diff --git a/mustache.js b/mustache.js
index 7ea9845..c3ff790 100644
--- a/mustache.js
+++ b/mustache.js
@@ -130,7 +130,7 @@
     function stripSpace () {
       if (hasTag && !nonSpace) {
         while (spaces.length)
-          delete tokens[spaces.pop()];
+          delete tokens[spaces.pop()];          
       } else {
         spaces = [];
       }
@@ -168,7 +168,7 @@
           chr = value.charAt(i);
 
           if (isWhitespace(chr)) {
-            spaces.push(tokens.length);
+            spaces.push(tokens.length);                                 
           } else {
             nonSpace = true;
           }
@@ -185,11 +185,16 @@
       // Match the opening tag.
       if (!scanner.scan(openingTagRe))
         break;
-
+        
       hasTag = true;
 
       // Get the tag type.
       type = scanner.scan(tagRe) || 'name';
+
+      if (type == '>') {
+        spaces = [];
+      } 
+      
       scanner.scan(whiteRe);
 
       // Get the tag value.
@@ -238,7 +243,7 @@
     if (openSection)
       throw new Error('Unclosed section "' + openSection[1] + '" at ' + scanner.pos);
 
-    return nestTokens(squashTokens(tokens));
+      return nestTokens(squashTokens(tokens));
   }
 
   /**
@@ -528,7 +533,7 @@
    */
   Writer.prototype.renderTokens = function renderTokens (tokens, context, partials, originalTemplate, tags) {
     var buffer = '';
-    var indentationContext = {spacer: ''};
+    var indentationContext = {spacer: '', active: true};
 
     var token, symbol, value;
     for (var i = 0, numTokens = tokens.length; i < numTokens; ++i) {
@@ -554,11 +559,15 @@
   Writer.prototype.updateIndentationContext = function updateIndentationContext (indentationContext, value) {
     for (var j = 0; j < value.length; j++) {
       if (value[j] == '\n') {
+        indentationContext.active = true;
         indentationContext.spacer = '';
       } else if (isWhitespace(value[j])) {
-        indentationContext.spacer += value[j];
+        if (indentationContext.active) {
+          indentationContext.spacer += value[j];
+        }    
       } else {
-        indentationContext.spacer += ' ';
+        indentationContext.active = false;
+        indentationContext.spacer = '';
       }
     }
   };
@@ -611,22 +620,25 @@
 
     var value = isFunction(partials) ? partials(token[1]) : partials[token[1]];
     if (value != null) {
-      var renderResult = this.renderTokens(this.parse(value, tags), context, partials, value);
-      return this.indent(renderResult, indentationContext);
+      var indentedValue = this.indent(value, indentationContext);
+      return this.renderTokens(this.parse(indentedValue, tags), context, partials, value);      
     }      
   };
 
   Writer.prototype.indent = function indent (value, indentationContext) {
     var indentedValue = '';
-    var lines = value.split('\n');
+    var val = value + '$';
+    var lines = val.split('\n');
     for (var i=0; i<lines.length; i++) {
       if (i == 0) {
         indentedValue += lines[i];
+      } else if (lines[i] == '$') {
+        indentedValue += '\n$';
       } else {
         indentedValue += ('\n' + indentationContext.spacer + lines[i]);
       }
     }
-    return indentedValue;
+    return indentedValue.substring(0, indentedValue.length-1); // remove the $
   };
 
   Writer.prototype.unescapedValue = function unescapedValue (token, context) {
diff --git a/test/partial-tests.js b/test/partial-tests.js
new file mode 100644
index 0000000..b76fb58
--- /dev/null
+++ b/test/partial-tests.js
@@ -0,0 +1,112 @@
+/* eslint-disable func-names */
+require('./helper');
+
+describe('Partials spec', function () {
+  beforeEach(function () {
+    Mustache.clearCache();
+  });
+
+  
+    it('The greater-than operator should expand to the named partial.', function () {
+      var template = '"{{>text}}"';
+      var data = {};
+      var partials = {'text':'from partial'};
+      var expected = '"from partial"';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('The empty string should be used when the named partial is not found.', function () {
+      var template = '"{{>text}}"';
+      var data = {};
+      var partials = {};
+      var expected = '""';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('The greater-than operator should operate within the current context.', function () {
+      var template = '"{{>partial}}"';
+      var data = {'text':'content'};
+      var partials = {'partial':'*{{text}}*'};
+      var expected = '"*content*"';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('The greater-than operator should properly recurse.', function () {
+      var template = '{{>node}}';
+      var data = {'content':'X','nodes':[{'content':'Y','nodes':[]}]};
+      var partials = {'node':'{{content}}<{{#nodes}}{{>node}}{{/nodes}}>'};
+      var expected = 'X<Y<>>';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('The greater-than operator should not alter surrounding whitespace.', function () {
+      var template = '| {{>partial}} |';
+      var data = {};
+      var partials = {'partial':'\t|\t'};
+      var expected = '| \t|\t |';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('"\r\n" should be considered a newline for standalone tags.', function () {
+      var template = '|\r\n{{>partial}}\r\n|';
+      var data = {};
+      var partials = {'partial':'>'};
+      var expected = '|\r\n>|';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('Standalone tags should not require a newline to precede them.', function () {
+      var template = '  {{>partial}}\n>';
+      var data = {};
+      var partials = {'partial':'>\n>'};
+      var expected = '  >\n  >>';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });   
+    it('Superfluous in-tag whitespace should be ignored.', function () {
+      var template = '|{{> partial }}|';
+      var data = {'boolean':true};
+      var partials = {'partial':'[]'};
+      var expected = '|[]|';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+    it('Each line of the partial should be indented before rendering.', function () {
+      var template = '\\\n {{>partial}}\n/\n';
+      var data = {
+				'content': '<\n->'
+			};
+      var partials =  {
+				'partial': '|\n{{{content}}}\n|\n'
+			};
+      var expected = '\\\n |\n <\n->\n |\n/\n';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+
+    it('Standalone tags should not require a newline to follow them.', function () {
+      var template = '>\n  {{>partial}}';
+      var data = {
+			
+			};
+      var partials =  {
+				'partial': '>\n>'
+			};
+      var expected = '>\n  >\n  >';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+
+    it('Whitespace should be left untouched.', function () {
+      var template = '  {{data}}  {{> partial}}\n';
+      var data = {
+        'data': '|'
+			};
+      var partials =  {
+				'partial': '>\n>'
+			};
+      var expected = '  |  >\n>\n';
+      var renderResult = Mustache.render(template, data, partials);
+      assert.equal(renderResult, expected);
+    });
+});
\ No newline at end of file
diff --git a/test/render-test.js b/test/render-test.js
index 4922e7a..4f1c063 100644
--- a/test/render-test.js
+++ b/test/render-test.js
@@ -18,11 +18,13 @@ describe('Mustache.render', function () {
   });
 
   describe('preserve indentation when using partials', function() {
-    it.only ('should preserve indentation', function() {
-      var template = 'line1\n  bla la  \t\r\f foo line2{{>p1}}';
+
+    it ('should preserve indentation with whitespaces', function() {
+      var template = 'a\n  {{>p1}}';
       var renderResult = Mustache.render(template, {}, {p1: 'l1\nl2'});      
-      assert.equal(renderResult, 'line1\n  bla la  \t\r\f foo line2l1\n          \t\r\f          l2');
+      assert.equal(renderResult, 'a\n  l1\n  l2');
     });
+
   });
 
   describe('custom tags', function () {