diff --git a/lib/file/file_storage.php b/lib/file/file_storage.php
index 32b898f0da7..7e175255102 100644
--- a/lib/file/file_storage.php
+++ b/lib/file/file_storage.php
@@ -45,6 +45,8 @@ class file_storage {
     private $filedir;
     /** @var string Contents of deleted files not needed any more */
     private $trashdir;
+    /** @var string tempdir */
+    private $tempdir;
     /** @var int Permissions for new directories */
     private $dirpermissions;
     /** @var int Permissions for new files */
@@ -55,12 +57,14 @@ class file_storage {
      *
      * @param string $filedir full path to pool directory
      * @param string $trashdir temporary storage of deleted area
+     * @param string $tempdir temporary storage of various files
      * @param int $dirpermissions new directory permissions
      * @param int $filepermissions new file permissions
      */
-    public function __construct($filedir, $trashdir, $dirpermissions, $filepermissions) {
+    public function __construct($filedir, $trashdir, $tempdir, $dirpermissions, $filepermissions) {
         $this->filedir         = $filedir;
         $this->trashdir        = $trashdir;
+        $this->tempdir         = $tempdir;
         $this->dirpermissions  = $dirpermissions;
         $this->filepermissions = $filepermissions;
 
@@ -575,9 +579,10 @@ class file_storage {
      * @param mixed $file_record object or array describing file
      * @param string $path path to file or content of file
      * @param array $options @see download_file_content() options
+     * @param bool $usetempfile use temporary file for download, may prevent out of memory problems
      * @return stored_file instance
      */
-    public function create_file_from_url($file_record, $url, array $options = NULL) {
+    public function create_file_from_url($file_record, $url, array $options = NULL, $usetempfile = false) {
 
         $file_record = (array)$file_record;  //do not modify the submitted record, this cast unlinks objects
         $file_record = (object)$file_record; // we support arrays too
@@ -589,11 +594,6 @@ class file_storage {
         $connecttimeout = isset($options['connecttimeout']) ? $options['connecttimeout'] : 20;
         $skipcertverify = isset($options['skipcertverify']) ? $options['skipcertverify'] : false;
 
-        // TODO: it might be better to add a new option to download file content to temp file,
-        //       the problem here is that the size of file is limited by available memory
-
-        $content = download_file_content($url, $headers, $postdata, $fullresponse, $timeout, $connecttimeout, $skipcertverify);
-
         if (!isset($file_record->filename)) {
             $parts = explode('/', $url);
             $filename = array_pop($parts);
@@ -602,7 +602,29 @@ class file_storage {
         $source = !empty($file_record->source) ? $file_record->source : $url;
         $file_record->source = clean_param($source, PARAM_URL);
 
-        return $this->create_file_from_string($file_record, $content);
+        if ($usetempfile) {
+            check_dir_exists($this->tempdir, true, true);
+            $tmpfile = tempnam($this->tempdir, 'newfromurl');
+            $content = download_file_content($url, $headers, $postdata, $fullresponse, $timeout, $connecttimeout, $skipcertverify, $tmpfile);
+            if ($content === false) {
+                throw new file_exception('storedfileproblem', 'Can not fetch file form URL');
+            }
+            try {
+                $newfile = $this->create_file_from_pathname($file_record, $tmpfile);
+                @unlink($tmpfile);
+                return $newfile;
+            } catch (Exception $e) {
+                @unlink($tmpfile);
+                throw $e;
+            }
+
+        } else {
+            $content = download_file_content($url, $headers, $postdata, $fullresponse, $timeout, $connecttimeout, $skipcertverify);
+            if ($content === false) {
+                throw new file_exception('storedfileproblem', 'Can not fetch file form URL');
+            }
+            return $this->create_file_from_string($file_record, $content);
+        }
     }
 
     /**
diff --git a/lib/filelib.php b/lib/filelib.php
index be696ff518d..3eac5a23ab6 100644
--- a/lib/filelib.php
+++ b/lib/filelib.php
@@ -901,9 +901,10 @@ function format_postdata_for_curlcall($postdata) {
  *   usually happens if the remote server is completely down (default 20 seconds);
  *   may not work when using proxy
  * @param bool $skipcertverify If true, the peer's SSL certificate will not be checked. Only use this when already in a trusted location.
- * @return mixed false if request failed or content of the file as string if ok.
+ * @param string $tofile store the downloaded content to file instead of returning it
+ * @return mixed false if request failed or content of the file as string if ok. true if file downloaded into $tofile successfully.
  */
-function download_file_content($url, $headers=null, $postdata=null, $fullresponse=false, $timeout=300, $connecttimeout=20, $skipcertverify=false) {
+function download_file_content($url, $headers=null, $postdata=null, $fullresponse=false, $timeout=300, $connecttimeout=20, $skipcertverify=false, $tofile=NULL) {
     global $CFG;
 
