diff --git a/test/api/v3/integration/user/auth/GET-auth_reset-password-set-new-one.js b/test/api/v3/integration/user/auth/GET-auth_reset-password-set-new-one.js
new file mode 100644
index 0000000000..29d3807e87
--- /dev/null
+++ b/test/api/v3/integration/user/auth/GET-auth_reset-password-set-new-one.js
@@ -0,0 +1,140 @@
+import {
+  encrypt,
+} from '../../../../../../website/server/libs/encryption';
+import moment from 'moment';
+import {
+  generateUser,
+} from '../../../../../helpers/api-integration/v3';
+import superagent from 'superagent';
+import nconf from 'nconf';
+
+const API_TEST_SERVER_PORT = nconf.get('PORT');
+
+describe('GET /user/auth/local/reset-password-set-new-one', () => {
+  let endpoint = `http://localhost:${API_TEST_SERVER_PORT}/static/user/auth/local/reset-password-set-new-one`;
+
+  // Tests to validate the validatePasswordResetCodeAndFindUser function
+
+  it('renders an error page if the code is missing', async () => {
+    try {
+      await superagent.get(endpoint);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code is invalid json', async () => {
+    try {
+      await superagent.get(`${endpoint}?code=invalid`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code cannot be decrypted', async () => {
+    let user = await generateUser();
+
+    try {
+      let code = JSON.stringify({ // not encrypted
+        userId: user._id,
+        expiresAt: new Date(),
+      });
+      await superagent.get(`${endpoint}?code=${code}`);
+
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code is expired', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().subtract({minutes: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    try {
+      await superagent.get(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the user does not exist', async () => {
+    let code = encrypt(JSON.stringify({
+      userId: Date.now().toString(),
+      expiresAt: moment().add({days: 1}),
+    }));
+
+    try {
+      await superagent.get(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the user has no local auth', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      auth: 'not an object with valid fields',
+    });
+
+    try {
+      await superagent.get(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code doesn\'t match the one saved at user.auth.passwordResetCode', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': 'invalid',
+    });
+
+    try {
+      await superagent.get(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  //
+
+  it('returns the password reset page if the password reset code is valid', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    let res = await superagent.get(`${endpoint}?code=${code}`);
+    expect(res.status).to.equal(200);
+  });
+});
+
diff --git a/test/api/v3/integration/user/auth/POST-auth_reset-password-set-new-one.js b/test/api/v3/integration/user/auth/POST-auth_reset-password-set-new-one.js
new file mode 100644
index 0000000000..a963ced5d7
--- /dev/null
+++ b/test/api/v3/integration/user/auth/POST-auth_reset-password-set-new-one.js
@@ -0,0 +1,267 @@
+import {
+  encrypt,
+} from '../../../../../../website/server/libs/encryption';
+import {
+  compare,
+  bcryptCompare,
+  sha1MakeSalt,
+  sha1Encrypt as sha1EncryptPassword,
+} from '../../../../../../website/server/libs/password';
+import moment from 'moment';
+import {
+  generateUser,
+} from '../../../../../helpers/api-integration/v3';
+import superagent from 'superagent';
+import nconf from 'nconf';
+
+const API_TEST_SERVER_PORT = nconf.get('PORT');
+
+describe('POST /user/auth/local/reset-password-set-new-one', () => {
+  let endpoint = `http://localhost:${API_TEST_SERVER_PORT}/static/user/auth/local/reset-password-set-new-one`;
+
+  // Tests to validate the validatePasswordResetCodeAndFindUser function
+
+  it('renders an error page if the code is missing', async () => {
+    try {
+      await superagent.post(endpoint);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code is invalid json', async () => {
+    try {
+      await superagent.post(`${endpoint}?code=invalid`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code cannot be decrypted', async () => {
+    let user = await generateUser();
+
+    try {
+      let code = JSON.stringify({ // not encrypted
+        userId: user._id,
+        expiresAt: new Date(),
+      });
+      await superagent.post(`${endpoint}?code=${code}`);
+
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code is expired', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().subtract({minutes: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    try {
+      await superagent.post(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the user does not exist', async () => {
