diff --git a/p2p/host/basic/basic_host.go b/p2p/host/basic/basic_host.go
index 7338a41e27..d69751b0d3 100644
--- a/p2p/host/basic/basic_host.go
+++ b/p2p/host/basic/basic_host.go
@@ -631,10 +631,24 @@ func (h *BasicHost) NewStream(ctx context.Context, p peer.ID, pids ...protocol.I
 		}, nil
 	}
 
-	selected, err := msmux.SelectOneOf(pidStrings, s)
-	if err != nil {
+	// Negotiate the protocol in the background, obeying the context.
+	var selected string
+	errCh := make(chan error, 1)
+	go func() {
+		selected, err = msmux.SelectOneOf(pidStrings, s)
+		errCh <- err
+	}()
+	select {
+	case err = <-errCh:
+		if err != nil {
+			s.Reset()
+			return nil, err
+		}
+	case <-ctx.Done():
 		s.Reset()
-		return nil, err
+		// wait for the negotiation to cancel.
+		<-errCh
+		return nil, ctx.Err()
 	}
 
 	selpid := protocol.ID(selected)
diff --git a/p2p/host/basic/basic_host_test.go b/p2p/host/basic/basic_host_test.go
index 2f2ab7624a..3585b01b65 100644
--- a/p2p/host/basic/basic_host_test.go
+++ b/p2p/host/basic/basic_host_test.go
@@ -3,6 +3,7 @@ package basichost
 import (
 	"bytes"
 	"context"
+	"fmt"
 	"io"
 	"reflect"
 	"sync"
@@ -777,6 +778,49 @@ func TestHostAddrChangeDetection(t *testing.T) {
 	}
 }
 
+func TestNegotiationCancel(t *testing.T) {
+	ctx, cancel := context.WithCancel(context.Background())
+	defer cancel()
+
+	h1, h2 := getHostPair(ctx, t)
+	defer h1.Close()
+	defer h2.Close()
+
+	// pre-negotiation so we can make the negotiation hang.
+	h1.Network().SetStreamHandler(func(s network.Stream) {
+		<-ctx.Done() // wait till the test is done.
+		s.Reset()
+	})
+
+	ctx2, cancel2 := context.WithCancel(ctx)
+	defer cancel2()
+
+	errCh := make(chan error, 1)
+	go func() {
+		s, err := h2.NewStream(ctx2, h1.ID(), "/testing")
+		if s != nil {
+			errCh <- fmt.Errorf("expected to fail negotiation")
+			return
+		}
+		errCh <- err
+	}()
+	select {
+	case err := <-errCh:
+		t.Fatal(err)
+	case <-time.After(10 * time.Millisecond):
+		// ok, hung.
+	}
+	cancel2()
+
+	select {
+	case err := <-errCh:
+		require.Equal(t, err, context.Canceled)
+	case <-time.After(500 * time.Millisecond):
+		// failed to cancel
+		t.Fatal("expected negotiation to be canceled")
+	}
+}
+
 func waitForAddrChangeEvent(ctx context.Context, sub event.Subscription, t *testing.T) event.EvtLocalAddressesUpdated {
 	for {
 		select {