diff --git a/src/autocomplete.js b/src/autocomplete.js
index 520c74ec070..1076c157da6 100644
--- a/src/autocomplete.js
+++ b/src/autocomplete.js
@@ -1029,7 +1029,6 @@ class FilteredList {
     
     filterCompletions(items, needle) {
         var results = [];
-        var upper = needle.toUpperCase();
         var lower = needle.toLowerCase();
         loop: for (var i = 0, item; item = items[i]; i++) {
             var caption = (!this.ignoreCaption && item.caption) || item.value || item.snippet;
@@ -1043,23 +1042,32 @@ class FilteredList {
                 if (needle !== caption.substr(0, needle.length))
                     continue loop;
             } else {
+                var captionLower = caption.toLowerCase();
                 /**
                  * It is for situation then, for example, we find some like 'tab' in item.value="Check the table"
                  * and want to see "Check the TABle" but see "Check The tABle".
                  */
-                var fullMatchIndex = caption.toLowerCase().indexOf(lower);
+                var fullMatchIndex = captionLower.indexOf(lower);
                 if (fullMatchIndex > -1) {
                     penalty = fullMatchIndex;
+                    for (var j = 0; j < needle.length; j++) {
+                        index = fullMatchIndex + j;
+                        // Adding a penalty on case mismatch
+                        if ((lower[j] == needle[j]) != (captionLower[index] == caption[index])) {
+                            penalty += 3;
+                        }
+                    }
                 } else {
                     // caption char iteration is faster in Chrome but slower in Firefox, so lets use indexOf
                     for (var j = 0; j < needle.length; j++) {
-                        // TODO add penalty on case mismatch
-                        var i1 = caption.indexOf(lower[j], lastIndex + 1);
-                        var i2 = caption.indexOf(upper[j], lastIndex + 1);
-                        index = (i1 >= 0) ? ((i2 < 0 || i1 < i2) ? i1 : i2) : i2;
+                        index = captionLower.indexOf(lower[j], lastIndex + 1);
                         if (index < 0)
                             continue loop;
                         distance = index - lastIndex - 1;
+                        // Adding a penalty on case mismatch
+                        if ((lower[j] == needle[j]) != (captionLower[index] == caption[index])) {
+                            penalty += 3;
+                        }
                         if (distance > 0) {
                             // first char mismatch should be more sensitive
                             if (lastIndex === -1)
diff --git a/src/autocomplete_test.js b/src/autocomplete_test.js
index b48ec080b21..f5ef2785ce7 100644
--- a/src/autocomplete_test.js
+++ b/src/autocomplete_test.js
@@ -1542,6 +1542,49 @@ module.exports = {
 
         // Popup should be closed now
         assert.equal(completer.popup.isOpen, false); 
+    },
+    "test: penalty on case mismatch": function (done) {
+        var editor = initEditor("");
+        editor.completers = [
+            {
+                getCompletions: function (editor, session, pos, prefix, callback) {
+                    var completions = [
+                        {
+                            caption: "array",
+                            value: "array"
+                        }, {
+                            caption: "aRray",
+                            value: "aRray"
+                        }
+                    ];
+                    callback(null, completions);
+                }
+            }
+        ];
+        
+        sendKey("R");
+        var popup = editor.completer.popup;
+
+        check(function() {
+            assert.equal(popup.data.length, 2);
+            assert.equal(popup.container.querySelector(".ace_selected").textContent.trim(), "aRray");
+
+            sendKey("y");
+
+            check(function() {
+                assert.equal(popup.container.querySelector(".ace_selected").textContent.trim(), "aRray");
+
+                editor.destroy();
+                editor.container.remove();
+                done();
+            });
+        });
+    
+        function check(callback) {
+            setTimeout(function wait() {
+                callback();
+            }, 10);
+        }
     }
 };