diff --git a/src/Compiler.js b/src/Compiler.js
index a355444be770..e9f2fbe88a43 100644
--- a/src/Compiler.js
+++ b/src/Compiler.js
@@ -33,7 +33,15 @@ Template.prototype = {
         paths = this.paths,
         length = paths.length;
     for (i = 0; i < length; i++) {
-      children[i].link(jqLite(childNodes[paths[i]]), childScope);
+      // sometimes `element` can be modified by one of the linker functions in `this.linkFns`
+      // and childNodes may be added or removed
+      // TODO: element structure needs to be re-evaluated if new children added
+      // if the childNode still exists
+      if (childNodes[paths[i]])
+        children[i].link(jqLite(childNodes[paths[i]]), childScope);
+      else 
+        // if child no longer available, delete path
+        delete paths[i];
     }
   },
 
diff --git a/src/widget/select.js b/src/widget/select.js
index 1687721cc331..66d710bc5c74 100644
--- a/src/widget/select.js
+++ b/src/widget/select.js
@@ -243,9 +243,13 @@ angularWidget('select', function(element){
 
       // find existing special options
       forEach(selectElement.children(), function(option){
-        if (option.value == '')
+        if (option.value == '') {
           // User is allowed to select the null.
-          nullOption = {label:jqLite(option).text(), id:''};
+          // save <option> element 
+          nullOption = jqLite(option).remove();
+          // compile it in model scope
+          compile(nullOption)(modelScope);
+        }
       });
       selectElement.html(''); // clear contents
 
@@ -315,7 +319,7 @@ angularWidget('select', function(element){
           selectedSet = new HashMap(modelValue);
         } else if (modelValue === null || nullOption) {
           // if we are not multiselect, and we are null then we have to add the nullOption
-          optionGroups[''].push(extend({selected:modelValue === null, id:'', label:''}, nullOption));
+          optionGroups[''].push({selected:modelValue === null, id:'', label:''});
           selectedSet = true;
         }
 
@@ -385,18 +389,26 @@ angularWidget('select', function(element){
               if (existingOption.id !== option.id) {
                 lastElement.val(existingOption.id = option.id);
               }
-              if (existingOption.selected !== option.selected) {
+              if (existingOption.element.selected !== option.selected) {
                 lastElement.prop('selected', (existingOption.selected = option.selected));
               }
             } else {
               // grow elements
-              // jQuery(v1.4.2) Bug: We should be able to chain the method calls, but
-              // in this version of jQuery on some browser the .text() returns a string
-              // rather then the element.
-              (element = optionTemplate.clone())
-                  .val(option.id)
-                  .attr('selected', option.selected)
-                  .text(option.label);
+              
+              // if it's a null option 
+              if (option.id === '' && nullOption) {
+                // put back the pre-compiled element
+                element = nullOption;
+              } else {
+                // jQuery(v1.4.2) Bug: We should be able to chain the method calls, but
+                // in this version of jQuery on some browser the .text() returns a string
+                // rather then the element.
+                (element = optionTemplate.clone())
+                    .val(option.id)
+                    .attr('selected', option.selected)
+                    .text(option.label);
+              }
+
               existingOptions.push(existingOption = {
                   element: element,
                   label: option.label,
diff --git a/test/widget/selectSpec.js b/test/widget/selectSpec.js
index ad9dab18d743..9356ad22d57e 100644
--- a/test/widget/selectSpec.js
+++ b/test/widget/selectSpec.js
@@ -429,6 +429,104 @@ describe('select', function() {
         expect(select.find('option').length).toEqual(1);
       });
     });
+    
+    describe('blank option', function () {
+      // redefine createSelect for this test a bit
+      function createSelect(attrs, blank, unknown){
+        var html = '<select';
+        forEach(attrs, function(value, key){
+          if (isBoolean(value)) {
+            if (value) html += ' ' + key;
+          } else {
+            html += ' ' + key + '="' + value + '"';
+          }
+        });
+        html += '>' +
+          (blank ? blank : '') +    // blank can be specified in details
+          (unknown ? unknown : '') +
+        '</select>';
+        select = jqLite(html);
+        scope = compile(select);
+      }
+
+      function createSingleSelect(blank, unknown){
+        createSelect({
+          'ng:model':'selected',
+          'ng:options':'value.name for value in values'
+        }, blank, unknown);
+      }
+
+      it('should be compiled as template, be watched and updated', function () {
+        var option;
+
+        createSingleSelect('<option value="">blank is {{blankTemplate}}</option>');
+        scope.blankTemplate = 'so blank';
+        scope.values = [{name:'A'}];
+        scope.$digest();
+        
+        // check blank option is first and is compiled
+        expect(select.find('option').length == 2);
+        option = jqLite(select.find('option')[0]);
+        expect(option.val()).toBe('');
+        expect(option.text()).toBe('blank is so blank');
+
+        // change blankTemplate and $digest
+        scope.blankTemplate = 'not so blank';
+        scope.$digest();
+        
+        // check blank option is first and is compiled
+        expect(select.find('option').length == 2);
+        option = jqLite(select.find('option')[0]);
+        expect(option.val()).toBe('');
+        expect(option.text()).toBe('blank is not so blank');
+      });
+
+      it('should be compiled from ng:bind-template attribute if given instead of text', function () {
+        var option;
+        
+        createSingleSelect('<option value="" ng:bind-template="blank is {{blankTemplate}}"></option>');
+        scope.blankTemplate = 'so blank';
+        scope.values = [{name:'A'}];
+        scope.$digest();
+        
+        // check blank option is first and is compiled
+        expect(select.find('option').length == 2);
+        option = jqLite(select.find('option')[0]);
+        expect(option.val()).toBe('');
+        expect(option.text()).toBe('blank is so blank');
+      });
+
+      it('should be compiled from ng:bind attribute if given', function () {
+        var option;
+        
+        createSingleSelect('<option value="" ng:bind="blankTemplate"></option>');
+        scope.blankTemplate = 'is blank';
+        scope.values = [{name:'A'}];
+        scope.$digest();
+        
+        // check blank option is first and is compiled
+        expect(select.find('option').length == 2);
+        option = jqLite(select.find('option')[0]);
+        expect(option.val()).toBe('');
+        expect(option.text()).toBe('is blank');
+      });
+
+      it('should be rendered with the attributes preserved', function () {
+        var option;
+        
+        createSingleSelect('<option value="" class="coyote" id="road-runner" custom-attr="custom-attr">{{blankTemplate}}</option>');
+        scope.blankTemplate = 'is blank';
+        scope.$digest();
+        
+        // check blank option is first and is compiled
+        option = jqLite(select.find('option')[0]);
+        expect(option.hasClass('coyote')).toBeTruthy();
+        expect(option.attr('id')).toBe('road-runner');
+        expect(option.attr('custom-attr')).toBe('custom-attr');
+      });
+
+
+    });
 
     describe('on change', function() {
       it('should update model on change', function() {