diff --git a/src/lib/annotations/annotations.html b/src/lib/annotations/annotations.html
index 1974b03fdb..8d0ed853c2 100644
--- a/src/lib/annotations/annotations.html
+++ b/src/lib/annotations/annotations.html
@@ -72,11 +72,11 @@
     // construct and return a list of annotation records
     // by scanning `template`'s content
     //
-    parseAnnotations: function(template) {
+    parseAnnotations: function(template, stripWhiteSpace) {
       var list = [];
       var content = template._content || template.content;
       this._parseNodeAnnotations(content, list,
-        template.hasAttribute('strip-whitespace'));
+        stripWhiteSpace || template.hasAttribute('strip-whitespace'));
       return list;
     },
 
@@ -231,7 +231,7 @@
           var next = node.nextSibling;
           if (node.localName === 'template' &&
             !node.hasAttribute('preserve-content')) {
-            this._parseTemplate(node, i, list, annote);
+            this._parseTemplate(node, i, list, annote, stripWhiteSpace);
           }
           if (node.localName == 'slot') {
             node = this._replaceSlotWithContent(node);
@@ -295,11 +295,11 @@
     //    (this is both an optimization to avoid re-stamping nested template
     //    children and avoids a bug in Chrome where nested template children
     //    upgrade)
-    _parseTemplate: function(node, index, list, parent) {
+    _parseTemplate: function(node, index, list, parent, stripWhiteSpace) {
       // TODO(sjmiles): simply altering the .content reference didn't
       // work (there was some confusion, might need verification)
       var content = document.createDocumentFragment();
-      content._notes = this.parseAnnotations(node);
+      content._notes = this.parseAnnotations(node, stripWhiteSpace);
       content.appendChild(node.content);
       // TODO(sjmiles): using `nar` to avoid unnecessary allocation;
       // in general the handling of these arrays needs some cleanup
diff --git a/test/unit/template-whitespace.html b/test/unit/template-whitespace.html
index 5f17145f21..3f05455e72 100644
--- a/test/unit/template-whitespace.html
+++ b/test/unit/template-whitespace.html
@@ -40,13 +40,13 @@
     <div>A</div>
     <div>B</div>
   </template>
-  
+
   <script>
   HTMLImports.whenReady(function() {
     Polymer({
       is: 'no-whitespace'
     });
-  });  
+  });
   </script>
 
 </dom-module>
@@ -55,7 +55,7 @@
 
 <dom-module id="no-whitespace-style">
 
-  <template strip-whitespace> 
+  <template strip-whitespace>
     <style>
       :host {
         display: block;
@@ -70,14 +70,14 @@
     Polymer({
       is: 'no-whitespace-style'
     });
-  });  
+  });
   </script>
 
 </dom-module>
 
 <dom-module id="no-whitespace-nested">
 
-  <template strip-whitespace> 
+  <template strip-whitespace>
     <div>
       <div>A</div>
     </div>
@@ -91,14 +91,14 @@
     Polymer({
       is: 'no-whitespace-nested'
     });
-  });  
+  });
   </script>
 
 </dom-module>
 
 <dom-module id="no-whitespace-binding">
 
-  <template strip-whitespace> 
+  <template strip-whitespace>
 
     <div id="text">{{text}}</div>
     <div id="attr" attr$="{{attr}}">
@@ -121,7 +121,32 @@
       },
       is: 'no-whitespace-binding'
     });
-  });  
+  });
+  </script>
+
+</dom-module>
+
+<dom-module id="no-whitespace-repeat">
+
+  <template strip-whitespace>
+
+    <template is="dom-repeat" items="[[items]]">
+      <div></div>
+    </template>
+
+  </template>
+
+  <script>
+  HTMLImports.whenReady(function() {
+    Polymer({
+      properties: {
+        items: {
+          value: function() { return [1, 2, 3]}
+        }
+      },
+      is: 'no-whitespace-repeat'
+    });
+  });
   </script>
 
 </dom-module>
@@ -169,6 +194,13 @@
       assert.equal(el.$.compound.textContent, ' a b ');
     });
 
+    test('template with dom-repeat stamped without whitespace when strip-template is used', function() {
+      var el = document.createElement('no-whitespace-repeat');
+      document.body.appendChild(el);
+      Polymer.dom.flush();
+      assert.equal(Polymer.dom(el.root).childNodes.length, 4);
+    });
+
   });
 
 </script>