diff --git a/CHANGELOG.md b/CHANGELOG.md
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,4 +1,24 @@
 
+0.4.1
+=====
+
+Bug fixes:
+ * Fixed a bug that caused breakTokens to diverge for lines with
+   indentation longer than the indentation width when
+   preserveIndentation was enabled. (Thanks Callum Oakley.) The
+   resulting fix does the following:
+   * When breakLongWords is enabled, this change reduces the indentation
+     of the indented lines to result in lines that are no longer than
+     the wrap limit, so they will have reduced indentation and word
+     fragments. This is a trade-off with other options that are open to
+     evaluation.
+   * When breakLongWords is disabled, this change reduces the
+     indentation of the indented lines and leaves whole words, unbroken,
+     on them, resulting in lines that are longer than the indentation
+     limit. This behavior is similar to non-indented lines with
+     over-long tokens. This is also a trade-off with other options that
+     are open to evaluation.
+
 0.4
 ===
 
diff --git a/src/Text/Wrap.hs b/src/Text/Wrap.hs
--- a/src/Text/Wrap.hs
+++ b/src/Text/Wrap.hs
@@ -82,9 +82,9 @@
                 Nothing -> [firstLineText]
                 Just rest -> firstLineText : go lim rest
         (indent, modifiedText) = if preserveIndentation settings
-                         then let i = T.takeWhile isSpace t
-                              in (i, T.drop (T.length i) t)
-                         else (T.empty, t)
+                                 then let i = T.takeWhile isSpace t
+                                      in (T.take (limit - 1) i, T.drop (T.length i) t)
+                                 else (T.empty, t)
         result = go (limit - T.length indent) (tokenize modifiedText)
     in (indent <>) <$> result
 
diff --git a/tests/Main.hs b/tests/Main.hs
--- a/tests/Main.hs
+++ b/tests/Main.hs
@@ -50,3 +50,17 @@
         `shouldBe` [ "  Hello", "  Crazy", "  World", "  !"
                    , "  Reall", "  yLong", "  Token"
                    ]
+
+    it "gracefully handles indentation longer than the target width when breaking is off" $ do
+      let s = defaultWrapSettings { breakLongWords = False
+                                  , preserveIndentation = True
+                                  }
+      wrapTextToLines s 4 "           foo bar"
+        `shouldBe` ["   foo", "   bar"]
+
+    it "gracefully handles indentation longer than the target width when breaking is on" $ do
+      let s = defaultWrapSettings { breakLongWords = True
+                                  , preserveIndentation = True
+                                  }
+      wrapTextToLines s 4 "           foo bar"
+        `shouldBe` ["   f", "   o", "   o", "   b", "   a", "   r"]
diff --git a/word-wrap.cabal b/word-wrap.cabal
--- a/word-wrap.cabal
+++ b/word-wrap.cabal
@@ -1,5 +1,5 @@
 name:                word-wrap
-version:             0.4
+version:             0.4.1
 synopsis:            A library for word-wrapping
 description:         A library for wrapping long lines of text.
 license:             BSD3