diff --git a/src/main_grammar.cpp b/src/main_grammar.cpp
index 2ada312..5f5deb9 100644
--- a/src/main_grammar.cpp
+++ b/src/main_grammar.cpp
@@ -34,10 +34,18 @@ namespace quickbook
     namespace cl = boost::spirit::classic;
 
     struct list_stack_item {
-        bool root;
-        unsigned int indent;
-        unsigned int indent2;
-        char mark;
+        bool root; // Is this the root of the context
+                   // (e.g. top, template, table cell etc.)
+        unsigned int indent;  // Indent of list marker
+                              // (or paragraph if not in a list)
+        unsigned int indent2; // Indent of paragraph
+        char mark;            // List mark, '\0' if not in a list.
+
+        // Example of inside a list:
+        //
+        //   |indent
+        //   * List item
+        //     |indent2 
 
         list_stack_item() :
             root(true), indent(0), indent2(0), mark('\0') {}
@@ -809,9 +817,32 @@ namespace quickbook
 
                 if (!list_stack.top().root && new_indent == list_stack.top().indent)
                 {
+                    // If the paragraph is aligned with the list item's marker,
+                    // then end the current list item if that's aligned (or to
+                    // the left of) the parent's paragraph.
+                    //
+                    // i.e.
+                    //
+                    // * Level 1
+                    //    * Level 2
+                    //
+                    //    Still Level 2
+                    //
+                    // vs.
+                    //
+                    // * Level 1
+                    //   * Level 2
+                    //
+                    //   Back to Level 1
+                
                     list_stack_item save = list_stack.top();
                     list_stack.pop();
-                    if (new_indent == list_stack.top().indent) {
+
+                    assert(list_stack.top().root ?
+                        new_indent >= list_stack.top().indent :
+                        new_indent > list_stack.top().indent);
+
+                    if (new_indent <= list_stack.top().indent2) {
                         actions_.end_list_item();
                         actions_.end_list(save.mark);
                         list_indent = list_stack.top().indent;
diff --git a/test/list_test-1_6.gold b/test/list_test-1_6.gold
index aa6e946..223509a 100644
--- a/test/list_test-1_6.gold
+++ b/test/list_test-1_6.gold
@@ -426,30 +426,49 @@
     <itemizedlist>
       <listitem>
         <simpara>
-          One
+          A1
           <para>
-            Two
+            A2
           </para>
         </simpara>
       </listitem>
       <listitem>
         <simpara>
-          Three
+          B1
           <itemizedlist>
             <listitem>
               <simpara>
-                Four
+                C1
                 <para>
-                  Five
+                  C2
                 </para>
               </simpara>
             </listitem>
           </itemizedlist>
+          <para>
+            B2
+          </para>
         </simpara>
       </listitem>
       <listitem>
         <simpara>
-          Six
+          D1
+          <itemizedlist>
+            <listitem>
+              <simpara>
+                E1
+                <para>
+                  E2
+                </para>
+                <para>
+                  E3
+                </para>
+              </simpara>
+            </listitem>
+          </itemizedlist>
+          <para>
+            D2
+          </para>
         </simpara>
       </listitem>
     </itemizedlist>
diff --git a/test/list_test-1_6.quickbook b/test/list_test-1_6.quickbook
index 05efb5d..fd01b38 100644
--- a/test/list_test-1_6.quickbook
+++ b/test/list_test-1_6.quickbook
@@ -105,14 +105,24 @@ Don't end list with comment 2:
 
 [section Paragraphs in list items]
 
-* One
+* A1
 
-  Two
+  A2
 
-* Three
-  * Four
+* B1
+  * C1
 
-    Five
-* Six
+   C2
+
+  B2
+
+* D1
+    * E1
+
+     E2
+
+    E3
+
+   D2
 
 [endsect]
\ No newline at end of file