diff --git a/reactos/apps/tests/palbitblt/.cvsignore b/reactos/apps/tests/palbitblt/.cvsignore
new file mode 100644
index 00000000000..d63774a7353
--- /dev/null
+++ b/reactos/apps/tests/palbitblt/.cvsignore
@@ -0,0 +1,6 @@
+*.o
+*.d
+*.exe
+*.coff
+*.sym
+*.map
diff --git a/reactos/apps/tests/palbitblt/makefile b/reactos/apps/tests/palbitblt/makefile
new file mode 100644
index 00000000000..28b00d22ac5
--- /dev/null
+++ b/reactos/apps/tests/palbitblt/makefile
@@ -0,0 +1,20 @@
+
+PATH_TO_TOP = ../../..
+
+TARGET_NORC = yes
+
+TARGET_TYPE = program
+
+TARGET_APPTYPE = windows
+
+TARGET_NAME = palbitblt
+
+TARGET_SDKLIBS = kernel32.a gdi32.a
+
+TARGET_OBJECTS = pal.o
+
+include $(PATH_TO_TOP)/rules.mak
+
+include $(TOOLS_PATH)/helper.mk
+
+# EOF
diff --git a/reactos/apps/tests/palbitblt/pal.c b/reactos/apps/tests/palbitblt/pal.c
new file mode 100644
index 00000000000..98e4d5e7fe1
--- /dev/null
+++ b/reactos/apps/tests/palbitblt/pal.c
@@ -0,0 +1,200 @@
+/* The idea of this test app is inspired from tutorial       *
+ * found at http://www.theparticle.com/pgraph.html           *
+ *                                                           *
+ * Developed by: Aleksey Bragin <aleksey@studiocerebral.com> *
+ * Version: 1.0                                              */
+
+#include <windows.h>
+
+#define W_WIDTH 320
+#define W_HEIGHT 240
+
+// special version of BITMAPINFO and LOGPALETTE for max of 256 palette entries
+typedef struct
+{
+	BITMAPINFOHEADER bmiHeader;
+	RGBQUAD bmiColors[256];
+} BITMAPINFO256;
+
+typedef struct {
+	WORD	palVersion;
+	WORD	palNumEntries;
+	PALETTEENTRY palPalEntry[256];
+} LOGPALETTE256;
+
+// The only global variable --- contents of the DIBitmap
+BYTE* dibits;
+
+void GeneratePalette(RGBQUAD* p)
+{
+	int i;
+	for(i=0;i<256;i++)
+	{
+		p[i].rgbRed = i;
+		p[i].rgbGreen = i;
+		p[i].rgbBlue = i;
+		p[i].rgbReserved = 0;
+	}
+}
+
+void DoBlt(HBITMAP hBM)
+{
+	HDC hDC,Context;
+	HWND ActiveWindow;
+	RECT dest;
+	HBITMAP dflBmp;
+
+	if((ActiveWindow = GetActiveWindow()) == NULL)
+		return;
+
+	hDC = GetDC(ActiveWindow);
+	GetClientRect(ActiveWindow,&dest);
+	
+	Context = CreateCompatibleDC(0);
+	dflBmp = SelectObject(Context, hBM);
+	BitBlt(hDC, 0, 0, dest.right, dest.bottom, Context, 0, 0, SRCCOPY);
+	SelectObject(Context, dflBmp);
+	DeleteDC(Context);
+	DeleteObject(dflBmp);
+	ReleaseDC(ActiveWindow, hDC);
+}
+
+void UpdatePalette(HBITMAP hBM){
+	int i,y;
+	static unsigned int c=0;
+
+	for(i=0;i<W_WIDTH;i++){
+		for(y=0;y<=W_HEIGHT-1;y++)
+			dibits[y*320+i] = c % 256;
+
+		if (c > 512)
+			c = 0;
+		else
+			c++; // It's operation of incrementing of c variable, not reference of a cool OO language :-)
+	}
+	
+	DoBlt(hBM);
+}
+
+void InitBitmap(HANDLE *hBM){
+	HPALETTE PalHan;
+	HWND ActiveWindow;
+	HDC hDC;
+	RGBQUAD palette[256];
+	int i;
+	BITMAPINFO256 bmInf;
+	LOGPALETTE256 palInf;
