diff --git a/scikits/image/data/palette_color.png b/scikits/image/data/palette_color.png
new file mode 100644
index 00000000..4f5878af
Binary files /dev/null and b/scikits/image/data/palette_color.png differ
diff --git a/scikits/image/data/palette_gray.png b/scikits/image/data/palette_gray.png
new file mode 100644
index 00000000..a47b5d54
Binary files /dev/null and b/scikits/image/data/palette_gray.png differ
diff --git a/scikits/image/io/pil_imread.py b/scikits/image/io/pil_imread.py
index 421f45c7..10d273ca 100644
--- a/scikits/image/io/pil_imread.py
+++ b/scikits/image/io/pil_imread.py
@@ -34,6 +34,34 @@ def imread(fname, flatten=False, dtype=None):
                           " instructions.")
 
     im = Image.open(fname)
+    if im.mode == 'P':
+        if palette_is_grayscale(im):
+            im = im.convert('L')
+        else:
+            im = im.convert('RGB')
     if flatten and not im.mode in ('1', 'L', 'I', 'F', 'I;16', 'I;16L', 'I;16B'):
         im = im.convert('F')
     return np.array(im, dtype=dtype)
+
+
+def palette_is_grayscale(pil_image):
+    """Return True if PIL image in palette mode is grayscale.
+
+    Parameters
+    ----------
+    pil_image : PIL image
+        PIL Image that is in Palette mode.
+
+    Returns
+    -------
+    is_grayscale : bool
+        True if all colors in image palette are gray.
+    """
+    assert pil_image.mode == 'P'
+    # get palette as an array with R, G, B columns
+    palette = np.asarray(pil_image.getpalette()).reshape((256, 3))
+    # Not all palette colors are used; unused colors have junk values.
+    start, stop = pil_image.getextrema()
+    valid_palette = palette[start:stop]
+    # Image is grayscale if channel differences (R - G and G - B) are all zero.
+    return np.allclose(np.diff(valid_palette), 0)
diff --git a/scikits/image/io/tests/test_imread.py b/scikits/image/io/tests/test_imread.py
index 86aa8fe6..2e9a2f7a 100644
--- a/scikits/image/io/tests/test_imread.py
+++ b/scikits/image/io/tests/test_imread.py
@@ -3,6 +3,7 @@ import numpy as np
 
 from scikits.image import data_dir
 from scikits.image.io import imread
+from scikits.image.io.pil_imread import palette_is_grayscale
 
 def test_imread_flatten():
     # a color image is flattened and returned as float32
@@ -15,3 +16,16 @@ def test_imread_flatten():
 def test_imread_dtype():
     img = imread(os.path.join(data_dir, 'camera.png'), dtype=np.float64)
     assert img.dtype == np.float64
+
+def test_imread_palette():
+    img = imread(os.path.join(data_dir, 'palette_gray.png'))
+    assert img.ndim == 2
+    img = imread(os.path.join(data_dir, 'palette_color.png'))
+    assert img.ndim == 3
+
+def test_palette_is_gray():
+    from PIL import Image
+    gray = Image.open(os.path.join(data_dir, 'palette_gray.png'))
+    assert palette_is_grayscale(gray)
+    color = Image.open(os.path.join(data_dir, 'palette_color.png'))
+    assert not palette_is_grayscale(color)