diff --git a/opm/autodiff/AutoDiffMatrix.hpp b/opm/autodiff/AutoDiffMatrix.hpp
index 330e22e6c..4c62c99c1 100644
--- a/opm/autodiff/AutoDiffMatrix.hpp
+++ b/opm/autodiff/AutoDiffMatrix.hpp
@@ -330,10 +330,11 @@ namespace Opm
 	{
 	    assert(lhs.type_ == D);
 	    assert(rhs.type_ == D);
-	    AutoDiffMatrix retval = lhs;
-	    for (int r = 0; r < lhs.rows_; ++r) {
-		retval.d_.diagonal().array() *= rhs.d_.diagonal().array();
-	    }
+	    AutoDiffMatrix retval;
+	    retval.type_ = D;
+	    retval.rows_ = lhs.rows_;
+	    retval.cols_ = rhs.cols_;
+	    retval.d_ = (lhs.d_.diagonal().array() * rhs.d_.diagonal().array()).matrix().asDiagonal();
 	    return retval;
 	}
 
diff --git a/tests/test_autodiffmatrix.cpp b/tests/test_autodiffmatrix.cpp
index 03a7c09a4..9b2bc2d8b 100644
--- a/tests/test_autodiffmatrix.cpp
+++ b/tests/test_autodiffmatrix.cpp
@@ -173,3 +173,51 @@ BOOST_AUTO_TEST_CASE(AdditionOps)
     BOOST_CHECK(x == ss);
 }
 
+BOOST_AUTO_TEST_CASE(MultOps)
+{
+    // Setup.
+    Mat z = Mat(AutoDiffMatrix::ZeroMatrix, 3);
+    Sp zs(3,3);
+
+    Mat i = Mat(AutoDiffMatrix::IdentityMatrix, 3);
+    Sp is(Eigen::Matrix<double, Eigen::Dynamic, Eigen::Dynamic>::Identity(3,3).sparseView());
+
+    Eigen::Array<double, Eigen::Dynamic, 1> d1(3);
+    d1 << 0.2, 1.2, 13.4;
+    Mat d = Mat(d1.matrix().asDiagonal());
+    Sp ds = spdiag(d1);
+
+    Eigen::Matrix<double, Eigen::Dynamic, Eigen::Dynamic> s1(3,3);
+    s1 <<
+        1.0, 0.0, 2.0,
+        0.0, 1.0, 0.0,
+	0.0, 0.0, 2.0;
+    Sp ss(s1.sparseView());
+    Mat s = Mat(ss);
+
+    // Convert to Eigen::SparseMatrix
+    Sp x;
+    z.toSparse(x);
+    BOOST_CHECK(x == zs);
+    i.toSparse(x);
+    BOOST_CHECK(x == is);
+    d.toSparse(x);
+    BOOST_CHECK(x == ds);
+    s.toSparse(x);
+    BOOST_CHECK(x == ss);
+
+    // Multiply by diagonal matrix.
+    auto ztd = z * d;
+    ztd.toSparse(x);
+    BOOST_CHECK(x == zs*ds);
+    auto itd = i * d;
+    itd.toSparse(x);
+    BOOST_CHECK(x == is*ds);
+    auto dtd = d * d;
+    dtd.toSparse(x);
+    BOOST_CHECK(x == ds*ds);
+    auto std = s * d;
+    std.toSparse(x);
+    BOOST_CHECK(x == ss*ds);
+}
+