diff --git a/src/Compiler.pir b/src/Compiler.pir
index 7d8c0c8..c66a3af 100644
--- a/src/Compiler.pir
+++ b/src/Compiler.pir
@@ -106,8 +106,10 @@ Return generated HTML for all of its children.
 
 .sub 'html_children' :method
     .param pmc node
-    .param string sep  :optional
-    .param int has_sep :opt_flag
+    .param string ssep  :optional
+    .param int has_ssep :opt_flag
+    .param string esep  :optional
+    .param int has_esep :opt_flag
     .local pmc code, iter
     code = new 'CodeString'
     iter = node.'iterator'()
@@ -118,10 +120,13 @@ Return generated HTML for all of its children.
     $P0 = self.'html'(cpast)
     $I0 = elements $P0
     unless $I0 goto iter_loop
-    code .= $P0
-    unless has_sep goto L1
-    code .= sep
+    unless has_ssep goto L1
+    code .= ssep
   L1:
+    code .= $P0
+    unless has_esep goto L2
+    code .= esep
+  L2:
     goto iter_loop
   iter_end:
     .return (code)
@@ -144,7 +149,7 @@ Return generated HTML for all of its children.
 
 .sub 'html' :method :multi(_, ['Markdown'; 'Document'])
     .param pmc node
-    .tailcall self.'html_children'(node, "\n\n")
+    .tailcall self.'html_children'(node, '', "\n\n")
 .end
 
 
@@ -224,7 +229,7 @@ Return generated HTML for all of its children.
     .param pmc node
     $S0 = "<blockquote>\n"
     $S0 .= "  "
-    $S1 = self.'html_children'(node, "\n\n")
+    $S1 = self.'html_children'(node, '', "\n\n")
     $I0 = length $S1
     dec $I0
     $S1 = substr $S1, 0, $I0
@@ -274,16 +279,18 @@ Return generated HTML for all of its children.
 
 .sub 'html' :method :multi(_, ['Markdown'; 'ListItem'])
     .param pmc node
-    $S1 = self.'html_children'(node)
-    $I0 = node.'loose'()
     $S0 = "<li>"
-    unless $I0 goto L1
-    $S0 .= "<p>"
+    $I0 = node.'loose'()
+    if $I0 goto L1
+    $S1 = self.'html_children'(node)
+    goto L2
   L1:
-    $S0 .= $S1
-    unless $I0 goto L2
-    $S0 .= "</p>"
+    $S1 = self.'html_children'(node, "<p>", "</p>\n\n")
+    $I0 = length $S1
+    $I0 -= 2
+    $S1 = substr $S1, 0, $I0
   L2:
+    $S0 .= $S1
     $S0 .= "</li>\n"
     .local pmc code
     new code, 'CodeString'
diff --git a/src/parser/actions.pm b/src/parser/actions.pm
index 07c0354..3b7f09a 100644
--- a/src/parser/actions.pm
+++ b/src/parser/actions.pm
@@ -194,8 +194,7 @@ method BulletListItem($/) {
 
 method ListItem($/) {
     if ( $<ListContinuationBlock> ) {
-        my $mast := Markdown::ListItem.new( :loose( 1 ),
-                                            $( $<ListBlock> ) );
+        my $mast := Markdown::ListItem.new( $( $<ListBlock> ) );
         for $<ListContinuationBlock> {
             $mast.push( $( $_ ) );
         }
@@ -211,13 +210,20 @@ method ListBlock($/) {
     for $<Inline> {
         $mast.push( $( $_ ) );
     }
+    for $<ListBlockLine> {
+        $mast.push( Markdown::Newline.new() );
+        $mast.push( $( $_ ) );
+    }
     make $mast;
 }
 
+method ListBlockLine($/) {
+    make $( $<OptionallyIndentedLine><Line> );
+}
+
 method ListContinuationBlock($/) {
     my $mast := Markdown::Node.new();
     for $<ListBlock> {
-        $mast.push( Markdown::Newline.new() );
         $mast.push( $( $_ ) );
     }
     make $mast;
diff --git a/src/parser/grammar.pg b/src/parser/grammar.pg
index cae5540..97d78d7 100644
--- a/src/parser/grammar.pg
+++ b/src/parser/grammar.pg
@@ -148,12 +148,12 @@ token BulletListItem {
 }
 
 token ListItem {
-    [ <.Bullet> | <.Enumerator> ] <ListBlock> <ListContinuationBlock>* <.Newline>
+    [ <.Bullet> | <.Enumerator> ] <ListBlock> <ListContinuationBlock>*
     {*}
 }
 
 token ListBlock {
-    <Inline>+ <ListBlockLine>*
+    <Inline>+ <.Newline> <ListBlockLine>*
     {*}
 }
 
@@ -190,6 +190,7 @@ token OrderedListItem {
 
 token ListBlockLine {
     <!_ListItem> <!BlankLine> <OptionallyIndentedLine>
+    {*}
 }
 
 token _ListItem {
diff --git a/t/14-list.t b/t/14-list.t
index e2c735e..0c45321 100644
--- a/t/14-list.t
+++ b/t/14-list.t
@@ -15,10 +15,10 @@ use warnings;
 use FindBin;
 use lib "$FindBin::Bin/../../../lib", "$FindBin::Bin";
 
-use Parrot::Test tests => 3;
+use Parrot::Test tests => 5;
 use Test::More;
 
-language_output_is( 'markdown', <<'CODE', <<'OUT', 'unordered' );
+language_output_is( 'markdown', <<'CODE', <<'OUT', 'unordered tight' );
 
 - An item in a bulleted (unordered) list
 - Another item in a bulleted list
@@ -31,7 +31,7 @@ CODE
 
 OUT
 
-language_output_is( 'markdown', <<'CODE', <<'OUT', 'ordered' );
+language_output_is( 'markdown', <<'CODE', <<'OUT', 'ordered tight' );
 
 1. An item in a enumeradted (ordered) list
 2. Another item in a enumeradted list
@@ -58,6 +58,39 @@ CODE
 
 OUT
 
+language_output_is( 'markdown', <<'CODE', <<'OUT', 'with continuation' );
+
+*   A list item.
+    With continuation.
+*   Another item in the list.
+
+CODE
+<ul>
+<li>A list item.
+With continuation.</li>
+<li>Another item in the list.</li>
+</ul>
+
+OUT
+
+language_output_is( 'markdown', <<'CODE', <<'OUT', 'with multi-para' );
+
+*   Para 1.
+
+    Para 2.
+
+*   Another item in the list.
+
+CODE
+<ul>
+<li><p>Para 1.</p>
+
+<p>Para 2.</p></li>
+<li><p>Another item in the list.</p></li>
+</ul>
+
+OUT
+
 
 # Local Variables:
 #   mode: cperl