--- a/modules/libjar/nsJARURI.cpp
+++ b/modules/libjar/nsJARURI.cpp
@@ -283,16 +283,25 @@ nsJARURI::SetSpecWithBase(const nsACStri
     aSpec.BeginReading(begin);
     aSpec.EndReading(end);
 
     while (begin != end && *begin != ':')
         ++begin;
 
     ++begin; // now we're past the "jar:"
 
+    nsACString::const_iterator frag = begin;
+    while (frag != end && *frag != '#') {
+        ++frag;
+    }
+    if (frag != end) {
+        // there was a fragment, mark that as the end of the URL to scan
+        end = frag;
+    }
+
     // Search backward from the end for the "!/" delimiter. Remember, jar URLs
     // can nest, e.g.:
     //    jar:jar:http://www.foo.com/bar.jar!/a.jar!/b.html
     // This gets the b.html document from out of the a.jar file, that's 
     // contained within the bar.jar file.
     // Also, the outermost "inner" URI may be a relative URI:
     //   jar:../relative.jar!/a.html
 
@@ -307,16 +316,17 @@ nsJARURI::SetSpecWithBase(const nsACStri
     if (NS_FAILED(rv)) return rv;
 
     NS_TryToSetImmutable(mJARFile);
 
     // skip over any extra '/' chars
     while (*delim_end == '/')
         ++delim_end;
 
+    aSpec.EndReading(end); // set to the original 'end'
     return SetJAREntry(Substring(delim_end, end));
 }
 
 NS_IMETHODIMP
 nsJARURI::GetPrePath(nsACString &prePath)
 {
     prePath = NS_JAR_SCHEME;
     return NS_OK;

new file mode 100644
--- /dev/null
+++ b/modules/libjar/test/unit/test_bug1328865.js
@@ -0,0 +1,24 @@
+/* This Source Code Form is subject to the terms of the Mozilla Public
+ * License, v. 2.0. If a copy of the MPL was not distributed with this
+ * file, You can obtain one at http://mozilla.org/MPL/2.0/. */
+
+"use strict";
+
+var Cc = Components.classes;
+var Ci = Components.interfaces;
+var Cu = Components.utils;
+Cu.import("resource://gre/modules/NetUtil.jsm");
+
+// Check that reading non existant inner jars results in the right error
+
+function run_test() {
+  var file = do_get_file("data/test_bug597702.zip");
+  var ios = Cc["@mozilla.org/network/io-service;1"].
+            getService(Ci.nsIIOService);
+  var outerJarBase = "jar:" + ios.newFileURI(file).spec + "!/";
+  var goodSpec = "jar:" + outerJarBase + "inner.jar!/hello#!/ignore%20this%20part";
+  var goodChannel = NetUtil.newChannel({uri: goodSpec, loadUsingSystemPrincipal: true});
+  var instr = goodChannel.open2();
+
+  ok(!!instr, "Should be able to open channel");
+}

--- a/modules/libjar/test/unit/xpcshell.ini
+++ b/modules/libjar/test/unit/xpcshell.ini
@@ -36,8 +36,9 @@ skip-if = os == "mac"
 [test_corrupt_541828.js]
 [test_corrupt_1211262.js]
 [test_crx.js]
 [test_dirjar_bug525755.js]
 [test_jarinput_stream_zipreader_reference.js]
 [test_not_found.js]
 [test_uncompressed.js]
 [test_umlaute.js]
+[test_bug1328865.js]