+    let code = encrypt(JSON.stringify({
+      userId: Date.now().toString(),
+      expiresAt: moment().add({days: 1}),
+    }));
+
+    try {
+      await superagent.post(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the user has no local auth', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      auth: 'not an object with valid fields',
+    });
+
+    try {
+      await superagent.post(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders an error page if the code doesn\'t match the one saved at user.auth.passwordResetCode', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': 'invalid',
+    });
+
+    try {
+      await superagent.post(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  //
+
+  it('renders the error page if the new password is missing', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    try {
+      await superagent.post(`${endpoint}?code=${code}`);
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders the error page if the password confirmation is missing', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    try {
+      await superagent
+        .post(`${endpoint}?code=${code}`)
+        .send({newPassword: 'my new password'});
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders the error page if the password confirmation does not match', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    try {
+      await superagent
+        .post(`${endpoint}?code=${code}`)
+        .send({
+          newPassword: 'my new password',
+          confirmPassword: 'not matching',
+        });
+      throw new Error('Request should fail.');
+    } catch (err) {
+      expect(err.status).to.equal(401);
+    }
+  });
+
+  it('renders the success page and save the user', async () => {
+    let user = await generateUser();
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    let res = await superagent
+      .post(`${endpoint}?code=${code}`)
+      .send({
+        newPassword: 'my new password',
+        confirmPassword: 'my new password',
+      });
+
+    expect(res.status).to.equal(200);
+
+    await user.sync();
+    expect(user.auth.local.passwordResetCode).to.equal(undefined);
+    expect(user.auth.local.passwordHashMethod).to.equal('bcrypt');
+    expect(user.auth.local.salt).to.be.undefined;
+    let isPassValid = await compare(user, 'my new password');
+    expect(isPassValid).to.equal(true);
+  });
+
+  it('renders the success page and convert the password from sha1 to bcrypt', async () => {
+    let user = await generateUser();
+
+    let textPassword = 'mySecretPassword';
+    let salt = sha1MakeSalt();
+    let sha1HashedPassword = sha1EncryptPassword(textPassword, salt);
+
+    await user.update({
+      'auth.local.hashed_password': sha1HashedPassword,
+      'auth.local.passwordHashMethod': 'sha1',
+      'auth.local.salt': salt,
+    });
+
+    await user.sync();
+    expect(user.auth.local.passwordHashMethod).to.equal('sha1');
+    expect(user.auth.local.salt).to.equal(salt);
+    expect(user.auth.local.hashed_password).to.equal(sha1HashedPassword);
+
+    let code = encrypt(JSON.stringify({
+      userId: user._id,
+      expiresAt: moment().add({days: 1}),
+    }));
+    await user.update({
+      'auth.local.passwordResetCode': code,
+    });
+
+    let res = await superagent
+      .post(`${endpoint}?code=${code}`)
+      .send({
+        newPassword: 'my new password',
+        confirmPassword: 'my new password',
+      });
+
+    expect(res.status).to.equal(200);
+
+    await user.sync();
+    expect(user.auth.local.passwordResetCode).to.equal(undefined);
+    expect(user.auth.local.passwordHashMethod).to.equal('bcrypt');
+    expect(user.auth.local.salt).to.be.undefined;
+    expect(user.auth.local.hashed_password).not.to.equal(sha1HashedPassword);
+
+    let isValidPassword = await bcryptCompare('my new password', user.auth.local.hashed_password);
+    expect(isValidPassword).to.equal(true);
+  });
+});
diff --git a/test/api/v3/integration/user/auth/POST-user_reset_password.test.js b/test/api/v3/integration/user/auth/POST-user_reset_password.test.js
index bc10c9a06d..ab86bdcb90 100644
--- a/test/api/v3/integration/user/auth/POST-user_reset_password.test.js
+++ b/test/api/v3/integration/user/auth/POST-user_reset_password.test.js
@@ -2,10 +2,10 @@ import {
   generateUser,
   translate as t,
 } from '../../../../../helpers/api-integration/v3';
+import moment from 'moment';
 import {
-  sha1MakeSalt,
-  sha1Encrypt as sha1EncryptPassword,
-} from '../../../../../../website/server/libs/password';
+  decrypt,
+} from '../../../../../../website/server/libs/encryption';
 
