diff --git a/activerecord/lib/active_record.rb b/activerecord/lib/active_record.rb
index 3b37b001f7..8526e224da 100644
--- a/activerecord/lib/active_record.rb
+++ b/activerecord/lib/active_record.rb
@@ -143,6 +143,8 @@ module ActiveRecord
     autoload :DatabaseTasks
     autoload :SQLiteDatabaseTasks, 'active_record/tasks/sqlite_database_tasks'
     autoload :MySQLDatabaseTasks,  'active_record/tasks/mysql_database_tasks'
+    autoload :PostgreSQLDatabaseTasks,
+      'active_record/tasks/postgresql_database_tasks'
   end
 
   autoload :TestCase
diff --git a/activerecord/lib/active_record/railties/databases.rake b/activerecord/lib/active_record/railties/databases.rake
index 662c84bfda..3d9b1770ed 100644
--- a/activerecord/lib/active_record/railties/databases.rake
+++ b/activerecord/lib/active_record/railties/databases.rake
@@ -30,14 +30,18 @@ db_namespace = namespace :db do
         #    *defaults
         next unless config['database']
         # Only connect to local databases
-        local_database?(config) { create_database(config) }
+        local_database?(config) {
+          ActiveRecord::Tasks::DatabaseTasks.create config
+        }
       end
     end
   end
 
   desc 'Create the database from config/database.yml for the current Rails.env (use db:create:all to create all dbs in the config)'
   task :create => :load_config do
-    configs_for_environment.each { |config| create_database(config) }
+    configs_for_environment.each { |config|
+      ActiveRecord::Tasks::DatabaseTasks.create config
+    }
     ActiveRecord::Base.establish_connection(configs_for_environment.first)
   end
 
@@ -47,35 +51,6 @@ db_namespace = namespace :db do
     {:charset => (config['charset'] || @charset), :collation => (config['collation'] || @collation)}
   end
 
-  def create_database(config)
-    begin
-      if config['adapter'] =~ /sqlite/
-        ActiveRecord::Tasks::DatabaseTasks.create config
-        return # Skip the else clause of begin/rescue
-      else
-        ActiveRecord::Base.establish_connection(config)
-        ActiveRecord::Base.connection
-      end
-    rescue
-      case config['adapter']
-      when /mysql/
-        ActiveRecord::Tasks::DatabaseTasks.create config
-      when /postgresql/
-        @encoding = config['encoding'] || ENV['CHARSET'] || 'utf8'
-        begin
-          ActiveRecord::Base.establish_connection(config.merge('database' => 'postgres', 'schema_search_path' => 'public'))
-          ActiveRecord::Base.connection.create_database(config['database'], config.merge('encoding' => @encoding))
-          ActiveRecord::Base.establish_connection(config)
-        rescue Exception => e
-          $stderr.puts e, *(e.backtrace)
-          $stderr.puts "Couldn't create database for #{config.inspect}"
-        end
-      end
-    else
-      $stderr.puts "#{config['database']} already exists"
-    end
-  end
-
   namespace :drop do
     # desc 'Drops all the local databases defined in config/database.yml'
     task :all => :load_config do
@@ -475,7 +450,7 @@ db_namespace = namespace :db do
       when /postgresql/
         ActiveRecord::Base.clear_active_connections!
         drop_database(abcs['test'])
-        create_database(abcs['test'])
+        ActiveRecord::Tasks::DatabaseTasks.create abcs['test']
       when /sqlite/
         dbfile = abcs['test']['database']
         File.delete(dbfile) if File.exist?(dbfile)
diff --git a/activerecord/lib/active_record/tasks/database_tasks.rb b/activerecord/lib/active_record/tasks/database_tasks.rb
index d0d3ea12dd..6b9115f214 100644
--- a/activerecord/lib/active_record/tasks/database_tasks.rb
+++ b/activerecord/lib/active_record/tasks/database_tasks.rb
@@ -1,7 +1,7 @@
 class ActiveRecord::Tasks::DatabaseTasks
   TASKS_PATTERNS = {
     /mysql/      => ActiveRecord::Tasks::MySQLDatabaseTasks,
-    # /postgresql/ => ActiveRecord::Tasks::PostgreSQLTasker,
+    /postgresql/ => ActiveRecord::Tasks::PostgreSQLDatabaseTasks,
     /sqlite/     => ActiveRecord::Tasks::SQLiteDatabaseTasks
   }
 
