diff --git a/Rebracer.Tests/UtilitiesTets/XmlMergerTests.cs b/Rebracer.Tests/UtilitiesTets/XmlMergerTests.cs
index 01dda7c..f6391d9 100644
--- a/Rebracer.Tests/UtilitiesTets/XmlMergerTests.cs
+++ b/Rebracer.Tests/UtilitiesTets/XmlMergerTests.cs
@@ -245,6 +245,36 @@ public void ReorderingNewElementsGetNewLines() {
 </C>");
 		}
 
+		[TestMethod]
+		public void ReplacedChildElementsPreserveIndentation() {
+			// Note two tabs before each element
+			var source = @"<C>
+		<a b=""c"">
+				<x1>Hi!</x1>
+				<x2>
+						<content>Bye!</content>
+				</x2>
+		</a>
+		<d />
+</C>";
+			var container = XElement.Parse(source, LoadOptions.PreserveWhitespace);
+			var newSource = MergeElements(container, 
+				new XElement("a", new XAttribute("b", "c"),
+					new XElement("x1", "Hi!"),
+					new XElement("x2", new XElement("NewContent", "Bye!"))
+				)
+			);
+			container.ToString().Should().Be(@"<C>
+		<a b=""c"">
+				<x1>Hi!</x1>
+				<x2>
+						<NewContent>Bye!</NewContent>
+				</x2>
+		</a>
+		<d />
+</C>");
+		}
+
 		[TestMethod]
 		public void ReorderingElementsPreservesComments() {
 			// Note two tabs before each element
diff --git a/Rebracer/Utilities/XmlMerger.cs b/Rebracer/Utilities/XmlMerger.cs
index 09e4aaa..ab395d5 100644
--- a/Rebracer/Utilities/XmlMerger.cs
+++ b/Rebracer/Utilities/XmlMerger.cs
@@ -52,6 +52,7 @@ public static bool MergeElements(this XElement container, IEnumerable<XElement>
 					if (!changed && !XNode.DeepEquals(o, newItems[newIndex].Value))
 						changed = true;
 					o.ReplaceWith(newItems[newIndex].Value);
+					IndentChildren(newItems[newIndex].Value);
 					newIndex++;
 				}
 
@@ -92,15 +93,16 @@ public static bool MergeElements(this XElement container, IEnumerable<XElement>
 		///<summary>Gets all whitespace and comment nodes before the specified element, until its preceding element.</summary>
 		static IEnumerable<XNode> GetPrecedingTrivia(this XElement element) {
 			var lastElem = element.ElementsBeforeSelf().LastOrDefault();
-			if (lastElem == null)	// If it's the first element, take all preceding nodes
+			if (lastElem == null)   // If it's the first element, take all preceding nodes
 				return element.NodesBeforeSelf();
-			else					// Otherwise, take all nodes after the prior element.
+			else                    // Otherwise, take all nodes after the prior element.
 				return lastElem.NodesAfterSelf().TakeWhile(n => n != element);
 		}
 
 		///<summary>A method to insert nodes into a LINQ to XML document.</summary>
 		delegate void NodeInserter(params object[] content);
-		private static XNode GetPrecedingWhitespace(this XElement element) {
+		///<summary>Gets the XText node containing the whitespace used to indent this element.  If there is no preceding whitespace, the following whitespace will be returned, if any.</summary>
+		private static XText GetPrecedingWhitespace(this XElement element) {
 			// If we started from an empty parent, there is no known whitespace
 			if (element == null)
 				return null;
@@ -111,5 +113,48 @@ private static XNode GetPrecedingWhitespace(this XElement element) {
 				return null;
 			return new XText(sample);
 		}
+
+		///<summary>Indents the children of an inserted element, based on the indentation of the parent element.</summary>
+		public static void IndentChildren(this XElement parent) {
+			var parentPrefix = parent.GetPrecedingWhitespace();
+			if (parentPrefix == null)   // No known indent to start from
+				return;
+
+			// Copy the child list before we start mutating.
+			// Looking at XContainer source code, this isn't
+			// strictly necessary.
+			var childElements = parent.Elements().ToList();
+			if (childElements.Count == 0)
+				return;
+			parent.Add(parentPrefix);   // Indent the closing tag.
+
+			var childPrefix = GetChildPrefix(parent.Depth(), parentPrefix.Value);
+			if (string.IsNullOrEmpty(childPrefix))
+				return;
+
+			foreach (var child in childElements) {
+				child.AddBeforeSelf(childPrefix);
+				IndentChildren(child);
+			}
+		}
+
+		public static int Depth(this XElement element) {
+			if (element.Parent == null)
+				return 0;
+			return element.Parent.Depth() + 1;
+		}
+
+		private static string GetChildPrefix(int parentDepth, string parentPrefix) {
+			string newLine = parentPrefix.Substring(0, parentPrefix.TakeWhile(c => c == '\r' || c == '\n').Count());
+			parentPrefix = parentPrefix.Substring(newLine.Length);
+
+			string levelIndent;
+			if (parentDepth == 0)
+				return newLine; // Don't know how to indent
+			else
+				levelIndent = parentPrefix.Substring(0, parentPrefix.Length / parentDepth);
+
+			return newLine + string.Concat(Enumerable.Repeat(levelIndent, parentDepth + 1));
+		}
 	}
 }