diff --git a/include/xbps_api.h b/include/xbps_api.h
index 1b0e5247..e97d44f3 100644
--- a/include/xbps_api.h
+++ b/include/xbps_api.h
@@ -56,7 +56,7 @@
  */
 #define XBPS_PKGINDEX_VERSION	"1.4"
 
-#define XBPS_API_VERSION	"20120525-2"
+#define XBPS_API_VERSION	"20120525-3"
 #define XBPS_VERSION		"0.16"
 
 /**
diff --git a/lib/package_unpack.c b/lib/package_unpack.c
index e193ee18..5ff0452d 100644
--- a/lib/package_unpack.c
+++ b/lib/package_unpack.c
@@ -166,13 +166,17 @@ unpack_archive(prop_dictionary_t pkg_repod, struct archive *ar)
 	char *buf = NULL, *pkgfilesd = NULL;
 	int rv, flags;
 	bool preserve, update, conf_file, file_exists, skip_obsoletes;
+	bool softreplace;
 
 	assert(prop_object_type(pkg_repod) == PROP_TYPE_DICTIONARY);
 	assert(ar != NULL);
 
-	preserve = update = conf_file = file_exists = skip_obsoletes = false;
+	preserve = update = conf_file = file_exists = false;
+	skip_obsoletes = softreplace = false;
+
 	prop_dictionary_get_bool(pkg_repod, "preserve", &preserve);
 	prop_dictionary_get_bool(pkg_repod, "skip-obsoletes", &skip_obsoletes);
+	prop_dictionary_get_bool(pkg_repod, "softreplace", &softreplace);
 	prop_dictionary_get_cstring_nocopy(pkg_repod,
 	    "transaction", &transact);
 	prop_dictionary_get_cstring_nocopy(pkg_repod, "pkgname", &pkgname);
@@ -480,9 +484,9 @@ unpack_archive(prop_dictionary_t pkg_repod, struct archive *ar)
 	}
 	/*
 	 * Skip checking for obsolete files on:
-	 *  - New package installation.
-	 *  - Package with "preserve" keyword.
-	 *  - Package with "skip-obsoletes" keyword.
+	 * 	- New package installation without "softreplace" keyword.
+	 * 	- Package with "preserve" keyword.
+	 * 	- Package with "skip-obsoletes" keyword.
 	 */
 	pkgfilesd = xbps_xasprintf("%s/metadata/%s/%s",
 	    XBPS_META_PATH, pkgname, XBPS_PKGFILES);
@@ -490,10 +494,12 @@ unpack_archive(prop_dictionary_t pkg_repod, struct archive *ar)
 		rv = ENOMEM;
 		goto out;
 	}
-	if (skip_obsoletes || preserve || !update)
+	if (skip_obsoletes || preserve || (!softreplace && !update))
 		goto out1;
 	/*
-	 * Check for obsolete files.
+	 * Check for obsolete files on:
+	 * 	- Package upgrade.
+	 * 	- Package with "softreplace" keyword.
 	 */
 	old_filesd = prop_dictionary_internalize_from_zfile(pkgfilesd);
 	if (prop_object_type(old_filesd) == PROP_TYPE_DICTIONARY) {
diff --git a/lib/transaction_package_replace.c b/lib/transaction_package_replace.c
index 31d496ae..0f315f0b 100644
--- a/lib/transaction_package_replace.c
+++ b/lib/transaction_package_replace.c
@@ -29,17 +29,20 @@
 #include <string.h>
 #include <errno.h>
 #include <unistd.h>
+#include <libgen.h>
 
 #include "xbps_api_impl.h"
 
 int HIDDEN
 xbps_transaction_package_replace(prop_dictionary_t transd)
 {
+	struct xbps_handle *xhp = xbps_handle_get();
 	prop_array_t replaces, instd_reqby, transd_unsorted;
-	prop_dictionary_t instd, pkg_repod, reppkgd;
+	prop_dictionary_t instd, pkg_repod, reppkgd, filesd;
 	prop_object_t obj;
 	prop_object_iterator_t iter;
 	const char *pattern, *pkgname, *curpkgname, *pkgver, *curpkgver;
+	char *dirc, *buf, *dname;
 	bool instd_auto, sr;
 	size_t idx;
 
@@ -144,7 +147,9 @@ xbps_transaction_package_replace(prop_dictionary_t transd)
 			/*
 			 * Copy requiredby and automatic-install objects
 			 * from replaced package into pkg's dictionary
-			 * for "softreplace" packages.
+			 * for "softreplace" packages. Also externalize
+			 * PKGFILES from package being replaced to remove
+			 * obsolete files.
 			 */
 			sr = false;
 			prop_dictionary_get_bool(pkg_repod, "softreplace", &sr);
@@ -158,6 +163,39 @@ xbps_transaction_package_replace(prop_dictionary_t transd)
 				    "automatic-install", instd_auto);
 				prop_dictionary_set_bool(instd,
 				    "softreplace", true);
+				buf = xbps_xasprintf("%s/%s/metadata/%s/%s",
+				    xhp->rootdir, XBPS_META_PATH, curpkgname,
+				    XBPS_PKGFILES);
+				assert(buf != NULL);
+				filesd = prop_dictionary_internalize_from_zfile(buf);
+				free(buf);
+				assert(filesd != NULL);
+				buf = xbps_xasprintf("%s/%s/metadata/%s/%s",
+				    xhp->rootdir, XBPS_META_PATH, pkgname,
+				    XBPS_PKGFILES);
+				assert(buf != NULL);
+				dirc = strdup(buf);
+				assert(dirc != NULL);
+				dname = dirname(dirc);
+				if (xbps_mkpath(dname, 0755) == -1) {
+					if (errno != EEXIST) {
+						free(buf);
+						prop_object_release(instd);
+						prop_object_iterator_release(iter);
+						return errno;
+					}
+				}
+				if (!prop_dictionary_externalize_to_zfile(filesd, buf)) {
+					free(buf);
+					free(dirc);
+					prop_object_release(filesd);
+					prop_object_release(instd);
+					prop_object_iterator_release(iter);
+					return errno;
+				}
+				prop_object_release(filesd);
+				free(buf);
+				free(dirc);
 			}
 			/*
 			 * Add package dictionary into the transaction and mark