--- user_resource.inc	2012-02-25 13:19:50.000000000 +1100
+++ user_resourcenew.inc	2012-02-28 09:09:58.000000000 +1100
@@ -368,7 +368,12 @@ function _user_resource_login($username,
     return services_error(t('Already logged in as !user.', array('!user' => $user->name)), 406);
   }
 
-  user_authenticate(array('name' => $username, 'pass' => $password));
+  if(module_exists('phpass')){
+    phpass_user_authenticate(array('name' => $username, 'pass' => $password));
+  }
+  else{
+    user_authenticate(array('name' => $username, 'pass' => $password));
+  }
 
   if (isset($user->uid) && $user->uid) {
     // Regenerate the session ID to prevent against session fixation attacks.