diff --git a/activerecord/lib/active_record/tasks/postgresql_database_tasks.rb b/activerecord/lib/active_record/tasks/postgresql_database_tasks.rb
new file mode 100644
index 0000000000..4e64a5e346
--- /dev/null
+++ b/activerecord/lib/active_record/tasks/postgresql_database_tasks.rb
@@ -0,0 +1,27 @@
+class ActiveRecord::Tasks::PostgreSQLDatabaseTasks
+  DEFAULT_ENCODING = ENV['CHARSET'] || 'utf8'
+
+  delegate :connection, :establish_connection, :to => ActiveRecord::Base
+
+  def initialize(configuration)
+    @configuration = configuration
+  end
+
+  def create
+    establish_connection configuration.merge(
+      'database' => 'postgres',
+      'schema_search_path' => 'public'
+    )
+    connection.create_database configuration['database'],
+      configuration.merge('encoding' => encoding)
+    establish_connection configuration
+  end
+
+  private
+
+  attr_reader :configuration
+
+  def encoding
+    configuration['encoding'] || DEFAULT_ENCODING
+  end
+end
diff --git a/activerecord/lib/active_record/tasks/sqlite_database_tasks.rb b/activerecord/lib/active_record/tasks/sqlite_database_tasks.rb
index 882a4f98a9..dd43414d79 100644
--- a/activerecord/lib/active_record/tasks/sqlite_database_tasks.rb
+++ b/activerecord/lib/active_record/tasks/sqlite_database_tasks.rb
@@ -1,16 +1,18 @@
 class ActiveRecord::Tasks::SQLiteDatabaseTasks
+  delegate :connection, :establish_connection, :to => ActiveRecord::Base
+
   def initialize(configuration)
     @configuration = configuration
   end
 
   def create
-    if File.exist?(configuration['database'])
+    if File.exist? configuration['database']
       $stderr.puts "#{configuration['database']} already exists"
       return
     end
 
-    ActiveRecord::Base.establish_connection(configuration)
-    ActiveRecord::Base.connection
+    establish_connection configuration
+    connection
   end
 
   private
diff --git a/activerecord/test/cases/postgresql_rake_test.rb b/activerecord/test/cases/postgresql_rake_test.rb
new file mode 100644
index 0000000000..b2f7c2e8ba
--- /dev/null
+++ b/activerecord/test/cases/postgresql_rake_test.rb
@@ -0,0 +1,57 @@
+require 'cases/helper'
+
+module ActiveRecord
+  class PostgreSQLDBCreateTest < ActiveRecord::TestCase
+    def setup
+      @connection    = stub(:create_database => true)
+      @configuration = {
+        'adapter'  => 'postgresql',
+        'database' => 'my-app-db'
+      }
+
+      ActiveRecord::Base.stubs(:connection).returns(@connection)
+      ActiveRecord::Base.stubs(:establish_connection).returns(true)
+    end
+
+    def test_establishes_connection_to_postgresql_database
+      ActiveRecord::Base.expects(:establish_connection).with(
+        'adapter'            => 'postgresql',
+        'database'           => 'postgres',
+        'schema_search_path' => 'public'
+      )
+
+      ActiveRecord::Tasks::DatabaseTasks.create @configuration
+    end
+
+    def test_creates_database_with_default_encoding
+      @connection.expects(:create_database).
+        with('my-app-db', @configuration.merge('encoding' => 'utf8'))
+
+      ActiveRecord::Tasks::DatabaseTasks.create @configuration
+    end
+
+    def test_creates_database_with_given_encoding
+      @connection.expects(:create_database).
+        with('my-app-db', @configuration.merge('encoding' => 'latin'))
+
+      ActiveRecord::Tasks::DatabaseTasks.create @configuration.
+        merge('encoding' => 'latin')
+    end
+
+    def test_establishes_connection_to_new_database
+      ActiveRecord::Base.expects(:establish_connection).with(@configuration)
+
+      ActiveRecord::Tasks::DatabaseTasks.create @configuration
+    end
+
+    def test_db_create_with_error_prints_message
+      ActiveRecord::Base.stubs(:establish_connection).raises(Exception)
+
+      $stderr.stubs(:puts).returns(true)
+      $stderr.expects(:puts).
+        with("Couldn't create database for #{@configuration.inspect}")
+
+      ActiveRecord::Tasks::DatabaseTasks.create @configuration
+    end
+  end
+end