diff --git a/mcs/class/System.Web/ChangeLog b/mcs/class/System.Web/ChangeLog
index d2242c6cac5e8..241b2c967b02f 100644
--- a/mcs/class/System.Web/ChangeLog
+++ b/mcs/class/System.Web/ChangeLog
@@ -1,3 +1,8 @@
+2009-06-04  Marek Habersack  <mhabersack@novell.com>
+
+	* Makefile (TEST_RESOURCE_FILES): added
+	Test/mainsoft/NunitWebResources/ServerSideControlsInScriptBlock.aspx
+
 2009-05-10  Marek Habersack  <mhabersack@novell.com>
 
 	* Makefile (TEST_RESOURCE_FILES): added
diff --git a/mcs/class/System.Web/Makefile b/mcs/class/System.Web/Makefile
index 5d69e10eace45..4495669bf6918 100644
--- a/mcs/class/System.Web/Makefile
+++ b/mcs/class/System.Web/Makefile
@@ -162,7 +162,8 @@ TEST_RESOURCE_FILES = \
 	Test/mainsoft/NunitWebResources/LoginDisplayRememberMe.aspx \
 	Test/mainsoft/NunitWebResources/NoBindForMethodsWithBindInName.aspx \
 	Test/mainsoft/NunitWebResources/LinkInHeadWithEmbeddedExpression.aspx \
-	Test/mainsoft/NunitWebResources/ExpressionInListControl.aspx
+	Test/mainsoft/NunitWebResources/ExpressionInListControl.aspx \
+	Test/mainsoft/NunitWebResources/ServerSideControlsInScriptBlock.aspx
 
 RESX_DIST =  resources/TranslationResources.resx
 ifeq (net_2_0, $(PROFILE))
diff --git a/mcs/class/System.Web/System.Web.Compilation/AspGenerator.cs b/mcs/class/System.Web/System.Web.Compilation/AspGenerator.cs
index a1e2960a44a19..0a4ec35277561 100644
--- a/mcs/class/System.Web/System.Web.Compilation/AspGenerator.cs
+++ b/mcs/class/System.Web/System.Web.Compilation/AspGenerator.cs
@@ -950,6 +950,8 @@ void TextParsed (ILocation location, string text)
 			if (ignore_text)
 				return;
 
+			// And again... the first one wins - if we have expressions and server-side
+			// controls together in one block of plain text, tough luck...
 			if (text.IndexOf ("<%") != -1 && !inScript) {
 				if (this.text.Length > 0)
 					FlushText (true);
@@ -957,8 +959,32 @@ void TextParsed (ILocation location, string text)
 				r.AddChildren (this);
 				return;
 			}
+
+			int startIndex = 0, index = 0;
+			Match match;
+			int textLen = text.Length;
+
+			while (index > -1 && startIndex < textLen) {
+				match = runatServer.Match (text, index);
+					
+				if (match.Success) {
+					string value = match.Value;
+					index = match.Index;
+					if (index > startIndex)
+						this.text.Append (text.Substring (startIndex, index - startIndex));
+					ParseAttributeTag (value);
+					index += value.Length;
+					startIndex = index;
+				} else
+					break;
+
+				if (index < textLen)
+					index = text.IndexOf ('<', index);
+				else
+					break;
+			}
 			
-			this.text.Append (text);
+			this.text.Append (text.Substring (startIndex));
 			//PrintLocation (location);
 		}
 
@@ -1093,6 +1119,12 @@ bool ProcessTag (ILocation location, string tagid, TagAttributes atts, TagType t
 					builder = RootBuilder.CreateSubBuilder (tagid, htable, null, tparser, location);
 				} catch (TypeLoadException e) {
 					throw new ParseException (Location, "Type not found.", e);
+				} catch (HttpException e) {
+					CompilationException inner = e.InnerException as CompilationException;
+					if (inner != null)
+						throw inner;
+					
+					throw new ParseException (Location, e.Message, e);
 				} catch (Exception e) {
 					throw new ParseException (Location, e.Message, e);
 				}
diff --git a/mcs/class/System.Web/System.Web.Compilation/ChangeLog b/mcs/class/System.Web/System.Web.Compilation/ChangeLog
index 5b284a0088d70..01c664ae4c5e9 100644
--- a/mcs/class/System.Web/System.Web.Compilation/ChangeLog
+++ b/mcs/class/System.Web/System.Web.Compilation/ChangeLog
@@ -1,3 +1,8 @@
+2009-06-04  Marek Habersack  <mhabersack@novell.com>
+
+	* AspGenerator.cs: if plain text is parsed and it contains
+	server-side controls, parse and process them. Fixes bug #508888
+
 2009-06-02 Gonzalo Paniagua Javier <gonzalo@novell.com>
 
