diff --git a/paypalhttp/http_client.py b/paypalhttp/http_client.py
index f1422db..6b69e3e 100644
--- a/paypalhttp/http_client.py
+++ b/paypalhttp/http_client.py
@@ -69,6 +69,7 @@ def map_headers(self, raw_headers, formatted_headers):
         return raw_headers
 
     def parse_response(self, response):
+        response.encoding = response.encoding or 'utf-8'
         status_code = response.status_code
 
         if 200 <= status_code <= 299:
diff --git a/paypalhttp/testutils/testharness.py b/paypalhttp/testutils/testharness.py
index fe0fc09..577328c 100644
--- a/paypalhttp/testutils/testharness.py
+++ b/paypalhttp/testutils/testharness.py
@@ -15,7 +15,7 @@ def stub_request_with_empty_reponse(self, request):
     def stub_request_with_response(self, request, response_body="", status=200, content_type="application/json"):
         body = None
         if response_body:
-            if isinstance(response_body, str):
+            if isinstance(response_body, (bytes, str)):
                 body = response_body
             else:
                 body = json.dumps(response_body)
diff --git a/tests/http_client_test.py b/tests/http_client_test.py
index 56d36e3..8cffdf6 100644
--- a/tests/http_client_test.py
+++ b/tests/http_client_test.py
@@ -202,5 +202,18 @@ def test_HttpClient_execute_filesArePreservedInCopy(self):
 
         license.close()
 
+    @responses.activate
+    def test_HttpClient_encoding(self):
+        client = HttpClient(self.environment())
+
+        request = GenericRequest()
+        request.path = "/error"
+        request.verb = "GET"
+        self.stub_request_with_response(
+            request, status=200, response_body=u'{"city": "D\u00fcsseldorf"}'.encode('utf-8'))
+
+        resp = client.execute(request)
+        self.assertEqual(resp.result.city, 'D\u00fcsseldorf')
+
 if __name__ == '__main__':
     unittest.main()