diff --git a/src/reactivity/unwrap.ts b/src/reactivity/unwrap.ts
index 611e178c..e5e1466c 100644
--- a/src/reactivity/unwrap.ts
+++ b/src/reactivity/unwrap.ts
@@ -27,6 +27,11 @@ export function unwrapRefProxy(value: any, map = new WeakMap()) {
     (s) => (obj[s] = (value as any)[s])
   )
 
+  // copy __ob__
+  if (value.__ob__) {
+    Object.defineProperty(obj, '__ob__', value.__ob__)
+  }
+
   for (const k of Object.keys(value)) {
     const r = value[k]
     // don't process on falsy or raw
diff --git a/test/setup.spec.js b/test/setup.spec.js
index 92a770ea..9dc0ba98 100644
--- a/test/setup.spec.js
+++ b/test/setup.spec.js
@@ -696,6 +696,33 @@ describe('setup', () => {
         },
       })
     })
+
+    // #392
+    it('should copy __ob__ and make toRaw work when passing via props', () => {
+      const Foo = {
+        template: '<p>{{obj.bar}}</p>',
+        props: {
+          obj: {
+            type: Object,
+            required: true,
+          },
+        },
+        setup(props) {
+          expect(toRaw(props.obj)).toEqual({ bar: 1 })
+          return {}
+        },
+      }
+
+      const vm = new Vue({
+        template: '<Foo :obj="obj" />',
+        components: { Foo },
+        setup() {
+          return { obj: { bar: ref(1) } }
+        },
+      }).$mount()
+
+      expect(vm.$el.textContent).toBe('1')
+    })
   })
 
   it('should not unwrap built-in objects on the template', () => {