diff --git a/view/mustache/mustache.js b/view/mustache/mustache.js
index 6780a32df1a..3fc5c098dd5 100644
--- a/view/mustache/mustache.js
+++ b/view/mustache/mustache.js
@@ -1866,9 +1866,10 @@ steal('can/util',
 			 *     {{/unless}}
 			 */
 			'unless': function (expr, options) {
-				if (!Mustache.resolve(expr)) {
-					return options.fn(options.contexts || this);
-				}
+				var fn = options.fn;
+				options.fn = options.inverse;
+				options.inverse = fn;
+				return Mustache._helpers['if'].fn.apply(this, arguments);
 			},
 
 			// Implements the `each` built-in helper.
diff --git a/view/mustache/mustache_test.js b/view/mustache/mustache_test.js
index 194662f9f18..dc2fa36ab74 100644
--- a/view/mustache/mustache_test.js
+++ b/view/mustache/mustache_test.js
@@ -3789,4 +3789,10 @@ steal("can/model", "can/view/mustache", "can/test", "can/view/mustache/spec/spec
 			.render({}, t.helpers), t.expected);
 	});
 
+	test("{{else}} with {{#unless}} (#988)", function(){
+		var tmpl = "<div>{{#unless noData}}data{{else}}no data{{/unless}}</div>";
+
+		var frag = can.mustache(tmpl)({ noData: true });
+		equal(frag.childNodes[0].innerHTML, 'no data', 'else with unless worked');
+	});
 });
diff --git a/view/stache/mustache_helpers.js b/view/stache/mustache_helpers.js
index 424723e7e67..32b01f72e63 100644
--- a/view/stache/mustache_helpers.js
+++ b/view/stache/mustache_helpers.js
@@ -81,9 +81,10 @@ steal("can/util", "./utils.js","can/view/live",function(can, utils, live){
 			}
 		},
 		'unless': function (expr, options) {
-			if (!resolve(expr)) {
-				return options.fn(options.scope || this);
-			}
+			var fn = options.fn;
+			options.fn = options.inverse;
+			options.inverse = fn;
+			return helpers['if'].apply(this, arguments);
 		},
 		'with': function (expr, options) {
 			var ctx = expr;
diff --git a/view/stache/stache_test.js b/view/stache/stache_test.js
index 965f39aecde..baabc4ac066 100644
--- a/view/stache/stache_test.js
+++ b/view/stache/stache_test.js
@@ -3460,4 +3460,11 @@ steal("can/view/stache", "can/view","can/test","can/view/mustache/spec/specs",fu
 		frag = can.stache(t.template)({}, t.helpers);
 		equal(frag.childNodes[0].nodeValue, t.expected);
 	});
+
+	test("{{else}} with {{#unless}} (#988)", function(){
+		var tmpl = "<div>{{#unless noData}}data{{else}}no data{{/unless}}</div>";
+
+		var frag = can.stache(tmpl)({ noData: true });
+		equal(frag.childNodes[0].innerHTML, 'no data', 'else with unless worked');
+	});
 });