     // some extra security
@@ -958,7 +959,7 @@ function download_file_content($url, $headers=null, $postdata=null, $fullrespons
     }
 
     curl_setopt($ch, CURLOPT_RETURNTRANSFER, true);
-    curl_setopt($ch, CURLOPT_HEADER, true);
+    curl_setopt($ch, CURLOPT_HEADER, false);
     curl_setopt($ch, CURLOPT_CONNECTTIMEOUT, $connecttimeout);
     curl_setopt($ch, CURLOPT_TIMEOUT, $timeout);
     if (!ini_get('open_basedir') and !ini_get('safe_mode')) {
@@ -1006,12 +1007,26 @@ function download_file_content($url, $headers=null, $postdata=null, $fullrespons
         }
     }
 
-    $data = curl_exec($ch);
+    // set up header and ocntent handlers
+    $received = new object();
+    $received->headers = array(); // received headers array
+    $received->tofile  = $tofile;
+    $received->fh      = null;
+    curl_setopt($ch, CURLOPT_HEADERFUNCTION, partial('download_file_content_header_handler', $received));
+    if ($tofile) {
+        curl_setopt($ch, CURLOPT_WRITEFUNCTION, partial('download_file_content_write_handler', $received));
+    }
+
+    $result = curl_exec($ch);
 
     // try to detect encoding problems
     if ((curl_errno($ch) == 23 or curl_errno($ch) == 61) and defined('CURLOPT_ENCODING')) {
         curl_setopt($ch, CURLOPT_ENCODING, 'none');
-        $data = curl_exec($ch);
+        $result = curl_exec($ch);
+    }
+
+    if ($received->fh) {
+        fclose($received->fh);
     }
 
     if (curl_errno($ch)) {
@@ -1028,7 +1043,7 @@ function download_file_content($url, $headers=null, $postdata=null, $fullrespons
             }
             $response->headers       = array();
             $response->response_code = $error;
-            $response->results       = '';
+            $response->results       = false;
             $response->error         = $error;
             return $response;
         } else {
@@ -1046,21 +1061,15 @@ function download_file_content($url, $headers=null, $postdata=null, $fullrespons
             $response->status        = '0';
             $response->headers       = array();
             $response->response_code = 'Unknown cURL error';
-            $response->results       = ''; // do NOT change this!
+            $response->results       = false; // do NOT change this, we really want to ignore the result!
             $response->error         = 'Unknown cURL error';
 
         } else {
-            // strip redirect headers and get headers array and content
-            $data = explode("\r\n\r\n", $data, $info['redirect_count'] + 2);
-            $results = array_pop($data);
-            $headers = array_pop($data);
-            $headers = explode("\r\n", trim($headers));
-
             $response = new object();;
             $response->status        = (string)$info['http_code'];
-            $response->headers       = $headers;
-            $response->response_code = $headers[0];
-            $response->results       = $results;
+            $response->headers       = $received->headers;
+            $response->response_code = $received->headers[0];
+            $response->results       = $result;
             $response->error         = '';
         }
 
@@ -1075,6 +1084,32 @@ function download_file_content($url, $headers=null, $postdata=null, $fullrespons
     }
 }
 
+/**
+ * internal implementation 
+ */
+function download_file_content_header_handler($received, $ch, $header) {
+    $received->headers[] = $header;
+    return strlen($header);
+}
+
+/**
+ * internal implementation 
+ */
+function download_file_content_write_handler($received, $ch, $data) {
+    if (!$received->fh) {
+        $received->fh = fopen($received->tofile, 'w');
+        if ($received->fh === false) {
+            // bad luck, file creation or overriding failed
+            return 0;
+        }
+    }
+    if (fwrite($received->fh, $data) === false) {
+        // bad luck, write failed, let's abort completely
+        return 0;
+    }
+    return strlen($data);
+}
+
 /**
  * @return array List of information about file types based on extensions.
  *   Associative array of extension (lower-case) to associative array
diff --git a/lib/moodlelib.php b/lib/moodlelib.php
index 5443aacad05..de84f3a17e0 100644
--- a/lib/moodlelib.php
+++ b/lib/moodlelib.php
@@ -5156,7 +5156,7 @@ function get_file_storage() {
         $trashdirdir = $CFG->dataroot.'/trashdir';
     }
 
-    $fs = new file_storage($filedir, $trashdirdir, $CFG->directorypermissions, $CFG->filepermissions);
+    $fs = new file_storage($filedir, $trashdirdir, "$CFG->dataroot/temp/filestorage", $CFG->directorypermissions, $CFG->filepermissions);
 
     return $fs;
 }