diff --git a/python/pyspark/shuffle.py b/python/pyspark/shuffle.py
index 43b91459b56ea..a28f6efde1c4f 100644
--- a/python/pyspark/shuffle.py
+++ b/python/pyspark/shuffle.py
@@ -247,7 +247,7 @@ def mergeValues(self, iterator):
         """ Combine the items by creator and combiner """
         # speedup attribute lookup
         creator, comb = self.agg.createCombiner, self.agg.mergeValue
-        c, data, pdata, hfun, batch = 0, self.data, self.pdata, self._partition, 100
+        c, data, pdata, hfun, batch = 0, self.data, self.pdata, self._partition, self.batch
         limit = self.memory_limit
 
         for k, v in iterator:
@@ -259,36 +259,40 @@ def mergeValues(self, iterator):
                 if get_used_memory() >= limit:
                     self._spill()
                     limit = self._next_limit()
+                    batch /= 2
+                    c = 0
                 else:
-                    batch = min(batch * 2, self.batch)
-                c = 0
+                    batch *= 1.5
 
     def _partition(self, key):
         """ Return the partition for key """
         return hash((key, self._seed)) % self.partitions
 
+    def _object_size(self, obj):
+        return 1
+
     def mergeCombiners(self, iterator, limit=None):
         """ Merge (K,V) pair by mergeCombiner """
         if limit is None:
             limit = self.memory_limit
         # speedup attribute lookup
-        comb, hfun = self.agg.mergeCombiners, self._partition
-        c, data, pdata, batch = 0, self.data, self.pdata, 1
+        comb, hfun, objsize = self.agg.mergeCombiners, self._partition, self._object_size
+        c, data, pdata, batch = 0, self.data, self.pdata, self.batch
         for k, v in iterator:
             d = pdata[hfun(k)] if pdata else data
             d[k] = comb(d[k], v) if k in d else v
             if not limit:
                 continue
 
-            c += 1
+            c += objsize(v)
             if c > batch:
                 if get_used_memory() > limit:
                     self._spill()
                     limit = self._next_limit()
-                    batch /= 4
+                    batch /= 2
+                    c = 0
                 else:
-                    batch = min(batch * 2, self.batch)
-                c = 0
+                    batch *= 1.5
 
     def _spill(self):
         """
@@ -476,18 +480,42 @@ class SameKey(object):
     >>> l = zip(range(2), range(2))
     >>> list(SameKey(0, [1], iter(l), GroupByKey(iter([]))))
     [1, 0]
+    >>> s = SameKey(0, [1], iter(l), GroupByKey(iter([])))
+    >>> for i in range(2000):
+    ...     s.append(i)
+    >>> len(list(s))
+    2002
     """
     def __init__(self, key, values, it, groupBy):
         self.key = key
         self.values = values
         self.it = it
         self.groupBy = groupBy
-        self._index = 0
+        self._file = None
+        self._ser = None
+        self._index = None
 
     def __iter__(self):
         return self
 
     def next(self):
+        if self._index is None:
+            # begin of iterator
+            if self._file is not None:
+                if self.values:
+                    self._spill()
+                self._file.flush()
+                self._file.seek(0)
+            self._index = 0
+
+        if self._index >= len(self.values) and self._file is not None:
+            try:
+                self.values = next(self._ser.load_stream(self._file))
+                self._index = 0
+            except StopIteration:
+                self._file.close()
+                self._file = None
+
         if self._index < len(self.values):
             value = self.values[self._index]
             self._index += 1
@@ -503,6 +531,29 @@ def next(self):
             raise StopIteration
         return value
 
+    def append(self, value):
+        if self._index is not None:
+            raise ValueError("Can not append value while iterating")
+
+        self.values.append(value)
+        # dump them into disk if the key is huge
+        if len(self.values) >= 10240:
+            self._spill()
+
+    def _spill(self):
+        if self._file is None:
+            dirs = _get_local_dirs("objects")
+            d = dirs[id(self) % len(dirs)]
+            if not os.path.exists(d):
+                os.makedirs(d)
+            p = os.path.join(d, str(id))
+            self._file = open(p, "w+")
+            self._ser = CompressedSerializer(PickleSerializer())
+
+        self._ser.dump_stream([self.values], self._file)
+        self.values = []
+        gc.collect()
+
 
 class GroupByKey(object):
     """
@@ -528,16 +579,12 @@ def next(self):
                 key, value = self.it.next()
                 if self.current is None or key != self.current.key:
                     break
-                self.current.values.append(value)
-
+                self.current.append(value)
         else:
             key, value = self._next_item
             self._next_item = None
 
-        if self.current is not None:
-            self.current.it = None
         self.current = SameKey(key, [value], self.it, self)
-
         return key, (v for vs in self.current for v in vs)
 
 
@@ -557,6 +604,9 @@ def _flatted_serializer(self):
             ser = FlattedValuesSerializer(ser, 20)
         return ser
 
+    def _object_size(self, obj):
+        return len(obj)
+
     def _spill(self):
         """
         dump already partitioned data into disks.
@@ -615,8 +665,9 @@ def _merged_items(self, index, limit=0):
         size = sum(os.path.getsize(os.path.join(self._get_spill_dir(j), str(index)))
                    for j in range(self.spills))
         # if the memory can not hold all the partition,
-        # then use sort based merge
-        if (size >> 20) > self.memory_limit / 2:
+        # then use sort based merge. Because of compression,
+        # the data on disks will be much smaller than needed memory
+        if (size >> 20) > self.memory_limit / 10:
             return self._sorted_items(index)
 
         self.data = {}