diff --git a/system/libraries/Image_lib.php b/system/libraries/Image_lib.php
index 899b995..ef41878 100644
--- a/system/libraries/Image_lib.php
+++ b/system/libraries/Image_lib.php
@@ -1320,6 +1320,13 @@
 				imagestring($src_img, $this->wm_font_size, $x_shad, $y_shad, $this->wm_text, $drp_color);
 				imagestring($src_img, $this->wm_font_size, $x_axis, $y_axis, $this->wm_text, $txt_color);
 			}
+
+			// We can preserve transparency for PNG images
+			if ($this->image_type === 3)
+			{
+				imagealphablending($src_img, FALSE);
+				imagesavealpha($src_img, TRUE);
+			}
 		}
 
 		// Output the final image
diff --git a/user_guide_src/source/changelog.rst b/user_guide_src/source/changelog.rst
index e2f780c..b3fbe71 100644
--- a/user_guide_src/source/changelog.rst
+++ b/user_guide_src/source/changelog.rst
@@ -172,10 +172,11 @@
 	 -  Added function remove() to remove a cart item, updating with quantity of 0 seemed like a hack but has remained to retain compatibility.
    -  :doc:`Image Manipulation library <libraries/image_lib>` changes include:
 	 -  The initialize() method now only sets existing class properties.
-	 -  Added support for 3-length hex color values for wm_font_color and wm_shadow_color properties, as well as validation for them.
-	 -  Class properties wm_font_color, wm_shadow_color and wm_use_drop_shadow are now protected, to avoid breaking the text_watermark() method if they are set manually after initialization.
-	 -  If property maintain_ratio is set to TRUE, image_reproportion() now doesn't need both width and height to be specified.
-	 -  Property maintain_ratio is now taken into account when resizing images using ImageMagick library
+	 -  Added support for 3-length hex color values for *wm_font_color* and *wm_shadow_color* properties, as well as validation for them.
+	 -  Class properties *wm_font_color*, *wm_shadow_color* and *wm_use_drop_shadow* are now protected, to avoid breaking the ``text_watermark()`` method if they are set manually after initialization.
+	 -  If property *maintain_ratio* is set to TRUE, ``image_reproportion()`` now doesn't need both width and height to be specified.
+	 -  Property *maintain_ratio* is now taken into account when resizing images using ImageMagick library.
+	 -  Added support for maintaining transparency for PNG images in method ``text_watermark()``.
    -  :doc:`Form Validation library <libraries/form_validation>` changes include:
 	 -  Added method error_array() to return all error messages as an array.
 	 -  Added method set_data() to set an alternative data array to be validated instead of the default $_POST.