 	* BuildManager.cs: allow deployment of precompiled applications under
diff --git a/mcs/class/System.Web/Test/System.Web.Compilation/ChangeLog b/mcs/class/System.Web/Test/System.Web.Compilation/ChangeLog
index bd14646cf2aed..ab7fadfa7d0fe 100644
--- a/mcs/class/System.Web/Test/System.Web.Compilation/ChangeLog
+++ b/mcs/class/System.Web/Test/System.Web.Compilation/ChangeLog
@@ -1,3 +1,7 @@
+2009-06-04  Marek Habersack  <mhabersack@novell.com>
+
+	* TemplateControlCompilerTest.cs: added test for bug #508888
+
 2009-05-10  Marek Habersack  <mhabersack@novell.com>
 
 	* TemplateControlCompilerTest.cs: added a test for expressions in
diff --git a/mcs/class/System.Web/Test/System.Web.Compilation/TemplateControlCompilerTest.cs b/mcs/class/System.Web/Test/System.Web.Compilation/TemplateControlCompilerTest.cs
index b9bb89fcd3995..b09207f55c969 100644
--- a/mcs/class/System.Web/Test/System.Web.Compilation/TemplateControlCompilerTest.cs
+++ b/mcs/class/System.Web/Test/System.Web.Compilation/TemplateControlCompilerTest.cs
@@ -53,6 +53,7 @@ public void TemplateControlCompiler_Init ()
 			WebTest.CopyResource (GetType (), "ReadOnlyPropertyBind.aspx", "ReadOnlyPropertyBind.aspx");
 			WebTest.CopyResource (GetType (), "ReadOnlyPropertyControl.ascx", "ReadOnlyPropertyControl.ascx");
 			WebTest.CopyResource (GetType (), "TemplateControlParsingTest.aspx", "TemplateControlParsingTest.aspx");
+			WebTest.CopyResource (GetType (), "ServerSideControlsInScriptBlock.aspx", "ServerSideControlsInScriptBlock.aspx");
 #if NET_2_0
 			WebTest.CopyResource (GetType (), "InvalidPropertyBind1.aspx", "InvalidPropertyBind1.aspx");
 			WebTest.CopyResource (GetType (), "InvalidPropertyBind2.aspx", "InvalidPropertyBind2.aspx");
@@ -181,6 +182,15 @@ public void ExpressionInListControl ()
 </select>";
 			HtmlDiff.AssertAreEqual (originalHtml, renderedHtml, "#A1");
 		}
+
+		[Test (Description="Bug #508888")]
+		public void ServerSideControlsInScriptBlock ()
+		{
+			string pageHtml = new WebTest ("ServerSideControlsInScriptBlock.aspx").Run ();
+			string renderedHtml = HtmlDiff.GetControlFromPageHtml (pageHtml);
+			string originalHtml = @"<script type=""text/javascript"">alert (escape(""reporting/location?report=ViewsByDate&minDate=minDate&maxDate=maxDate""));</script>";
+			HtmlDiff.AssertAreEqual (originalHtml, renderedHtml, "#A1");
+		}
 #endif
 		
 		[Test]
diff --git a/mcs/class/System.Web/Test/mainsoft/NunitWebResources/ServerSideControlsInScriptBlock.aspx b/mcs/class/System.Web/Test/mainsoft/NunitWebResources/ServerSideControlsInScriptBlock.aspx
new file mode 100644
index 0000000000000..39d4142c48df2
--- /dev/null
+++ b/mcs/class/System.Web/Test/mainsoft/NunitWebResources/ServerSideControlsInScriptBlock.aspx
@@ -0,0 +1,20 @@
+<%@ Page Language="C#" %>
+<html><head><title>Bug 508888</title></head>
+<body>
+<form runat="server">
+<%= MonoTests.stand_alone.WebHarness.HtmlDiff.BEGIN_TAG %><script type="text/javascript">alert (escape("reporting/location?report=ViewsByDate&minDate=<asp:Literal id="minDate" runat="server"/>&maxDate=<asp:Literal id="maxDate" runat="server" />"));</script><%= MonoTests.stand_alone.WebHarness.HtmlDiff.END_TAG %>
+
+<script runat="server">
+
+	void Page_Load(object sender, EventArgs e)
+	{
+		if (!Page.IsPostBack)
+		{
+            minDate.Text = "minDate";
+            maxDate.Text = "maxDate";
+		}
+	}
+
+</script>
+</form>
+</body></html>