diff --git a/CHANGES.md b/CHANGES.md
index e91c38b..c3e69da 100644
--- a/CHANGES.md
+++ b/CHANGES.md
@@ -2,6 +2,7 @@
 
 ## 0.3.0 (??-??-????)
 
+* Improved whitespace handling.
 * Make IMPLICIT ITERATORS a first class feature.
 * Fix Rhino compat.
 * CommonJS packaging is no longer a special case.
diff --git a/examples/array_of_strings.html b/examples/array_of_strings.html
index 38fa5ab..2898705 100644
--- a/examples/array_of_strings.html
+++ b/examples/array_of_strings.html
@@ -1 +1 @@
-{{#array_of_strings}} {{.}} {{/array_of_strings}}
\ No newline at end of file
+{{#array_of_strings}}{{.}} {{/array_of_strings}}
\ No newline at end of file
diff --git a/examples/array_of_strings_options.html b/examples/array_of_strings_options.html
index 87fbf5e..6b28278 100644
--- a/examples/array_of_strings_options.html
+++ b/examples/array_of_strings_options.html
@@ -1,2 +1,2 @@
 {{%IMPLICIT-ITERATOR iterator=rob}}
-{{#array_of_strings_options}} {{rob}} {{/array_of_strings_options}}
\ No newline at end of file
+{{#array_of_strings_options}}{{rob}} {{/array_of_strings_options}}
\ No newline at end of file
diff --git a/examples/array_partial.2.html b/examples/array_partial.2.html
index c2ea36c..235dd5f 100644
--- a/examples/array_partial.2.html
+++ b/examples/array_partial.2.html
@@ -1,4 +1,4 @@
 Here's a non-sense array of values
 {{#array}}
-	{{.}}
+  {{.}}
 {{/array}}
\ No newline at end of file
diff --git a/examples/array_partial.txt b/examples/array_partial.txt
index fa87c28..fd5f48e 100644
--- a/examples/array_partial.txt
+++ b/examples/array_partial.txt
@@ -1,6 +1,6 @@
 Here's a non-sense array of values
-1
-2
-3
-4
+  1
+  2
+  3
+  4
 
diff --git a/examples/complex.html b/examples/complex.html
index e7ca1b5..23bec3c 100644
--- a/examples/complex.html
+++ b/examples/complex.html
@@ -2,12 +2,12 @@
 {{#list}}
   <ul>
   {{#item}}
-    {{#current}}
-      <li><strong>{{name}}</strong></li>
-    {{/current}}
-    {{#link}}
-      <li><a href="{{url}}">{{name}}</a></li>
-    {{/link}}
+  {{#current}}
+  <li><strong>{{name}}</strong></li>
+  {{/current}}
+  {{#link}}
+  <li><a href="{{url}}">{{name}}</a></li>
+  {{/link}}
   {{/item}}
   </ul>
 {{/list}}
diff --git a/examples/complex.txt b/examples/complex.txt
index eb78d45..b51ca10 100644
--- a/examples/complex.txt
+++ b/examples/complex.txt
@@ -1,6 +1,6 @@
 <h1>Colors</h1>
-<ul>
-  <li><strong>red</strong></li>
-    <li><a href="#Green">green</a></li>
-    <li><a href="#Blue">blue</a></li>
-    </ul>
+  <ul>
+      <li><strong>red</strong></li>
+      <li><a href="#Green">green</a></li>
+      <li><a href="#Blue">blue</a></li>
+  </ul>
diff --git a/examples/partial_recursion.2.html b/examples/partial_recursion.2.html
index c002d68..457d2a0 100644
--- a/examples/partial_recursion.2.html
+++ b/examples/partial_recursion.2.html
@@ -1,4 +1,4 @@
 {{name}}
 {{#children}}
-  {{>partial}}
+{{>partial}}
 {{/children}}
\ No newline at end of file
diff --git a/examples/partial_recursion.html b/examples/partial_recursion.html
index 8d67c38..d965a6a 100644
--- a/examples/partial_recursion.html
+++ b/examples/partial_recursion.html
@@ -1,4 +1,4 @@
 {{name}}
 {{#kids}}
-  {{>partial}}
+{{>partial}}
 {{/kids}}
\ No newline at end of file
diff --git a/examples/recursion_with_same_names.txt b/examples/recursion_with_same_names.txt
index 0f3e1bc..c23bb65 100644
--- a/examples/recursion_with_same_names.txt
+++ b/examples/recursion_with_same_names.txt
@@ -1,6 +1,6 @@
 name
 desc
-t1
+  t1
   0
-t2
+  t2
   1
diff --git a/examples/reuse_of_enumerables.txt b/examples/reuse_of_enumerables.txt
index c6d5170..6d05d96 100644
--- a/examples/reuse_of_enumerables.txt
+++ b/examples/reuse_of_enumerables.txt
@@ -1,8 +1,8 @@
-t1
+  t1
   0
-t2
+  t2
   1
-t1
+  t1
   0
-t2
+  t2
   1
diff --git a/examples/section_as_context.html b/examples/section_as_context.html
index 6a39a43..59990f6 100644
--- a/examples/section_as_context.html
+++ b/examples/section_as_context.html
@@ -3,7 +3,7 @@
   <p>{{description}}</p>
   <ul>
     {{#a_list}}
-      <li>{{label}}</li>
+    <li>{{label}}</li>
     {{/a_list}}
   </ul>
 {{/a_object}}
diff --git a/examples/section_as_context.txt b/examples/section_as_context.txt
index 55d4179..53ee336 100644
--- a/examples/section_as_context.txt
+++ b/examples/section_as_context.txt
@@ -1,6 +1,6 @@
-<h1>this is an object</h1>
+  <h1>this is an object</h1>
   <p>one of its attributes is a list</p>
   <ul>
-    <li>listitem1</li>
-    <li>listitem2</li>
+        <li>listitem1</li>
+        <li>listitem2</li>
     </ul>
diff --git a/mustache.js b/mustache.js
index 80448b1..f3531e7 100644
--- a/mustache.js
+++ b/mustache.js
@@ -105,7 +105,7 @@ var Mustache = function() {
       var that = this;
       // CSW - Added "+?" so it finds the tighest bound, not the widest
       var regex = new RegExp(this.otag + "(\\^|\\#)\\s*(.+)\\s*" + this.ctag +
-              "\\s*([\\s\\S]+?)" + this.otag + "\\/\\s*\\2\\s*" + this.ctag +
+              "\n*([\\s\\S]+?)" + this.otag + "\\/\\s*\\2\\s*" + this.ctag +
               "\\s*", "mg");
 
       // for each {{#foo}}{{/foo}} section do...