 describe('POST /user/reset-password', async () => {
   let endpoint = '/user/reset-password';
@@ -25,33 +25,6 @@ describe('POST /user/reset-password', async () => {
     expect(user.auth.local.hashed_password).to.not.eql(previousPassword);
   });
 
-  it('converts user with SHA1 encrypted password to bcrypt encryption', async () => {
-    let textPassword = 'mySecretPassword';
-    let salt = sha1MakeSalt();
-    let sha1HashedPassword = sha1EncryptPassword(textPassword, salt);
-
-    await user.update({
-      'auth.local.hashed_password': sha1HashedPassword,
-      'auth.local.passwordHashMethod': 'sha1',
-      'auth.local.salt': salt,
-    });
-
-    await user.sync();
-    expect(user.auth.local.passwordHashMethod).to.equal('sha1');
-    expect(user.auth.local.salt).to.equal(salt);
-    expect(user.auth.local.hashed_password).to.equal(sha1HashedPassword);
-
-    // update email
-    await user.post(endpoint, {
-      email: user.auth.local.email,
-    });
-
-    await user.sync();
-    expect(user.auth.local.passwordHashMethod).to.equal('bcrypt');
-    expect(user.auth.local.salt).to.be.undefined;
-    expect(user.auth.local.hashed_password).not.to.equal(sha1HashedPassword);
-  });
-
   it('same message on error as on success', async () => {
     let response = await user.post(endpoint, {
       email: 'nonExistent@email.com',
@@ -66,4 +39,19 @@ describe('POST /user/reset-password', async () => {
       message: t('invalidReqParams'),
     });
   });
+
+  it('sets a new password reset code on user.auth.local that expires in 1 day', async () => {
+    expect(user.auth.local.passwordResetCode).to.be.undefined;
+
+    await user.post(endpoint, {
+      email: user.auth.local.email,
+    });
+
+    await user.sync();
+
+    expect(user.auth.local.passwordResetCode).to.be.a.string;
+    let decryptedCode = JSON.parse(decrypt(user.auth.local.passwordResetCode));
+    expect(decryptedCode.userId).to.equal(user._id);
+    expect(moment(decryptedCode.expiresAt).isAfter(moment().add({hours: 23}))).to.equal(true);
+  });
 });
diff --git a/test/api/v3/unit/libs/password.test.js b/test/api/v3/unit/libs/password.test.js
index 6d79f805ed..aa7316ba68 100644
--- a/test/api/v3/unit/libs/password.test.js
+++ b/test/api/v3/unit/libs/password.test.js
@@ -1,5 +1,12 @@
 /* eslint-disable camelcase */
 
+import {
+  encrypt,
+} from '../../../../../website/server/libs/encryption';
+import moment from 'moment';
+import {
+  generateUser,
+} from '../../../../helpers/api-integration/v3';
 import {
   sha1Encrypt as sha1EncryptPassword,
   sha1MakeSalt,
@@ -7,6 +14,7 @@ import {
   bcryptCompare,
   compare,
   convertToBcrypt,
+  validatePasswordResetCodeAndFindUser,
 } from '../../../../../website/server/libs/password';
 
 describe('Password Utilities', () => {
@@ -172,6 +180,95 @@ describe('Password Utilities', () => {
     });
   });
 
