diff --git a/tex-buf.el b/tex-buf.el
--- a/tex-buf.el
+++ b/tex-buf.el
@@ -2092,8 +2092,10 @@
 			   (if (not (re-search-forward TeX-header-end nil t))
 			       ""
 			     (re-search-forward "[\r\n]" nil t)
-			     (buffer-substring (point-min) (point)))))))))
+			     (buffer-substring-no-properties
+			      (point-min) (point)))))))))
 	 (header-offset 0)
+	 first-line
 	 ;; We search for the trailer from the master file, if it is
 	 ;; not present in the region.
 	 (trailer-offset 0)
@@ -2113,11 +2115,24 @@
 			      ;;(beginning-of-line 1)
 			      (re-search-backward "[\r\n]" nil t)
 			      (setq trailer-offset (TeX-current-offset))
-			      (buffer-substring (point) (point-max))))))))))
+			      (buffer-substring-no-properties
+			       (point) (point-max))))))))))
     ;; file name should be relative to master
     (setq original (TeX-quote-filename (file-relative-name
 					original (TeX-master-directory)))
 	  master-name (TeX-quote-filename master-name))
+
+    ;; Cater for %&FORMAT construct in the first line.
+    (setq first-line (if (and (> (length header) 1)
+			      (string= (substring header 0 2) "%&"))
+			 ;; This would work even if header has no newline.
+			 (substring header 0 (string-match "\n" header))
+		       ""))
+    (unless (string= first-line "")
+      ;; Remove first-line from header.
+      (setq header (substring header (length first-line)))
+      (setq first-line (concat first-line "\n")))
+
     (with-current-buffer file-buffer
       (setq buffer-read-only t
 	    buffer-undo-list t)
@@ -2127,7 +2142,8 @@
 	(when (boundp 'buffer-file-coding-system)
 	  (setq buffer-file-coding-system
 		(with-current-buffer master-buffer buffer-file-coding-system)))
-	(insert "\\message{ !name(" master-name ")}"
+	(insert first-line
+		"\\message{ !name(" master-name ")}"
 		header
 		TeX-region-extra
 		"\n\\message{ !name(" original ") !offset(")