diff --git a/.gitignore b/.gitignore
index d0b8649e..b4777dcf 100644
--- a/.gitignore
+++ b/.gitignore
@@ -8,3 +8,8 @@ pkg/
 coverage/
 .yardoc/
 /tags
+
+# Not sure if Pry devs use RVM or want the Gemfile.lock in the repo, thus I'm
+# ignoring them for now.
+.rvmrc
+Gemfile.lock
diff --git a/lib/pry.rb b/lib/pry.rb
index d364b110..fcd6ef7d 100644
--- a/lib/pry.rb
+++ b/lib/pry.rb
@@ -191,3 +191,4 @@ require "pry/plugins"
 require "pry/core_extensions"
 require "pry/pry_class"
 require "pry/pry_instance"
+require "pry/indent"
diff --git a/lib/pry/config.rb b/lib/pry/config.rb
index 37e236de..f5999214 100644
--- a/lib/pry/config.rb
+++ b/lib/pry/config.rb
@@ -126,6 +126,10 @@ class Pry
     #   The proc is passed the pry output object, the command string
     #   to eval, and a reference to the pry instance
     attr_accessor :system
+
+    # @return [TrueClass|FalseClass] Whether or not code should be indented
+    #  using Pry::Indent.
+    attr_accessor :indent
   end
 end
 
diff --git a/lib/pry/indent.rb b/lib/pry/indent.rb
new file mode 100644
index 00000000..2d33508a
--- /dev/null
+++ b/lib/pry/indent.rb
@@ -0,0 +1,136 @@
+require 'coderay'
+
+class Pry
+  ##
+  # Pry::Indent is a class that can be used to indent a number of lines
+  # containing Ruby code similar as to how IRB does it (but better). The class
+  # works by tokenizing a string using CodeRay and then looping over those
+  # tokens. Based on the tokens in a line of code that line (or the next one)
+  # will be indented or un-indented by 2 spaces.
+  #
+  # @author Yorick Peterse
+  # @since  04-10-2011
+  #
+  class Indent
+    # Array containing all the indentation levels.
+    attr_reader :stack
+
+    # The amount of spaces to insert for each indent level.
+    Spaces = '  '.freeze
+
+    # Array containing all the tokens that should increase the indentation
+    # level.
+    OpenTokens = [
+      'def',
+      'class',
+      'module',
+      '[',
+      '{',
+      'do',
+      'if',
+      'while',
+      'for'
+    ]
+
+    # Collection of tokens that decrease the indentation level.
+    ClosingTokens = ['end', ']', '}']
+
+    # Collection of token types that should be ignored. Without this list
+    # keywords such as "class" inside strings would cause the code to be
+    # indented incorrectly.
+    IgnoreTokens = [:space, :content, :string, :delimiter]
+
+    # Collection of tokens that should only increase the indentation level of
+    # the next line.
+    OpenTokensNext = ['else', 'elsif']
+
+    ##
+    # Creates a new instance of the class and starts with a fresh stack. The
+    # stack is used to keep track of the indentation level for each line of
+    # code.
+    #
+    # @author Yorick Peterse
+    # @since  05-10-2011
+    #
+    def initialize
+      @stack = []
+    end
+
+    ##
+    # Indents a string and returns it. This string can either be a single line
+    # or multiple ones.
+    #
+    # @example
+    #  str = <<TXT
+    #  class User
+    #  attr_accessor :name
+    #  end
+    #  TXT
+    #
+    #  # This would result in the following being displayed:
+    #  #
+    #  # class User
+    #  #   attr_accessor :name
+    #  # end
+    #  #
+    #  puts Pry::Indent.new.indent(str)
+    #
+    # @author Yorick Peterse
+    # @since  05-10-2011
+    # @param  [String] input The input string to indent.
+    # @return [String] The indented version of +input+.
+    #
+    def indent(input)
+      output = ''
+
+      input.lines.each do |line|
+        # Remove manually added indentation.
+        line   = line.strip + "\n"
+        tokens = CodeRay.scan(line, :ruby)
+
+        unless @stack.empty?
+          line = @stack[-1] + line
+        end
+
+        tokens.each_slice(2) do |token, kind|
+          next if IgnoreTokens.include?(kind)
+
+          if OpenTokensNext.include?(token) and @stack[-1]
+            line.sub!(@stack[-1], '')
+            break
+          # Start token found (such as "class"). Update the stack and indent the
+          # current line.
+          elsif OpenTokens.include?(token)
+            add  = ''
+            last = @stack[-1]
+
+            # Determine the amount of spaces to add to the stack and the line.
+            unless last.nil?
+              add = Spaces + last
+            end
+
+            # Don't forget to update the current line.
+            if @stack.empty?
+              line  = add + line
+              add  += Spaces
+            end
+
+            @stack.push(add)
+            break
+          # Stop token found. Remove the last number of spaces from the stack
+          # and un-indent the current line.
+          elsif ClosingTokens.include?(token)
+            @stack.pop
+
+            line = ( @stack[-1] || '' ) + line.strip + "\n"
+            break
+          end
+        end
+
+        output += line
+      end
+
+      return output.gsub!(/\s+$/, '')
+    end
+  end # Indent
+end # Pry
diff --git a/lib/pry/pry_class.rb b/lib/pry/pry_class.rb
index 3830f5fb..05bc8666 100644
--- a/lib/pry/pry_class.rb
+++ b/lib/pry/pry_class.rb
@@ -192,6 +192,7 @@ class Pry
     config.should_load_rc = true
     config.disable_auto_reload = false
     config.command_prefix = ""
+    config.indent = true
 