+  describe('validatePasswordResetCodeAndFindUser', () => {
+    it('returns false if the code is missing', async () => {
+      let res = await validatePasswordResetCodeAndFindUser();
+      expect(res).to.equal(false);
+    });
+
+    it('returns false if the code is invalid json', async () => {
+      let res = await validatePasswordResetCodeAndFindUser('invalid json');
+      expect(res).to.equal(false);
+    });
+
+    it('returns false if the code cannot be decrypted', async () => {
+      let user = await generateUser();
+      let res = await validatePasswordResetCodeAndFindUser(JSON.stringify({ // not encrypted
+        userId: user._id,
+        expiresAt: new Date(),
+      }));
+      expect(res).to.equal(false);
+    });
+
+    it('returns false if the code is expired', async () => {
+      let user = await generateUser();
+
+      let code = encrypt(JSON.stringify({
+        userId: user._id,
+        expiresAt: moment().subtract({minutes: 1}),
+      }));
+
+      await user.update({
+        'auth.local.passwordResetCode': code,
+      });
+
+      let res = await validatePasswordResetCodeAndFindUser(code);
+      expect(res).to.equal(false);
+    });
+
+    it('returns false if the user does not exist', async () => {
+      let res = await validatePasswordResetCodeAndFindUser(encrypt(JSON.stringify({
+        userId: Date.now().toString(),
+        expiresAt: moment().add({days: 1}),
+      })));
+      expect(res).to.equal(false);
+    });
+
+    it('returns false if the user has no local auth', async () => {
+      let user = await generateUser({
+        auth: 'not an object with valid fields',
+      });
+      let res = await validatePasswordResetCodeAndFindUser(encrypt(JSON.stringify({
+        userId: user._id,
+        expiresAt: moment().add({days: 1}),
+      })));
+      expect(res).to.equal(false);
+    });
+
+    it('returns false if the code doesn\'t match the one saved at user.auth.passwordResetCode', async () => {
+      let user = await generateUser();
+
+      let code = encrypt(JSON.stringify({
+        userId: user._id,
+        expiresAt: moment().add({days: 1}),
+      }));
+
+      await user.update({
+        'auth.local.passwordResetCode': 'invalid',
+      });
+
+      let res = await validatePasswordResetCodeAndFindUser(code);
+      expect(res).to.equal(false);
+    });
+
+    it('returns the user if the password reset code is valid', async () => {
+      let user = await generateUser();
+
+      let code = encrypt(JSON.stringify({
+        userId: user._id,
+        expiresAt: moment().add({days: 1}),
+      }));
+
+      await user.update({
+        'auth.local.passwordResetCode': code,
+      });
+
+      let res = await validatePasswordResetCodeAndFindUser(code);
+      expect(res).not.to.equal(false);
+      expect(res._id).to.equal(user._id);
+    });
+  });
+
   describe('bcrypt', () => {
     describe('Hash', () => {
       it('returns a hashed string', async () => {
diff --git a/website/common/locales/en/front.json b/website/common/locales/en/front.json
index 217e13c762..3bb4021fef 100644
--- a/website/common/locales/en/front.json
+++ b/website/common/locales/en/front.json
@@ -252,10 +252,11 @@
     "usernameTaken": "Username already taken.",
     "passwordConfirmationMatch": "Password confirmation doesn't match password.",
     "invalidLoginCredentials": "Incorrect username and/or email and/or password.",
-    "passwordReset": "If we have your email on file, a new password has been sent to your email.",
+    "passwordResetPage": "Reset Password",
+    "passwordReset": "If we have your email on file, instructions for setting a new password have been sent to your email.",
     "passwordResetEmailSubject": "Password Reset for Habitica",
-    "passwordResetEmailText": "Password for <%= username %> has been reset to <%= newPassword %> . Important! Both username and password are case-sensitive -- you must enter both exactly as shown here. We recommend copying and pasting both instead of typing them. Log in at <%= baseUrl %>. After you have logged in, head to <%= baseUrl %>/#/options/settings/settings and change your password.",
