diff --git a/xpcom/components/nsCategoryManager.cpp b/xpcom/components/nsCategoryManager.cpp
index 6efed14e216c..4e2946e5100d 100644
--- a/xpcom/components/nsCategoryManager.cpp
+++ b/xpcom/components/nsCategoryManager.cpp
@@ -624,16 +624,28 @@ nsCategoryManager::AddCategoryEntry( const char *aCategoryName,
   if (!category)
     return NS_ERROR_OUT_OF_MEMORY;
 
+  // We will need the return value of AddLeaf even if the called doesn't want it
+  char *oldEntry = nsnull;
+
   nsresult rv = category->AddLeaf(aEntryName,
                                   aValue,
                                   aPersist,
                                   aReplace,
-                                  _retval,
+                                  &oldEntry,
                                   &mArena);
 
   if (NS_SUCCEEDED(rv)) {
+    if (oldEntry) {
+      NotifyObservers(NS_XPCOM_CATEGORY_ENTRY_REMOVED_OBSERVER_ID,
+                      aCategoryName, oldEntry);
+    }
     NotifyObservers(NS_XPCOM_CATEGORY_ENTRY_ADDED_OBSERVER_ID,
                     aCategoryName, aEntryName);
+
+    if (_retval)
+      *_retval = oldEntry;
+    else if (oldEntry)
+      nsMemory::Free(oldEntry);
   }
 
   return rv;
diff --git a/xpcom/tests/unit/test_bug374754.js b/xpcom/tests/unit/test_bug374754.js
new file mode 100644
index 000000000000..f0cf04d8fc80
--- /dev/null
+++ b/xpcom/tests/unit/test_bug374754.js
@@ -0,0 +1,58 @@
+const Cc = Components.classes;
+const Ci = Components.interfaces;
+
+var addedTopic = "xpcom-category-entry-added";
+var removedTopic = "xpcom-category-entry-removed";
+var testCategory = "bug-test-category";
+var testEntry = "@mozilla.org/bug-test-entry;1";
+
+var result = "";
+var expected = "add remove add remove ";
+var timer;
+
+var observer = {
+  QueryInterface: function(iid) {
+    if (iid.equals(Ci.nsISupports) || iid.equals(Ci.nsIObserver))
+      return this;
+
+    throw Components.results.NS_ERROR_NO_INTERFACE;
+  },
+
+  observe: function(subject, topic, data) {
+    if (topic == "timer-callback") {
+      do_check_eq(result, expected);
+
+      var observerService = Cc["@mozilla.org/observer-service;1"].getService(Ci.nsIObserverService);
+      observerService.removeObserver(this, addedTopic);
+      observerService.removeObserver(this, removedTopic);
+
+      do_test_finished();
+
+      timer = null;
+    }
+
+    if (subject.QueryInterface(Ci.nsISupportsCString).data != testEntry || data != testCategory)
+      return;
+
+    if (topic == addedTopic)
+      result += "add ";
+    else if (topic == removedTopic)
+      result += "remove ";
+  }
+};
+
+function run_test() {
+  do_test_pending();
+
+  var observerService = Cc["@mozilla.org/observer-service;1"].getService(Ci.nsIObserverService);
+  observerService.addObserver(observer, addedTopic, false);
+  observerService.addObserver(observer, removedTopic, false);
+
+  var categoryManager = Cc["@mozilla.org/categorymanager;1"].getService(Ci.nsICategoryManager);
+  categoryManager.addCategoryEntry(testCategory, testEntry, testEntry, false, true);
+  categoryManager.addCategoryEntry(testCategory, testEntry, testEntry, false, true);
+  categoryManager.deleteCategoryEntry(testCategory, testEntry, false);
+
+  timer = Cc["@mozilla.org/timer;1"].createInstance(Ci.nsITimer);
+  timer.init(observer, 0, timer.TYPE_ONE_SHOT);
+}