+
+	ActiveWindow = GetActiveWindow();
+	hDC = GetDC(ActiveWindow);
+
+	bmInf.bmiHeader.biSize = sizeof(BITMAPINFOHEADER);
+	bmInf.bmiHeader.biWidth = W_WIDTH;
+	bmInf.bmiHeader.biHeight = -abs(W_HEIGHT);
+	bmInf.bmiHeader.biPlanes = 1;
+	bmInf.bmiHeader.biBitCount = 8;
+	bmInf.bmiHeader.biCompression = BI_RGB;
+	bmInf.bmiHeader.biSizeImage = 0;
+	bmInf.bmiHeader.biXPelsPerMeter = 0;
+	bmInf.bmiHeader.biYPelsPerMeter = 0;
+	bmInf.bmiHeader.biClrUsed = 256;
+	bmInf.bmiHeader.biClrImportant = 256;
+
+	GeneratePalette(palette);
+
+	for(i=0;i<256;i++)
+		bmInf.bmiColors[i] = palette[i];
+
+	palInf.palVersion = 0x300;
+	palInf.palNumEntries = 256;
+	for(i=0;i<256;i++){
+		palInf.palPalEntry[i].peRed = palette[i].rgbRed;
+		palInf.palPalEntry[i].peGreen = palette[i].rgbGreen;
+		palInf.palPalEntry[i].peBlue = palette[i].rgbBlue;
+		palInf.palPalEntry[i].peFlags = PC_NOCOLLAPSE;
+	}
+
+	// Create palette
+	PalHan = CreatePalette((LOGPALETTE*)&palInf);
+	
+	// Select it into hDC
+	SelectPalette(hDC,PalHan,FALSE);
+	
+	// Realize palette in hDC
+	RealizePalette(hDC);
+	
+	// Delete handle to palette
+	DeleteObject(PalHan);
+
+	// Create dib section
+	*hBM = CreateDIBSection(hDC,(BITMAPINFO*)&bmInf,
+		DIB_RGB_COLORS,(void**)&dibits,0,0);
+
+	// Release dc
+	ReleaseDC(ActiveWindow,hDC);
+}
+
+LRESULT CALLBACK WndProc(HWND hWnd,UINT msg, WPARAM wParam,LPARAM lParam)
+{
+	switch(msg){
+		case WM_DESTROY:
+			PostQuitMessage(0);
+			return 0;
+		default:
+			return DefWindowProc(hWnd,msg,wParam,lParam);
+	}
+}
+
+
+
+int WINAPI WinMain(HINSTANCE hInstance,HINSTANCE hPrevInstance, LPSTR lpszCmdParam,int nCmdShow)
+{
+	WNDCLASS WndClass;
+	HWND hWnd;
+	MSG msg;
+	char szName[] = "Palette BitBlt test";
+	BOOL exit = FALSE;
+	HBITMAP hBM;
+
+	// Create and register window class (not modified!!!!!!!!!!!1)
+	WndClass.style = CS_HREDRAW|CS_VREDRAW|CS_OWNDC;
+	WndClass.lpfnWndProc = WndProc;
+	WndClass.cbClsExtra = 0;
+	WndClass.cbWndExtra = 0;
+	WndClass.hbrBackground = NULL;//GetStockObject(BLACK_BRUSH);
+	WndClass.hIcon = NULL;//LoadIcon(hInstance,NULL);
+	WndClass.hCursor = NULL;//LoadCursor(NULL,IDC_ARROW);
+	WndClass.hInstance = hInstance;
+	WndClass.lpszClassName = szName;
+	WndClass.lpszMenuName = 0;
+
+	RegisterClass(&WndClass);
+
+	// Create and show window (change styles !!!!!!!!)
+	hWnd = CreateWindow(szName, "ReactOS palette bitblt test",
+		WS_CAPTION|WS_MINIMIZEBOX|WS_SYSMENU,
+		CW_USEDEFAULT,CW_USEDEFAULT,W_WIDTH,W_HEIGHT,
+		0,0,hInstance,0);
+	ShowWindow(hWnd,nCmdShow);
+
+	// Prepare bitmap to be bitblt
+	InitBitmap(&hBM);	
+
+	// Main message loop
+	while (!exit)
+	{
+		UpdatePalette(hBM);
+		Sleep(200);
+		
+		if(PeekMessage(&msg,0,0,0,PM_NOREMOVE) == TRUE)
+		{
+			if (!GetMessage(&msg,0,0,0))
+				exit = TRUE;
+
+			TranslateMessage(&msg);
+			DispatchMessage(&msg);
+		}
+	}
+
+	return msg.wParam;
+}