diff --git a/sshuttle/assembler.py b/sshuttle/assembler.py
index 2d09a50..2937335 100644
--- a/sshuttle/assembler.py
+++ b/sshuttle/assembler.py
@@ -42,4 +42,4 @@ import sshuttle.cmdline_options as options  # noqa: E402
 from sshuttle.server import main  # noqa: E402
 main(options.latency_control, options.latency_buffer_size,
      options.auto_hosts, options.to_nameserver,
-     options.auto_nets, options.ttl)
+     options.auto_nets, options.ttl, options.localhost_detector)
diff --git a/sshuttle/client.py b/sshuttle/client.py
index c1cabdb..354c887 100644
--- a/sshuttle/client.py
+++ b/sshuttle/client.py
@@ -6,6 +6,7 @@ import subprocess as ssubprocess
 import os
 import sys
 import platform
+import tempfile
 import psutil
 
 import sshuttle.helpers as helpers
@@ -47,6 +48,10 @@ def got_signal(signum, frame):
 
 _pidname = None
 
+# This variable is set to true if the client and the server appear to
+# be running on the same host.
+_client_server_samehost = False
+
 
 def check_daemon(pidfile):
     global _pidname
@@ -467,6 +472,16 @@ def _main(tcp_listener, udp_listener, fw, ssh_cmd, remotename,
     handlers = []
     debug1('Connecting to server...')
 
+    # The client creates this file. If the server sees the file, it
+    # will delete it before writing SSHUTTLE0001 back to the client.
+    # If the server sees the file, then the server can deduce that it
+    # is running on the same host as the client. If the client sees
+    # that the server deleted the file, then the client can deduce
+    # that it is running on the same host as the server. The
+    # _client_server_samehost variable is set to true when they are on
+    # the same machine.
+    (_, localhost_detector) = tempfile.mkstemp(prefix="sshuttle-localhost-")
+
     try:
         (serverproc, serversock) = ssh.connect(
             ssh_cmd, remotename, python,
@@ -476,7 +491,8 @@ def _main(tcp_listener, udp_listener, fw, ssh_cmd, remotename,
                          auto_hosts=auto_hosts,
                          to_nameserver=to_nameserver,
                          auto_nets=auto_nets,
-                         ttl=ttl))
+                         ttl=ttl,
+                         localhost_detector=localhost_detector))
     except socket.error as e:
         if e.args[0] == errno.EPIPE:
             raise Fatal("failed to establish ssh session (1)")
@@ -586,6 +602,18 @@ def _main(tcp_listener, udp_listener, fw, ssh_cmd, remotename,
                     % (expected, initstring))
     log('Connected to server.')
     sys.stdout.flush()
+
+    # If the server couldn't delete our localhost_detector file, then
+    # the server is running on a different machine.
+    global _client_server_samehost
+    if os.path.exists(localhost_detector):
+        debug2("Client and server appear to be running on different machines.")
+        _client_server_samehost = False
+        os.remove(localhost_detector)  # cleanup
+    else:
+        debug1("Client and server are running on the same machine.")
+        _client_server_samehost = True
+
     if daemon:
         daemonize()
         log('daemonizing (%s).' % _pidname)
diff --git a/sshuttle/server.py b/sshuttle/server.py
index 645252b..1d443e8 100644
--- a/sshuttle/server.py
+++ b/sshuttle/server.py
@@ -16,6 +16,8 @@ from sshuttle.ssnet import Handler, Proxy, Mux, MuxWrapper
 from sshuttle.helpers import b, log, debug1, debug2, debug3, Fatal, \
     resolvconf_random_nameserver, which, get_env
 
+_client_server_samehost = False
+
 
 def _ipmatch(ipstr):
     # FIXME: IPv4 only
@@ -273,7 +275,7 @@ class UdpProxy(Handler):
 
 
 def main(latency_control, latency_buffer_size, auto_hosts, to_nameserver,
-         auto_nets, ttl):
+         auto_nets, ttl, localhost_detector):
     try:
         helpers.logprefix = ' s: '
         debug1('Starting server with Python version %s'
@@ -284,6 +286,16 @@ def main(latency_control, latency_buffer_size, auto_hosts, to_nameserver,
             import sshuttle.ssnet as ssnet
             ssnet.LATENCY_BUFFER_SIZE = latency_buffer_size
 
+        # The client writes this file to the local machine. If we can see
+        # it, we delete it prior to send the synchronization header. The
+        # client can then determine if the server and client are running
+        # on the same machine by checking for the presence of the file.
+        global _client_server_samehost
+        if os.path.exists(localhost_detector):
+            debug3("Deleted the localhost_detector created by the client.\n")
+            os.remove(localhost_detector)
+            _client_server_samehost = True
+
         # synchronization header
         sys.stdout.write('\0\0SSHUTTLE0001')
         sys.stdout.flush()