diff --git a/lib/handlebars/compiler/compiler.js b/lib/handlebars/compiler/compiler.js
index 1aba34b4e..1303d8fc4 100644
--- a/lib/handlebars/compiler/compiler.js
+++ b/lib/handlebars/compiler/compiler.js
@@ -179,7 +179,12 @@ Compiler.prototype = {
       this.opcode('pushContext');
     }
 
-    this.opcode('invokePartial', partialName.name, partial.indent || '');
+    var indent = partial.indent || '';
+    if (this.options.preventIndent && indent) {
+      this.opcode('appendContent', indent);
+      indent = '';
+    }
+    this.opcode('invokePartial', partialName.name, indent);
     this.opcode('append');
   },
 
diff --git a/spec/env/common.js b/spec/env/common.js
index 92cc61123..62edf1d8b 100644
--- a/spec/env/common.js
+++ b/spec/env/common.js
@@ -18,7 +18,7 @@ global.compileWithPartials = function(string, hashOrArray, partials) {
     ary = [];
     ary.push(hashOrArray[0]);
     ary.push({ helpers: hashOrArray[1], partials: hashOrArray[2] });
-    options = {compat: hashOrArray[3]};
+    options = typeof hashOrArray[3] === 'object' ? hashOrArray[3] : {compat: hashOrArray[3]};
     if (hashOrArray[4] != null) {
       options.data = !!hashOrArray[4];
       ary[1].data = hashOrArray[4];
diff --git a/spec/partials.js b/spec/partials.js
index 20187f81d..9c0be4002 100644
--- a/spec/partials.js
+++ b/spec/partials.js
@@ -167,6 +167,14 @@ describe('partials', function() {
       shouldCompileToWithPartials(string, [hash, {}, {dude: dude, url: url}], true,
             "Dudes:\n  Yehuda\n   http://yehuda!\n  Alan\n   http://alan!\n");
     });
+    it("prevent nested indented partials", function() {
+      var string = "Dudes:\n{{#dudes}}\n  {{>dude}}\n{{/dudes}}";
+      var dude = "{{name}}\n {{> url}}";
+      var url = "{{url}}!\n";
+      var hash = {dudes: [{name: "Yehuda", url: "http://yehuda"}, {name: "Alan", url: "http://alan"}]};
+      shouldCompileToWithPartials(string, [hash, {}, {dude: dude, url: url}, {preventIndent: true}], true,
+            "Dudes:\n  Yehuda\n http://yehuda!\n  Alan\n http://alan!\n");
+    });
   });
 
   describe('compat mode', function() {