diff --git a/lib/haml.rb b/lib/haml.rb
index ec43e202..64b9b208 100644
--- a/lib/haml.rb
+++ b/lib/haml.rb
@@ -564,8 +564,7 @@ $LOAD_PATH << dir unless $LOAD_PATH.include?(dir)
 #
 # [erb]       Parses the filtered text with ERB, like an RHTML template.
 #             Not available if the <tt>suppress_eval</tt> option is set to true.
-#             At the moment, this doesn't support access to variables
-#             defined by Ruby on Rails or Haml code.
+#             Embedded Ruby code is evaluated in the same context as the Haml template.
 #
 # [sass]      Parses the filtered text with Sass to produce CSS output.
 #
diff --git a/lib/haml/filters.rb b/lib/haml/filters.rb
index 8205186a..dd149dbd 100644
--- a/lib/haml/filters.rb
+++ b/lib/haml/filters.rb
@@ -191,8 +191,9 @@ module Haml
       include Base
       lazy_require 'erb'
 
-      def render(text)
-        ::ERB.new(text).result(binding)
+      def compile(precompiler, text)
+        src = ::ERB.new(text).src.sub(/^_erbout = '';/, "").gsub("\n", ';')
+        precompiler.send(:push_silent, src)
       end
     end
     
diff --git a/test/haml/results/filters.xhtml b/test/haml/results/filters.xhtml
index 43c0b713..f022b68e 100644
--- a/test/haml/results/filters.xhtml
+++ b/test/haml/results/filters.xhtml
@@ -36,26 +36,32 @@ This pre is pretty deeply&#x000A;      nested.&#x000A;   Does interpolation work
   This one is, too.&#x000A;Nested, that is.&#x000A;&#x000A;
   </pre>
 </p>
+<ul>
 
-  a
+  <li>a</li>
 
-  b
+  <li>b</li>
 
-  c
+  <li>c</li>
 
-  d
+  <li>d</li>
 
-  e
+  <li>e</li>
 
-  f
+  <li>f</li>
 
-  g
+  <li>g</li>
 
-  h
+  <li>h</li>
 
-  i
+  <li>i</li>
 
-  j
+  <li>j</li>
+
+
+
+</ul>
+<div class='res'>178</div>
 <ul>
 <li>Foo</li>
 <li>Bar</li>
diff --git a/test/haml/templates/filters.haml b/test/haml/templates/filters.haml
index c1af6436..fa96b875 100644
--- a/test/haml/templates/filters.haml
+++ b/test/haml/templates/filters.haml
@@ -52,10 +52,15 @@
         This one is, too.
       Nested, that is.
 
-:erb
-  <% 10.times do |c| %>
-    <%= (c+97).chr %>
-  <% end %>
+- num = 10
+%ul
+  :erb
+    <% num.times do |c| %>
+      <li><%= (c+97).chr %></li>
+    <% end %>
+    <% res = 178 %>
+
+.res= res
 
 :markdown
   *  Foo