-    "passwordResetEmailHtml": "Password for <strong><%= username %></strong> has been reset to <strong><%= newPassword %></strong><br /><br />Important! Both username and password are case-sensitive -- you must enter both exactly as shown here. We recommend copying and pasting both instead of typing them.<br /><br />Log in at <%= baseUrl %>. After you have logged in, head to <%= baseUrl %>/#/options/settings/settings and change your password.",
+    "passwordResetEmailText": "If you requested a password reset for <%= username %> on Habitica, head to <%= passwordResetLink %> to set a new one. The link will expire after 24 hours. If you haven't requested a password reset, please ignore this email.",
+    "passwordResetEmailHtml": "If you requested a password reset for <strong><%= username %></strong> on Habitica, <a href=\"<%= passwordResetLink %>\">click here</a> to set a new one. The link will expire after 24 hours.<br/><br>If you haven't requested a password reset, please ignore this email.",
     "invalidLoginCredentialsLong": "Uh-oh - your username or password is incorrect.\n- Make sure your username or email is typed correctly.\n- You may have signed up with Facebook, not email. Double-check by trying Facebook login.\n- If you forgot your password, click \"Forgot Password\".",
     "invalidCredentials": "There is no account that uses those credentials.",
     "accountSuspended": "Account has been suspended, please contact leslie@habitica.com with your User ID \"<%= userId %>\" for assistance.",
diff --git a/website/common/locales/en/generic.json b/website/common/locales/en/generic.json
index d94354ace5..555e5a8d12 100644
--- a/website/common/locales/en/generic.json
+++ b/website/common/locales/en/generic.json
@@ -108,7 +108,7 @@
     "buyThis": "Buy this <%= text %> with <%= price %> of your <%= gems %> Gems?",
     "noReachServer": "Server not currently reachable, try again later",
     "errorUpCase": "ERROR:",
-    "newPassSent": "If we have your email on file, a new password has been sent to your email.",
+    "newPassSent": "If we have your email on file, instructions for setting a new password have been sent to your email.",
     "serverUnreach": "Server currently unreachable.",
     "requestError": "Yikes, an error occurred! <strong>Please reload the page,</strong> your last action may not have been saved correctly.",
     "seeConsole": "If the error persists, please report it at Help > Report a Bug. If you're familiar with your browser's console, please include any error messages.",
diff --git a/website/common/locales/en/settings.json b/website/common/locales/en/settings.json
index 3799eb2276..236b884be1 100644
--- a/website/common/locales/en/settings.json
+++ b/website/common/locales/en/settings.json
@@ -88,6 +88,8 @@
     "deleteDo": "Do it, delete my account!",
     "enterNumber": "Please enter a number between 0 and 24",
     "fillAll": "Please fill out all fields",
+    "invalidPasswordResetCode": "The supplied password reset code is invalid or has expired.",
+    "passwordChangeSuccess": "Your password was successfully changed to the one you just chose. You can now use it to access your account.",
     "passwordSuccess": "Password successfully changed",
     "usernameSuccess": "Login Name successfully changed",
     "emailSuccess": "Email successfully changed",
diff --git a/website/server/controllers/api-v3/auth.js b/website/server/controllers/api-v3/auth.js
index f33cbfbf7e..9bcdedef78 100644
--- a/website/server/controllers/api-v3/auth.js
+++ b/website/server/controllers/api-v3/auth.js
@@ -16,11 +16,13 @@ import { model as User } from '../../models/user';
 import { model as Group } from '../../models/group';
 import { model as EmailUnsubscription } from '../../models/emailUnsubscription';
 import { sendTxn as sendTxnEmail } from '../../libs/email';
-import { decrypt } from '../../libs/encryption';
+import { decrypt, encrypt } from '../../libs/encryption';
 import { send as sendEmail } from '../../libs/email';
 import pusher from '../../libs/pusher';
 import common from '../../../common';
 
