diff --git a/commands.cpp b/commands.cpp
index 81c401d..7d33c68 100644
--- a/commands.cpp
+++ b/commands.cpp
@@ -461,6 +461,25 @@ static std::pair<std::string, std::string> get_file_attributes (const std::strin
 	return std::make_pair(filter_attr, diff_attr);
 }
 
+static bool check_if_blob_is_empty (const std::string& object_id)
+{
+	// git cat-file blob object_id
+
+	std::vector<std::string>	command;
+	command.push_back("git");
+	command.push_back("cat-file");
+	command.push_back("blob");
+	command.push_back(object_id);
+
+	// TODO: do this more efficiently - don't read entire command output into buffer, only read what we need
+	std::stringstream		output;
+	if (!successful_exit(exec_command(command, output))) {
+		throw Error("'git cat-file' failed - is this a Git repository?");
+	}
+
+	return output.get() == std::stringstream::traits_type::eof();
+}
+
 static bool check_if_blob_is_encrypted (const std::string& object_id)
 {
 	// git cat-file blob object_id
@@ -770,6 +789,10 @@ int clean (int argc, const char** argv)
 		return 1;
 	}
 
+	if (file_size == 0 && key_file.get_skip_empty()) {
+		return 0;
+	}
+
 	// We use an HMAC of the file as the encryption nonce (IV) for CTR mode.
 	// By using a hash of the file we ensure that the encryption is
 	// deterministic so git doesn't think the file has changed when it really
@@ -887,6 +910,11 @@ int smudge (int argc, const char** argv)
 	// Read the header to get the nonce and make sure it's actually encrypted
 	unsigned char		header[10 + Aes_ctr_decryptor::NONCE_LEN];
 	std::cin.read(reinterpret_cast<char*>(header), sizeof(header));
+
+	if (std::cin.gcount() == 0 && key_file.get_skip_empty()) {
+		return 0;
+	}
+
 	if (std::cin.gcount() != sizeof(header) || std::memcmp(header, "\0GITCRYPT\0", 10) != 0) {
 		// File not encrypted - just copy it out to stdout
 		std::clog << "git-crypt: Warning: file not encrypted" << std::endl;
@@ -991,6 +1019,7 @@ int init (int argc, const char** argv)
 	std::clog << "Generating key..." << std::endl;
 	Key_file		key_file;
 	key_file.set_key_name(key_name);
+	key_file.set_skip_empty(true);
 	key_file.generate();
 
 	mkdir_parent(internal_key_path);
@@ -1425,6 +1454,7 @@ int keygen (int argc, const char** argv)
 
 	std::clog << "Generating key..." << std::endl;
 	Key_file		key_file;
+	key_file.set_skip_empty(true);
 	key_file.generate();
 
 	if (std::strcmp(key_file_name, "-") == 0) {
@@ -1629,7 +1659,8 @@ int status (int argc, const char** argv)
 
 		if (file_attrs.first == "git-crypt" || std::strncmp(file_attrs.first.c_str(), "git-crypt-", 10) == 0) {
 			// File is encrypted
-			const bool	blob_is_unencrypted = !object_id.empty() && !check_if_blob_is_encrypted(object_id);
+			// If the file is empty, don't consider it unencrypted, because in newly-initialized repos (specifically those with keys with skip_empty set) we don't encrypt empty files. Unfortunately, we can't easily determine here if the key has skip_empty set, so just act like it is. This means we won't notice if an old repo has an empty unencrypted file that should be encrypted. Fortunately, this isn't really a big deal because empty files obviously don't contain anything sensitive in them.
+			const bool	blob_is_unencrypted = !object_id.empty() && !check_if_blob_is_encrypted(object_id) && !check_if_blob_is_empty(object_id);
 
 			if (fix_problems && blob_is_unencrypted) {
 				if (access(filename.c_str(), F_OK) != 0) {
diff --git a/key.cpp b/key.cpp
index d8fa482..082eb79 100644
--- a/key.cpp
+++ b/key.cpp
@@ -232,6 +232,11 @@ void		Key_file::load_header (std::istream& in)
 				key_name.clear();
 				throw Malformed();
 			}
+		} else if (field_id == HEADER_FIELD_SKIP_EMPTY) {
+			if (field_len != 0) {
+				throw Malformed();
+			}
+			skip_empty = true;
 		} else if (field_id & 1) { // unknown critical field
 			throw Incompatible();
 		} else {
@@ -256,6 +261,10 @@ void		Key_file::store (std::ostream& out) const
 		write_be32(out, key_name.size());
 		out.write(key_name.data(), key_name.size());
 	}
+	if (skip_empty) {
+		write_be32(out, HEADER_FIELD_SKIP_EMPTY);
+		write_be32(out, 0);
+	}
 	write_be32(out, HEADER_FIELD_END);
 	for (Map::const_iterator it(entries.begin()); it != entries.end(); ++it) {
 		it->second.store(out);
diff --git a/key.hpp b/key.hpp
index 2695581..557ec2e 100644
--- a/key.hpp
+++ b/key.hpp
@@ -83,18 +83,23 @@ struct Key_file {
 
 	void				set_key_name (const char* k) { key_name = k ? k : ""; }
 	const char*			get_key_name () const { return key_name.empty() ? 0 : key_name.c_str(); }
+
+	void				set_skip_empty (bool v) { skip_empty = v; }
+	bool				get_skip_empty () const { return skip_empty; }
 private:
 	typedef std::map<uint32_t, Entry, std::greater<uint32_t> > Map;
 	enum { FORMAT_VERSION = 2 };
 
 	Map				entries;
 	std::string			key_name;
+	bool				skip_empty = false;
 
 	void				load_header (std::istream&);
 
 	enum {
 		HEADER_FIELD_END	= 0,
-		HEADER_FIELD_KEY_NAME	= 1
+		HEADER_FIELD_KEY_NAME	= 1,
+		HEADER_FIELD_SKIP_EMPTY	= 3	// If this field is present, empty files are left unencrypted (see issue #53)
 	};
 	enum {
 		KEY_FIELD_END		= 0,