diff --git a/dvc/utils/__init__.py b/dvc/utils/__init__.py
index 864c9e5f56..a7e9ab5f42 100644
--- a/dvc/utils/__init__.py
+++ b/dvc/utils/__init__.py
@@ -152,9 +152,12 @@ def makedirs(path, exist_ok=False, mode=None):
         _makedirs(path, exist_ok=exist_ok)
         return
 
-    umask = os.umask(0)
+    # utilize umask to set proper permissions since Python 3.7 the `mode`
+    # `makedirs` argument no longer affects the file permission bits of
+    # newly-created intermediate-level directories.
+    umask = os.umask(0o777 - mode)
     try:
-        _makedirs(path, exist_ok=exist_ok, mode=mode)
+        _makedirs(path, exist_ok=exist_ok)
     finally:
         os.umask(umask)
 
diff --git a/dvc/utils/compat.py b/dvc/utils/compat.py
index 7d66dd090c..4863e4a565 100644
--- a/dvc/utils/compat.py
+++ b/dvc/utils/compat.py
@@ -85,8 +85,6 @@ def _makedirs(name, mode=0o777, exist_ok=False):
             if e.errno != errno.EEXIST:
                 raise
         cdir = os.curdir
-        if isinstance(tail, bytes):
-            cdir = bytes(os.curdir, "ASCII")
         if tail == cdir:
             return
     try:
diff --git a/tests/func/test_utils.py b/tests/func/test_utils.py
index 73f489e252..594fdc332d 100644
--- a/tests/func/test_utils.py
+++ b/tests/func/test_utils.py
@@ -1,6 +1,10 @@
+# encoding: utf-8
 import filecmp
 import os
 import shutil
+import stat
+
+import pytest
 
 from dvc import utils
 from tests.basic_env import TestDvc
@@ -69,3 +73,18 @@ def test_boxify(self):
         )
 
         assert expected == utils.boxify("message")
+
+
+@pytest.mark.skipif(os.name == "nt", reason="Not supported for Windows.")
+def test_makedirs_permissions(tmpdir):
+    dir_mode = 0o755
+    os.chdir(str(tmpdir))
+    intermediate_dir = "тестовая-директория"
+    test_dir = os.path.join(intermediate_dir, "data")
+
+    assert not os.path.exists(intermediate_dir)
+
+    utils.makedirs(test_dir, mode=dir_mode)
+
+    assert stat.S_IMODE(os.stat(test_dir).st_mode) == dir_mode
+    assert stat.S_IMODE(os.stat(intermediate_dir).st_mode) == dir_mode