diff --git a/lib/marked.js b/lib/marked.js
index 49b81ef0..2062d703 100644
--- a/lib/marked.js
+++ b/lib/marked.js
@@ -16,10 +16,7 @@ var block = {
   lheading: /^([^\n]+)\n *(=|-){3,}/,
   hr: /^( ?[\-*_]){3,}/,
   blockquote: /^ *>[^\n]*(?:\n *>[^\n]*)*/,
-  // list: /^(?:( *)(\*|\+|-|\d+\.)[^\n]+(?:\n(?:\1 )+[^\n]+)*(?:\n+|$)){2,}/g,
-  // this can be simplified because its the whole list
-  //list: /^(?:( *)(\*|\+|-|\d+\.)[^\n]+(?:\n\1+[^\n]+)*(?:\n{1,2}|$)){2,}/g,
-  list: /^(?: *(\*|\+|-|\d+\.)[^\n]+(?:\n[^\n]+)*(\n{1,2}|$)){2,}/g,
+  list: /^(?: *(\*|\+|-|\d+\.)[^\n]+(?:\n[^\n]+)*(?:\n{1,2}|$)){2,}/g,
   html: /^<([^\/\s>]+)[^\n>]*>[^\n]*(?:\n[^\n]+)*\n?<\/\1>/,
   text: /^[^\n]+/
 };
@@ -123,7 +120,12 @@ block.token = function(str, tokens) {
         });
         break;
       case 'list':
-        var loose = false; //cap[2].length === 2;
+        //var loose = false; //cap[2].length === 2;
+        var loose = new RegExp(
+          '\n *\n' 
+          + cap[1] 
+          + '(?:\\*|\\+|-|\\d+\\.)'
+        ).test(cap[0]);
         tokens.push({
           type: 'list_start',
           ordered: isFinite(cap[1])
@@ -146,7 +148,7 @@ block.token = function(str, tokens) {
           }
           tokens.push({
             type: loose 
-              ? 'loose_list_item_start'
+              ? 'loose_item_start'
               : 'list_item_start'
           });
           block.token(item, tokens);
@@ -396,8 +398,6 @@ var tok = function() {
     case 'list_item_start': 
       var body = [];
       while (next().type !== 'list_item_end') {
-        // TODO incorporate paragraph 
-        // list items here
         body.push(token.type === 'text' 
           ? inline.lexer(token.text)
           : tok());
@@ -405,6 +405,14 @@ var tok = function() {
       return '<li>' 
         + body.join(' ') 
         + '</li>';
+    case 'loose_item_start': 
+      var body = [];
+      while (next().type !== 'list_item_end') {
+        body.push(tok());
+      }
+      return '<li>' 
+        + body.join(' ') 
+        + '</li>';
     case 'html':
       return inline.lexer(token.text);
     case 'text': 
diff --git a/test/in.md b/test/in.md
index bc47d2c5..99a8c272 100644
--- a/test/in.md
+++ b/test/in.md
@@ -22,13 +22,18 @@ markdown.js doesnt acknowledge arbitrary html blocks =/</aside>
   * New List Item 3
     The last item
 * List Item 3
-  The final item.
+The final item.
+
+* List Item 4
+The real final item.
+
+Paragraph.
 
 > * bq Item 1
 > * bq Item 2
 >   * New bq Item 1
 >   * New bq Item 2
->     Text here
+>   Text here
 
 > Another blockquote!
 > I really need to get
diff --git a/test/out.html b/test/out.html
index 1f38a7c4..0841ee2e 100644
--- a/test/out.html
+++ b/test/out.html
@@ -1,4 +1,4 @@
 <h1>A heading</h1> <p>Just a note, I&apos;ve found that I can&apos;t test my markdown parser vs others. For example, both markdown.js and showdown code blocks in lists wrong. They&apos;re  also completely <a href="http://google.com/" title="Google">inconsistent</a> with regards to paragraphs in list items.</p> <p>A link. Not anymore.</p> <aside>This will make me fail the test because
 markdown.js doesnt acknowledge arbitrary html blocks =/</aside> <ul><li>List Item 1</li><li>List Item 2 <ul><li>New List Item 1 Hi, this is a list item.</li><li>New List Item 2 Another item <pre><code>Code goes here.
-Lots of it...</code></pre></li><li>New List Item 3 The last item</li></ul></li><li>List Item 3 The final item.</li></ul> <blockquote><ul><li>bq Item 1</li><li>bq Item 2 <ul><li>New bq Item 1</li><li>New bq Item 2 Text here</li></ul></li></ul></blockquote> <blockquote><p> Another blockquote!  I really need to get  more creative with  mockup text..  markdown.js breaks here again</p></blockquote> <h2>Another Heading</h2> <p>Hello <em>world</em>. Here is a <a href="//hello">link</a>. And an image <img src="src" alt="alt">.</p> <pre><code>Code goes here.
+Lots of it...</code></pre></li><li>New List Item 3 The last item</li></ul></li><li>List Item 3 The final item.</li><li>List Item 4 The real final item.</li></ul> <p>Paragraph.</p> <blockquote><ul><li>bq Item 1</li><li>bq Item 2 <ul><li>New bq Item 1</li><li>New bq Item 2 Text here</li></ul></li></ul></blockquote> <blockquote><p> Another blockquote!  I really need to get  more creative with  mockup text..  markdown.js breaks here again</p></blockquote> <h2>Another Heading</h2> <p>Hello <em>world</em>. Here is a <a href="//hello">link</a>. And an image <img src="src" alt="alt">.</p> <pre><code>Code goes here.
 Lots of it...</code></pre>