diff --git a/usr.bin/sed/compile.c b/usr.bin/sed/compile.c
index 2e3a2ced23c6..a5416ee4429b 100644
--- a/usr.bin/sed/compile.c
+++ b/usr.bin/sed/compile.c
@@ -324,9 +324,17 @@ semicolon:	EATSPACE();
 			if (p == NULL)
 				errx(1,
 				"%lu: %s: unterminated substitute pattern", linenum, fname);
+
+			/* Compile RE with no case sensitivity temporarily */
+			if (*re == '\0')
+				cmd->u.s->re = NULL;
+			else
+				cmd->u.s->re = compile_re(re, 0);
 			--p;
 			p = compile_subst(p, cmd->u.s);
 			p = compile_flags(p, cmd->u.s);
+
+			/* Recompile RE with case sensitivity from "I" flag if any */
 			if (*re == '\0')
 				cmd->u.s->re = NULL;
 			else