diff --git a/src/code/extfmts.lisp b/src/code/extfmts.lisp
index 9efcb0a6fae065a0da0bf0da406bafd6ea83cc08..f3f19c29c4e20081be55cc6e5b7634244337190b 100644
--- a/src/code/extfmts.lisp
+++ b/src/code/extfmts.lisp
@@ -22,7 +22,8 @@
 	  describe-external-format))
 
 (defvar *default-external-format*
-  :iso8859-1
+  #-unicode :iso8859-1
+  #+unicode :utf-8
   "The default external format to use if no other external format is
   specified")
 
@@ -460,11 +461,11 @@
 
 (defun %find-external-format (name)
   ;; avoid loading files, etc., early in the boot sequence
-  (when (or (eq name :iso8859-1)
-	    (and (eq name :default) (eq *default-external-format* :iso8859-1)))
+  (when (eq name :iso8859-1)
     (return-from %find-external-format
       (gethash :iso8859-1 *external-formats*)))
-  (when (eq name :utf-8)
+  (when (or (eq name :utf-8)
+	    (and (eq name :default) (eq *default-external-format* :utf-8)))
     (return-from %find-external-format
       (gethash :utf-8 *external-formats*)))
 
@@ -1154,7 +1155,8 @@ character and illegal outputs are replaced by a question mark.")
 	       (not (eq unix::*filename-encoding* filenames)))
       (cerror (intl:gettext "Change it anyway.")
 	      (intl:gettext "The external-format for encoding filenames is already set.")))
-    (setq unix::*filename-encoding* filenames))
+    (setq unix::*filename-encoding* filenames)
+    (setq unix::*default-filename-encoding* filenames))
   t)
 
 
diff --git a/src/code/fd-stream.lisp b/src/code/fd-stream.lisp
index 470dfe23e94422627320af48f101f342c630052a..1d9099b0d0781a10e23fb71da0395245efe6e505 100644
--- a/src/code/fd-stream.lisp
+++ b/src/code/fd-stream.lisp
@@ -2397,20 +2397,20 @@
   (setf *available-buffers* nil)
   (setf *stdin*
 	(make-fd-stream 0 :name "Standard Input" :input t :buffering :line
-			:external-format :iso8859-1))
+			:external-format :utf-8))
   (setf *stdout*
 	(make-fd-stream 1 :name "Standard Output" :output t :buffering :line
-			:external-format :iso8859-1))
+			:external-format :utf-8))
   (setf *stderr*
 	(make-fd-stream 2 :name "Standard Error" :output t :buffering :line
-			:external-format :iso8859-1))
+			:external-format :utf-8))
   (let ((tty (and (not *batch-mode*)
 		  (unix:unix-open "/dev/tty" unix:o_rdwr #o666))))
     (setf *tty*
 	  (if tty
 	      (make-fd-stream tty :name "the Terminal" :input t :output t
 			      :buffering :line :auto-close t
-			      :external-format :iso8859-1)
+			      :external-format :utf-8)
 	      (make-two-way-stream *stdin* *stdout*))))
   nil)
 
diff --git a/src/code/lispinit.lisp b/src/code/lispinit.lisp
index 01d7f33c228339736c1bf954ffa6af14ecdd6327..42cf568896008eba519a97a3584c881060d7d002 100644
--- a/src/code/lispinit.lisp
+++ b/src/code/lispinit.lisp
@@ -482,7 +482,9 @@
     (set-floating-point-modes :traps
 			      '(:overflow :invalid :divide-by-zero))
     ;; Clear pseudo atomic in case this core wasn't compiled with support.
-    #+(or x86 amd64) (setf lisp::*pseudo-atomic-atomic* 0))))
+    #+(or x86 amd64) (setf lisp::*pseudo-atomic-atomic* 0)
+     (unless unix::*filename-encoding*
+       (setf unix::*filename-encoding* unix::*default-filename-encoding*)))))
 
 
 ;;;; Miscellaneous external functions:
diff --git a/src/code/unix.lisp b/src/code/unix.lisp
index 9dd6db03d3043b1b2586c0ce3810defdddfadf77..fef496437f3531141f026c101967f6b067ce2189 100644
--- a/src/code/unix.lisp
+++ b/src/code/unix.lisp
@@ -26,6 +26,9 @@
 ;; non-Latin-1 characters "mojibake", but otherwise they'll be inaccessible.
 ;; Must be set to NIL initially to enable building Lisp!
 (defvar *filename-encoding* nil)
+(defvar *default-filename-encoding*
+  #-unicode nil
+  #+unicode :utf-8)
 
 (eval-when (:compile-toplevel :load-toplevel :execute)
   (defmacro %name->file (string)
diff --git a/tests/issues.lisp b/tests/issues.lisp
index 3ad494bb15b5bb031e32c24a58e7ea1feac11381..eb257e8d127d5406930c42a601874f90688676ce 100644
--- a/tests/issues.lisp
+++ b/tests/issues.lisp
@@ -579,3 +579,24 @@
 	with user-info = (unix:unix-getpwuid uid)
 	while user-info
 	finally (assert-false user-info)))
+
+(define-test issue-139.1
+    (:tag :issues)
+  ;; Verify the value of the default external format and that system streams use :utf-8.
+  (assert-eql :utf-8 stream:*default-external-format*)
+  (assert-eql :utf-8 (stream-external-format sys:*stdin*))
+  (assert-eql :utf-8 (stream-external-format sys:*stdout*))
+  (assert-eql :utf-8 (stream-external-format sys:*stderr*))
+  ;; *tty* can either be an fd-stream, in which case the format is
+  ;; utf8, or a two-way-stream, in which case it is :default.  
+  (if (typep sys:*tty* 'two-way-stream)
+        (assert-eql :default (stream-external-format sys:*tty*))
+	(assert-eql :utf-8 (stream-external-format sys:*tty*)))
+  ;; Check that printing to *standard-output* is correctly encoded.
+  (dribble "test-format.txt")
+  ;; Print a Greek lower-case alpha character
+  (princ #\u+3b1)
+  (dribble)
+  (with-open-file (s "test-format.txt" :direction :input)
+    (let ((c (read-char s)))
+      (assert-equal #\u+3b1 c))))