhanced the implementation of ``ProxyCommand`` to avoid a deadlock/hang
+  condition that frequently occurs at ``Transport`` shutdown time. Thanks to
+  Mateusz Kobos, Matthijs van der Vleuten and Guillaume Zitta for the original
+  reports and to Marius Gedminas for helping test nontrivial use cases.
+* :bug:`268` Fix some missed renames of ``ProxyCommand`` related error classes.
+  Thanks to Marius Gedminas for catch & patch.
 * :bug:`34` (PR :issue:`35`) Fix SFTP prefetching incompatibility with some
   SFTP servers regarding request/response ordering. Thanks to Richard
   Kettlewell for catch & patch.