+const BASE_URL = nconf.get('BASE_URL');
+
 let api = {};
 
 // When the user signed up after having been invited to a group, invite them automatically to the group
@@ -549,11 +551,14 @@ api.resetPassword = {
     let user = await User.findOne({ 'auth.local.email': email }).exec();
 
     if (user) {
-      // use a salt as the new password too (they'll change it later)
-      let newPassword =  passwordUtils.sha1MakeSalt();
+      // create an encrypted link to be used to reset the password
+      const passwordResetCode = encrypt(JSON.stringify({
+        userId: user._id,
+        expiresAt: moment().add({ hours: 24 }),
+      }));
+      let link = `${BASE_URL}/static/user/auth/local/reset-password-set-new-one?code=${passwordResetCode}`;
 
-      // set new password and make sure it's using bcrypt for hashing
-      await passwordUtils.convertToBcrypt(user, newPassword); // user is saved a few lines below
+      user.auth.local.passwordResetCode = passwordResetCode;
 
       sendEmail({
         from: 'Habitica <admin@habitica.com>',
@@ -561,13 +566,11 @@ api.resetPassword = {
         subject: res.t('passwordResetEmailSubject'),
         text: res.t('passwordResetEmailText', {
           username: user.auth.local.username,
-          newPassword,
-          baseUrl: nconf.get('BASE_URL'),
+          passwordResetLink: link,
         }),
         html: res.t('passwordResetEmailHtml', {
           username: user.auth.local.username,
-          newPassword,
-          baseUrl: nconf.get('BASE_URL'),
+          passwordResetLink: link,
         }),
       });
 
diff --git a/website/server/controllers/top-level/auth.js b/website/server/controllers/top-level/auth.js
index 90724ab1f4..d547c281e8 100644
--- a/website/server/controllers/top-level/auth.js
+++ b/website/server/controllers/top-level/auth.js
@@ -1,7 +1,89 @@
+import locals from '../../middlewares/locals';
+import { validatePasswordResetCodeAndFindUser, convertToBcrypt} from '../../libs/password';
+
 let api = {};
 
 // Internal authentication routes
 
+function renderPasswordResetPage (options = {}) {
+  // res is express' res, error any error and success if the password was successfully changed
+  let {res, hasError, success = false, message} = options;
+
+  return res.status(hasError ? 401 : 200).render('auth/reset-password-set-new-one.jade', {
+    env: res.locals.habitrpg,
+    success,
+    hasError,
+    message, // can be error or success message
+  });
+}
+
+// Set a new password after having requested a password reset (GET route to input password)
+api.resetPasswordSetNewOne  = {
+  method: 'GET',
+  url: '/static/user/auth/local/reset-password-set-new-one',
+  middlewares: [locals],
+  runCron: false,
+  async handler (req, res) {
+    let user = await validatePasswordResetCodeAndFindUser(req.query.code);
+    let isValidCode = Boolean(user);
+
+    return renderPasswordResetPage({
+      res,
+      hasError: !isValidCode,
+      message: !isValidCode ? res.t('invalidPasswordResetCode') : null,
+    });
+  },
+};
+
+// Set a new password after having requested a password reset (POST route to save password)
+api.resetPasswordSetNewOneSubmit  = {
+  method: 'POST',
+  url: '/static/user/auth/local/reset-password-set-new-one',
+  middlewares: [locals],
+  runCron: false,
+  async handler (req, res) {
+    let user = await validatePasswordResetCodeAndFindUser(req.query.code);
+    let isValidCode = Boolean(user);
+
+    if (!isValidCode) return renderPasswordResetPage({
+      res,
+      hasError: true,
+      message: res.t('invalidPasswordResetCode'),
+    });
+
+    let newPassword = req.body.newPassword;
+    let confirmPassword = req.body.confirmPassword;
+
+    if (!newPassword) {
+      return renderPasswordResetPage({
+        res,
+        hasError: true,
+        message: res.t('missingNewPassword'),
+      });
+    }
+
+    if (newPassword !== confirmPassword) {
+      return renderPasswordResetPage({
+        res,
+        hasError: true,
+        message: res.t('passwordConfirmationMatch'),
+      });
+    }
+
+    // set new password and make sure it's using bcrypt for hashing
+    await convertToBcrypt(user, String(newPassword));
+    user.auth.local.passwordResetCode = undefined; // Reset saved password reset code
+    await user.save();
+
+    return renderPasswordResetPage({
+      res,
+      hasError: false,
+      success: true,
+      message: res.t('passwordChangeSuccess'),
+    });
+  },
+};
+
 // Logout the user from the website.
 api.logout = {
   method: 'GET',
diff --git a/website/server/libs/password.js b/website/server/libs/password.js
index 6e9f3ad57e..c81c836e04 100644
--- a/website/server/libs/password.js
+++ b/website/server/libs/password.js
@@ -1,6 +1,9 @@
 // Utilities for working with passwords
 import crypto from 'crypto';
 import bcrypt from 'bcrypt';
+import { decrypt } from './encryption';
+import moment from 'moment';
+import { model as User } from '../models/user';
 
 const BCRYPT_SALT_ROUNDS = 10;
 
