diff --git a/NEWS b/NEWS
index 4769e0f0e..46ec224cc 100644
--- a/NEWS
+++ b/NEWS
@@ -3,6 +3,12 @@ For full details, see the git log at: https://github.com/ksh93/ksh
 
 Any uppercase BUG_* names are modernish shell bug IDs.
 
+2020-09-24:
+
+- An omission made it impossible to turn off brace expansion within command
+  substitutions (`...`, $(...) or ${ ...; }) as the code for parsing these
+  did not check the -B/braceexpand option. This check has now been added.
+
 2020-09-23:
 
 - Fixed a crash that could occur when running a pipeline containing
diff --git a/src/cmd/ksh93/include/version.h b/src/cmd/ksh93/include/version.h
index fea99fb82..1c08d8894 100644
--- a/src/cmd/ksh93/include/version.h
+++ b/src/cmd/ksh93/include/version.h
@@ -17,4 +17,4 @@
 *                  David Korn <dgk@research.att.com>                   *
 *                                                                      *
 ***********************************************************************/
-#define SH_RELEASE	"93u+m 2020-09-23"
+#define SH_RELEASE	"93u+m 2020-09-24"
diff --git a/src/cmd/ksh93/sh/macro.c b/src/cmd/ksh93/sh/macro.c
index 69319f1d5..3a8ef035d 100644
--- a/src/cmd/ksh93/sh/macro.c
+++ b/src/cmd/ksh93/sh/macro.c
@@ -2489,10 +2489,11 @@ static void endfield(register Mac_t *mp,int split)
 		{
 			mp->shp->argaddr = 0;
 #if SHOPT_BRACEPAT
-			count = path_generate(mp->shp,argp,mp->arghead);
-#else
-			count = path_expand(mp->shp,argp->argval,mp->arghead);
+			if(sh_isoption(SH_BRACEEXPAND))
+				count = path_generate(mp->shp,argp,mp->arghead);
+			else
 #endif /* SHOPT_BRACEPAT */
+				count = path_expand(mp->shp,argp->argval,mp->arghead);
 			if(count)
 				mp->fields += count;
 			else if(split)	/* pattern is null string */
diff --git a/src/cmd/ksh93/tests/options.sh b/src/cmd/ksh93/tests/options.sh
index f0399a47c..b0bc12879 100755
--- a/src/cmd/ksh93/tests/options.sh
+++ b/src/cmd/ksh93/tests/options.sh
@@ -547,5 +547,19 @@ print $'alias print=:\nprint foobar' > dotfile
 "$SHELL" -m -c '[[ -o monitor ]]' || err_exit 'option -m on command line does not work'
 "$SHELL" -o monitor -c '[[ -o monitor ]]' || err_exit 'option -o monitor on command line does not work'
 
+# ======
+# Brace expansion could not be turned off in command substitutions (rhbz#1078698)
+set -B
+expect='test{1,2}'
+actual=$(set +B; echo `echo test{1,2}`)
+[[ $actual == "$expect" ]] || err_exit 'Brace expansion not turned off in `comsub`' \
+	"(expected $(printf %q "$expect"), got $(printf %q "$actual"))"
+actual=$(set +B; echo $(echo test{1,2}))
+[[ $actual == "$expect" ]] || err_exit 'Brace expansion not turned off in $(comsub)' \
+	"(expected $(printf %q "$expect"), got $(printf %q "$actual"))"
+actual=$(set +B; echo ${ echo test{1,2}; })
+[[ $actual == "$expect" ]] || err_exit 'Brace expansion not turned off in ${ comsub; }' \
+	"(expected $(printf %q "$expect"), got $(printf %q "$actual"))"
+
 # ======
 exit $((Errors<125?Errors:125))