diff --git a/src/ng/compile.js b/src/ng/compile.js
index 31c1696c0e6f..56dafc397df2 100644
--- a/src/ng/compile.js
+++ b/src/ng/compile.js
@@ -576,14 +576,16 @@ function $CompileProvider($provide) {
           }
         }
 
-        if (directiveValue = directive.template) {
+        if ((directiveValue = directive.template)) {
           assertNoDuplicate('template', templateDirective, directive, $compileNode);
           templateDirective = directive;
 
-          $template = jqLite('<div>' + trim(directiveValue) + '</div>').contents();
-          compileNode = $template[0];
-
           if (directive.replace) {
+            $template = jqLite('<div>' +
+                                 trim(directiveValue) +
+                               '</div>').contents();
+            compileNode = $template[0];
+
             if ($template.length != 1 || compileNode.nodeType !== 1) {
               throw new Error(MULTI_ROOT_TEMPLATE_ERROR + directiveValue);
             }
diff --git a/test/ng/compileSpec.js b/test/ng/compileSpec.js
index 31a83648ada8..cbf84a3885f0 100644
--- a/test/ng/compileSpec.js
+++ b/test/ng/compileSpec.js
@@ -369,7 +369,6 @@ describe('$compile', function() {
 
       describe('template', function() {
 
-
         beforeEach(module(function() {
           directive('replace', valueFn({
             restrict: 'CAM',
@@ -394,7 +393,7 @@ describe('$compile', function() {
             compile: function(element, attr) {
               attr.$set('compiled', 'COMPILED');
               expect(element).toBe(attr.$$element);
-	    }
+            }
           }));
         }));