diff --git a/ai/default/default.c b/ai/default/default.c
index 8daaf239e9..66dacd0143 100644
--- a/ai/default/default.c
+++ b/ai/default/default.c
@@ -1620,8 +1620,9 @@ clear_town_stuff:;
 
 			/* signals too? */
 			if (j&3) {
-				// Can't build signals on a road.
-				if (IsTileType(c, MP_STREET)) return CMD_ERROR;
+				/* XXX - we need to check manually whether we can build a signal if DC_EXEC is
+				   not set because the rail has not actually been built */
+				if (!IsTileType(c, MP_RAILWAY)) return CMD_ERROR;
 
 				if (flag & DC_EXEC) {
 					j = 4 - j;