@@ -63,3 +66,37 @@ export async function convertToBcrypt (user, plainTextPassword) {
   user.auth.local.passwordHashMethod = 'bcrypt';
   user.auth.local.hashed_password = await bcryptHash(plainTextPassword); // eslint-disable-line camelcase
 }
+
+// Returns the user if a valid password reset code is supplied, otherwise false
+export async function validatePasswordResetCodeAndFindUser (code) {
+  let isCodeValid = true;
+
+  let userId;
+  let user;
+  let decryptedPasswordResetCode;
+
+  // wrapping the code in a try to be able to handle the error here
+  try {
+    decryptedPasswordResetCode = JSON.parse(decrypt(code || 'invalid')); // also catches missing code
+    userId = decryptedPasswordResetCode.userId;
+    let expiresAt = decryptedPasswordResetCode.expiresAt;
+
+    if (moment(expiresAt).isBefore(moment())) throw new Error();
+  } catch (err) {
+    isCodeValid = false;
+  }
+
+  if (isCodeValid) {
+    user = await User.findById(userId).exec();
+
+    // check if user is found and if it's an email & password account
+    if (!user || !user.auth || !user.auth.local || !user.auth.local.email) {
+      isCodeValid = false;
+    } else if (code !== user.auth.local.passwordResetCode) {
+      // Make sure only the last code can be used
+      isCodeValid = false;
+    }
+  }
+
+  return isCodeValid ? user : false;
+}
diff --git a/website/server/models/user/schema.js b/website/server/models/user/schema.js
index 223c6020e9..d5dd67e44e 100644
--- a/website/server/models/user/schema.js
+++ b/website/server/models/user/schema.js
@@ -59,7 +59,9 @@ let schema = new Schema({
         type: String,
         enum: ['bcrypt', 'sha1'],
       },
-      salt: String, // Salt for SHA1 encrypted passwords, not stored for bcrypt
+      salt: String, // Salt for SHA1 encrypted passwords, not stored for bcrypt,
+      // Used to validate password reset codes and make sure only the most recent one can be used
+      passwordResetCode: String,
     },
     timestamps: {
       created: {type: Date, default: Date.now},
diff --git a/website/views/auth/reset-password-set-new-one.jade b/website/views/auth/reset-password-set-new-one.jade
new file mode 100644
index 0000000000..921c7f6674
--- /dev/null
+++ b/website/views/auth/reset-password-set-new-one.jade
@@ -0,0 +1,27 @@
+extends ../static/layout
+
+block vars
+  - var layoutEnv = env // needed to pass env variable to ./layout
+
+block title
+  title Habitica &VerticalLine;&nbsp;
+    =env.t('passwordResetPage')
+
+block content
+  .row(ng-controller='AccordionCtrl')
+    .col-md-12
+      .page-header
+        h1=env.t('passwordResetPage')
+      if message
+        p.lead(class=hasError ? 'text-danger' : 'text-success')=message
+        hr
+      if success !== true
+        // action empty is necessary to prevent Angular from handling the form itself (# causes issues)
+        form(method='post', action='')
+          .form-group
+            label(for='newPass')=env.t('newPass')
+            input#newPass.form-control(name='newPassword', type='password', placeholder=env.t('newPass'))
+          .form-group
+            label(for='confirmPass')=env.t('confirmPass')
+            input#confirmPass.form-control(name='confirmPassword', type='password', placeholder=env.t('confirmPass'))
+          button.btn.btn-default(type='submit')=env.t('submit')