     config.plugins ||= OpenStruct.new
     config.plugins.enabled = true
diff --git a/lib/pry/pry_instance.rb b/lib/pry/pry_instance.rb
index 333fc5e1..b22b34e6 100644
--- a/lib/pry/pry_instance.rb
+++ b/lib/pry/pry_instance.rb
@@ -22,7 +22,6 @@ class Pry
   attr_reader :input_array
   attr_reader :output_array
 
-
   # Create a new `Pry` object.
   # @param [Hash] options The optional configuration parameters.
   # @option options [#readline] :input The object to use for input.
@@ -37,6 +36,7 @@ class Pry
 
     @command_processor = CommandProcessor.new(self)
     @binding_stack     = []
+    @indent            = Pry::Indent.new
   end
 
   # Refresh the Pry instance settings from the Pry class.
@@ -278,7 +278,9 @@ class Pry
   end
 
   # Read a line of input and check for ^d, also determine prompt to use.
-  # This method should not need to be invoked directly.
+  # This method should not need to be invoked directly. This method
+  # automatically indents the input value using Pry::Indent.
+  #
   # @param [String] eval_string The cumulative lines of input.
   # @param [Binding] target The target of the session.
   # @return [String] The line received.
@@ -286,20 +288,27 @@ class Pry
     current_prompt = select_prompt(eval_string.empty?, target.eval('self'))
     val = readline(current_prompt)
 
-    # exit session if we receive EOF character (^D)
+    # exit session if receive EOF character (^D)
     if !val
       output.puts ""
       Pry.config.control_d_handler.call(eval_string, self)
-      ""
+
+      return ""
     else
 
       # Change the eval_string into the input encoding (Issue 284)
-      # TODO: This wouldn't be necessary if the eval_string was constructed from input strings only.
-      if eval_string.empty? && val.respond_to?(:encoding) && val.encoding != eval_string.encoding
+      # TODO: This wouldn't be necessary if the eval_string was constructed from
+      # input strings only.
+      if eval_string.empty? && val.respond_to?(:encoding) \
+      && val.encoding != eval_string.encoding
         eval_string.force_encoding(val.encoding)
       end
 
-      val
+      if Pry.config.indent === true
+        val = @indent.indent(val)
+      end
+
+      return val
     end
   end
 
