diff --git a/tokio/src/coop.rs b/tokio/src/coop.rs
index 256e9620e75..145e703971b 100644
--- a/tokio/src/coop.rs
+++ b/tokio/src/coop.rs
@@ -59,13 +59,9 @@ impl Budget {
     const fn unconstrained() -> Budget {
         Budget(None)
     }
-}
 
-cfg_rt_multi_thread! {
-    impl Budget {
-        fn has_remaining(self) -> bool {
-            self.0.map(|budget| budget > 0).unwrap_or(true)
-        }
+    fn has_remaining(self) -> bool {
+        self.0.map(|budget| budget > 0).unwrap_or(true)
     }
 }
 
@@ -107,16 +103,16 @@ fn with_budget<R>(budget: Budget, f: impl FnOnce() -> R) -> R {
     })
 }
 
+#[inline(always)]
+pub(crate) fn has_budget_remaining() -> bool {
+    CURRENT.with(|cell| cell.get().has_remaining())
+}
+
 cfg_rt_multi_thread! {
     /// Sets the current task's budget.
     pub(crate) fn set(budget: Budget) {
         CURRENT.with(|cell| cell.set(budget))
     }
-
-    #[inline(always)]
-    pub(crate) fn has_budget_remaining() -> bool {
-        CURRENT.with(|cell| cell.get().has_remaining())
-    }
 }
 
 cfg_rt! {
diff --git a/tokio/src/time/timeout.rs b/tokio/src/time/timeout.rs
index cc299161633..4a93089e8e8 100644
--- a/tokio/src/time/timeout.rs
+++ b/tokio/src/time/timeout.rs
@@ -5,6 +5,7 @@
 //! [`Timeout`]: struct@Timeout
 
 use crate::{
+    coop,
     time::{error::Elapsed, sleep_until, Duration, Instant, Sleep},
     util::trace,
 };
@@ -169,15 +170,33 @@ where
     fn poll(self: Pin<&mut Self>, cx: &mut task::Context<'_>) -> Poll<Self::Output> {
         let me = self.project();
 
+        let had_budget_before = coop::has_budget_remaining();
+
         // First, try polling the future
         if let Poll::Ready(v) = me.value.poll(cx) {
             return Poll::Ready(Ok(v));
         }
 
-        // Now check the timer
-        match me.delay.poll(cx) {
-            Poll::Ready(()) => Poll::Ready(Err(Elapsed::new())),
-            Poll::Pending => Poll::Pending,
+        let has_budget_now = coop::has_budget_remaining();
+
+        let delay = me.delay;
+
+        let poll_delay = || -> Poll<Self::Output> {
+            match delay.poll(cx) {
+                Poll::Ready(()) => Poll::Ready(Err(Elapsed::new())),
+                Poll::Pending => Poll::Pending,
+            }
+        };
+
+        if let (true, false) = (had_budget_before, has_budget_now) {
+            // if it is the underlying future that exhausted the budget, we poll
+            // the `delay` with an unconstrained one. This prevents pathological
+            // cases where the underlying future always exhausts the budget and
+            // we never get a chance to evaluate whether the timeout was hit or
+            // not.
+            coop::with_unconstrained(poll_delay)
+        } else {
+            poll_delay()
         }
     }
 }
diff --git a/tokio/tests/time_timeout.rs b/tokio/tests/time_timeout.rs
index dbd80eb8a6a..a1ff51e7d27 100644
--- a/tokio/tests/time_timeout.rs
+++ b/tokio/tests/time_timeout.rs
@@ -135,3 +135,16 @@ async fn deadline_future_elapses() {
 fn ms(n: u64) -> Duration {
     Duration::from_millis(n)
 }
+
+#[tokio::test]
+async fn timeout_is_not_exhausted_by_future() {
+    let fut = timeout(ms(1), async {
+        let mut buffer = [0u8; 1];
+        loop {
+            use tokio::io::AsyncReadExt;
+            let _ = tokio::io::empty().read(&mut buffer).await;
+        }
+    });
+
+    assert!(fut.await.is_err());
+}