diff --git a/entity.test b/entity.test
index 6f8987e..53fdcf7 100644
--- a/entity.test
+++ b/entity.test
@@ -863,6 +863,32 @@ class EntityMetadataIntegrationTestCase extends DrupalWebTestCase {
     // Test setting tags by using ids.
     $wrapper->field_tags->set(array(2));
     $this->assertEqual($wrapper->field_tags[0]->tid->value(), 2, 'Specified tags by a list of term ids.');
+    
+    // Test setting entity references to NULL.
+    // Create a taxonomy term field for that purpose.
+    $field_name = drupal_strtolower($this->randomName() . '_field_name');
+    $field = array('field_name' => $field_name, 'type' => 'taxonomy_term_reference', 'cardinality' => 1);
+    $field = field_create_field($field);
+    $field_id = $field['id'];
+    $field_instance = array(
+      'field_name' => $field_name,
+      'entity_type' => 'node',
+      'bundle' => 'article',
+      'label' => $this->randomName() . '_label',
+      'description' => $this->randomName() . '_description',
+      'weight' => mt_rand(0, 127),
+      'widget' => array(
+        'type' => 'options_select',
+        'label' => 'Test term field',
+      )
+    );
+    field_create_instance($field_instance);
+    $term_field[LANGUAGE_NONE][0]['tid'] = $term->tid;
+    $node = $this->drupalCreateNode(array('title' => 'foo', 'type' => 'article', $field_name => $term_field));
+    $wrapper = entity_metadata_wrapper('node', $node);
+    $wrapper->$field_name->set(NULL);
+    $termref = $wrapper->$field_name->value();
+    $this->assertNull($termref, 'Unset of a term reference successful.');
   }
 
   /**
diff --git a/includes/entity.wrapper.inc b/includes/entity.wrapper.inc
index 30418c7..faad0a2 100644
--- a/includes/entity.wrapper.inc
+++ b/includes/entity.wrapper.inc
@@ -604,6 +604,10 @@ class EntityDrupalWrapper extends EntityStructureWrapper {
       $id = entity_id($this->type, $data);
       $this->id = isset($id) ? $id : FALSE;
     }
+    elseif (!isset($data)){
+      $this->id = FALSE;
+      $this->data = NULL;
+    }
   }
 
   /**
@@ -705,7 +709,11 @@ class EntityDrupalWrapper extends EntityStructureWrapper {
       $this->updateParent($this);
     }
     elseif ($previous_id != $this->id) {
-      $this->updateParent($this->id);
+      $this->id === FALSE ? $this->updateParent(NULL) : $this->updateParent($this->id);
+    }
+    // Update the parent also if NULL references are set.
+    elseif (empty($this->id)) {
+      $this->updateParent(NULL);
     }
     return $this;
   }