diff --git a/lib/main.js b/lib/main.js
index 1d914575..e1c9b16e 100644
--- a/lib/main.js
+++ b/lib/main.js
@@ -22,28 +22,41 @@ function parse (src) {
     const key = match[1]
 
     // Default undefined or null to empty string
-    let value = (match[2] || '')
+    const unProcessedValue = (match[2] || '')
+    const value = parseValue(unProcessedValue)
+    // Add to object
+    obj[key] = value
+  }
 
-    // Remove whitespace
-    value = value.trim()
+  return obj
+}
 
-    // Check if double quoted
-    const maybeQuote = value[0]
+function parseValue (value) {
+  // Remove whitespace
+  const trimmedValue = value.trim()
+  // Check if double quoted
+  const maybeQuote = trimmedValue[0]
+  // Remove surrounding quotes
+  const valueNoQuotes = trimmedValue.replace(/^(['"`])([\s\S]*)\1$/mg, '$2')
 
-    // Remove surrounding quotes
-    value = value.replace(/^(['"`])([\s\S]*)\1$/mg, '$2')
+  return unescapeValue(valueNoQuotes, maybeQuote)
+}
 
-    // Expand newlines if double quoted
-    if (maybeQuote === '"') {
-      value = value.replace(/\\n/g, '\n')
-      value = value.replace(/\\r/g, '\r')
-    }
+function unescapeCharacters (value) {
+  return value.replace(/\\([^$])/g, '$1')
+}
 
-    // Add to object
-    obj[key] = value
-  }
+function expandNewLines (value) {
+  return value.replace(/\\n/g, '\n').replace(/\\r/g, '\r')
+}
 
-  return obj
+function unescapeValue (value, maybeQuote) {
+  // Expand newlines if double quoted
+  if (maybeQuote === '"') {
+    return unescapeCharacters(expandNewLines(value))
+  } else {
+    return unescapeCharacters(value)
+  }
 }
 
 function _log (message) {
diff --git a/tests/.env-escaping b/tests/.env-escaping
new file mode 100644
index 00000000..2af435ad
--- /dev/null
+++ b/tests/.env-escaping
@@ -0,0 +1,7 @@
+ESCAPE_CHAR=ab\cde
+ESCAPE_NEWLINE_NO_QUOTE=line1\nline2
+ESCAPE_NEWLINE_IN_DOUBLE_QUOTE="line1\nline2"
+ESCAPE_QUOTES=single quote: \', double quote: \", backtick: \`
+ESCAPE_TAB=\t
+ESCAPE_QUOTES_IN_QUOTES="John said: \"Lets go\""
+ESCAPE_DOLLAR=\$\$\$
diff --git a/tests/test-parse-escaping.js b/tests/test-parse-escaping.js
new file mode 100644
index 00000000..3ff92dcb
--- /dev/null
+++ b/tests/test-parse-escaping.js
@@ -0,0 +1,22 @@
+const fs = require('fs')
+const t = require('tap')
+
+const dotenv = require('../lib/main')
+
+const parsed = dotenv.parse(fs.readFileSync('tests/.env-escaping', { encoding: 'utf8' }))
+
+t.type(parsed, Object, 'should return an object')
+
+t.equal(parsed.ESCAPE_CHAR, 'abcde', 'a "regular" escaped character should not be modified by un-escaping')
+
+t.equal(parsed.ESCAPE_QUOTES, 'single quote: \', double quote: ", backtick: `', 'quote characters can be escaped just like any other "regular" character')
+
+t.equal(parsed.ESCAPE_NEWLINE_NO_QUOTE, 'line1nline2', 'without double quotes `\\n` is un-escaped to `n`')
+
+t.equal(parsed.ESCAPE_NEWLINE_IN_DOUBLE_QUOTE, 'line1\nline2', 'with double quotes `\\n` is expanded to `\n`')
+
+t.equal(parsed.ESCAPE_TAB, 't', '\\t has no special meaning (expansion) in this library')
+
+t.equal(parsed.ESCAPE_QUOTES_IN_QUOTES, 'John said: "Lets go"', 'quotes can be escaped inside quoted dotenv value')
+
+t.equal(parsed.ESCAPE_DOLLAR, '\\$\\$\\$', 'dollar sign is never escaped')
diff --git a/tests/test-parse-multiline.js b/tests/test-parse-multiline.js
index 67e18c40..68c1be90 100644
--- a/tests/test-parse-multiline.js
+++ b/tests/test-parse-multiline.js
@@ -23,9 +23,9 @@ t.equal(parsed.DOUBLE_QUOTES_SPACED, '    double quotes    ', 'respects surround
 
 t.equal(parsed.EXPAND_NEWLINES, 'expand\nnew\nlines', 'expands newlines but only if double quoted')
 
-t.equal(parsed.DONT_EXPAND_UNQUOTED, 'dontexpand\\nnewlines', 'expands newlines but only if double quoted')
+t.equal(parsed.DONT_EXPAND_UNQUOTED, 'dontexpandnnewlines', 'expands newlines but only if double quoted')
 
-t.equal(parsed.DONT_EXPAND_SQUOTED, 'dontexpand\\nnewlines', 'expands newlines but only if double quoted')
+t.equal(parsed.DONT_EXPAND_SQUOTED, 'dontexpandnnewlines', 'expands newlines but only if double quoted')
 
 t.notOk(parsed.COMMENTS, 'ignores commented lines')
 
diff --git a/tests/test-parse.js b/tests/test-parse.js
index 50e95b2c..5504e334 100644
--- a/tests/test-parse.js
+++ b/tests/test-parse.js
@@ -49,9 +49,9 @@ t.equal(parsed.DOUBLE_AND_SINGLE_QUOTES_INSIDE_BACKTICKS, "double \"quotes\" and
 
 t.equal(parsed.EXPAND_NEWLINES, 'expand\nnew\nlines', 'expands newlines but only if double quoted')
 
-t.equal(parsed.DONT_EXPAND_UNQUOTED, 'dontexpand\\nnewlines', 'expands newlines but only if double quoted')
+t.equal(parsed.DONT_EXPAND_UNQUOTED, 'dontexpandnnewlines', 'expands newlines but only if double quoted')
 
-t.equal(parsed.DONT_EXPAND_SQUOTED, 'dontexpand\\nnewlines', 'expands newlines but only if double quoted')
+t.equal(parsed.DONT_EXPAND_SQUOTED, 'dontexpandnnewlines', 'expands newlines but only if double quoted')
 
 t.notOk(parsed.COMMENTS, 'ignores commented lines')