@@ -419,6 +428,10 @@ class Pry
   # @param [String] current_prompt The prompt to use for input.
   # @return [String] The next line of input.
   def readline(current_prompt="> ")
+    if Pry.config.indent === true
+      current_prompt += @indent.stack[-1] || ''
+    end
+
     handle_read_errors do
       if input == Readline
         line = input.readline(current_prompt, false)
diff --git a/test/helper.rb b/test/helper.rb
index 1bf5f89e..876aa12f 100644
--- a/test/helper.rb
+++ b/test/helper.rb
@@ -20,10 +20,11 @@ class << Pry
 
     Pry.color = false
     Pry.pager = false
-    Pry.config.should_load_rc = false
-    Pry.config.plugins.enabled = false
+    Pry.config.should_load_rc      = false
+    Pry.config.plugins.enabled     = false
     Pry.config.history.should_load = false
     Pry.config.history.should_save = false
+    Pry.config.indent              = false
     Pry.config.hooks = { }
   end
 end
diff --git a/test/test_indent.rb b/test/test_indent.rb
new file mode 100644
index 00000000..a1676e04
--- /dev/null
+++ b/test/test_indent.rb
@@ -0,0 +1,127 @@
+require File.expand_path('../helper', __FILE__)
+
+# Please keep in mind that any hash signs ("#") in the heredoc strings are
+# placed on purpose. Without these editors might remove the whitespace on empty
+# lines.
+describe Pry::Indent do
+  before do
+    @indent = Pry::Indent.new
+  end
+
+  it 'should indent an array' do
+    input  = "array = [\n10,\n15\n]"
+    output = "array = [\n  10,\n  15\n]"
+
+    @indent.indent(input).should === output
+  end
+
+  it 'should indent a hash' do
+    input  = "hash = {\n:name => 'Ruby'\n}"
+    output = "hash = {\n  :name => 'Ruby'\n}"
+
+    @indent.indent(input).should === output
+  end
+
+  it 'should indent a function' do
+    input  = "def\nreturn 10\nend"
+    output = "def\n  return 10\nend"
+
+    @indent.indent(input).should === output
+  end
+
+  it 'should indent a module and class' do
+    input        = "module Foo\n# Hello world\nend"
+    output       = "module Foo\n  # Hello world\nend"
+    input_class  = "class Foo\n# Hello world\nend"
+    output_class = "class Foo\n  # Hello world\nend"
+
+    @indent.indent(input).should       === output
+    @indent.indent(input_class).should === output_class
+  end
+
+  it 'should indent separate lines' do
+    @indent.indent('def foo').should   === 'def foo'
+    @indent.indent('return 10').should === '  return 10'
+    @indent.indent('end').should       === 'end'
+  end
+
+  it 'should properly indent nested code' do
+    input = <<TXT.strip
+module A
+module B
+class C
+attr_accessor :test
+# keep
+def number
+return 10
+end
+end
+end
+end
+TXT
+
+    output = <<TXT.strip
+module A
+  module B
+    class C
+      attr_accessor :test
+      # keep
+      def number
+        return 10
+      end
+    end
+  end
+end
+TXT
+
+    @indent.indent(input).should === output
+  end
+
+  it 'should indent statements such as if, else, etc' do
+    input = <<TXT.strip
+if a === 10
+#
+elsif a === 15
+#
+else
+#
+end
+#
+while true
+#
+end
+#
+for num in [10, 15, 20]
+#
+end
+#
+for num in [10, 15, 20] do
+#
+end
+TXT
+
+    output = <<TXT.strip
+if a === 10
+  #
+elsif a === 15
+  #
+else
+  #
+end
+#
+while true
+  #
+end
+#
+for num in [10, 15, 20]
+  #
+end
+#
+for num in [10, 15, 20] do
+  #
+end
+TXT
+
+    @indent.indent(input).should === output
+  end
+end