A bypass valve for use in a hydraulic system having a hydraulic motor or pump. The bypass valve shunts the motor or pump and connects the supply and discharge lines thereto and in response to pressure drops across the motor or pump bypasses fluid to keep the motor speed or pump output constant. The bypass valve compensates for motor or pump fluid leakage and keeps the sum of the quantity of fluid flow through the bypass valve and the leakage fluid constant. The bypass valve has a nonlinear characteristic curve determined by bypass orifices of varying dimensions controlled by a pressure-responsive axially movable slide.