diff --git a/NEWS b/NEWS
index 6b6a2344..380b3676 100644
--- a/NEWS
+++ b/NEWS
@@ -3,6 +3,8 @@ User visible changes for UPX
 ==================================================================
 
 Changes in 3.01 (XX XXX 2007):
+  * dos/exe: fixed an incorrect error message caused by a bug in
+    relocation handling
 
 Changes in 3.00 (27 Apr 2007):
   * watcom/le & tmt/adam: fixed a problem when using certain filters
diff --git a/src/p_exe.cpp b/src/p_exe.cpp
index d1700882..d2922af1 100644
--- a/src/p_exe.cpp
+++ b/src/p_exe.cpp
@@ -478,7 +478,7 @@ void PackExe::pack(OutputFile *fo)
         for (ic = 0; ic < ih.relocs; ic++)
         {
             unsigned jc = get_le32(wr+4*ic);
-            set_le32(wr+4*ic, (jc>>16)*16+(jc&0xffff));
+            set_le32(wr+4*ic, ((jc>>16)*16+(jc&0xffff)) & 0xfffff);
         }
         qsort(wr,ih.relocs,4,le32_compare);
         relocsize = optimize_relocs(ibuf, ih_imagesize, wr, ih.relocs, w, &has_9a);