Index: references/node_reference/node_reference.module
===================================================================
--- references/node_reference/node_reference.module	(revision 823)
+++ references/node_reference/node_reference.module	(working copy)
@@ -870,33 +870,32 @@
  *
  * When preparing a translation, load any translations of existing
  * references.
- * @todo Correctly implement after http://drupal.org/node/362021 is fixed.
  */
-function node_reference_field_prepare_translation($entity_type, $entity, $field, $instance, $langcode, &$items) {
-  $addition = array();
-  $addition[$field['field_name']] = array();
+function node_reference_field_prepare_translation($entity_type, $entity, $field, $instance, $langcode, &$items, $source_entity, $source_langcode) {
+  $source_language = $entity->translation_source->language;
   if (isset($entity->translation_source->$field['field_name'])
   && is_array($entity->translation_source->$field['field_name'])) {
-    foreach ($entity->translation_source->$field['field_name'] as $key => $reference) {
-      $reference_node = node_load($reference['nid']);
-      // Test if the referenced node type is translatable and, if so,
-      // load translations if the reference is not for the current language.
-      // We can assume the translation module is present because it invokes 'prepare translation'.
-      if (translation_supported_type($reference_node->type)
-      && !empty($reference_node->language)
-      && $reference_node->language != $node->language
-      && $translations = translation_node_get_translations($reference_node->tnid)) {
-        // If there is a translation for the current language, use it.
-        $addition[$field['field_name']][] = array(
-          'nid' => isset($translations[$node->language])
-            ? $translations[$node->language]->nid
-            : $reference['nid'],
-        );
-      }
-    }
+  	$references = $entity->translation_source->$field['field_name'];
+  	if (key_exists($source_language, $references)) {
+	  	foreach ($references[$source_language] as $key => $reference) {
+	      $reference_node = node_load($reference['nid']);
+	      // Test if the referenced node type is translatable and, if so,
+	      // load translations if the reference is not for the current language.
+	      // We can assume the translation module is present because it invokes 'prepare translation'.
+	      if (translation_supported_type($reference_node->type)
+	      && !empty($reference_node->language)
+	      && $reference_node->language != $entity->language
+	      && $translations = translation_node_get_translations($reference_node->tnid)) {
+	        // If there is a translation for the current language, use it.
+	        $items[$key] = array(
+	          'nid' => isset($translations[$entity->language])
+	            ? $translations[$entity->language]->nid
+	            : $reference['nid'],
+	        );
+	      }
+	    }
+  	}
   }
-
-  return $addition;
 }
 
 /**