diff --git a/lib/handlebars.js b/lib/handlebars.js
index 9b5ce0c6..80e1de0b 100644
--- a/lib/handlebars.js
+++ b/lib/handlebars.js
@@ -2,7 +2,7 @@ Handlebars = {
   compile: function(string) {
     var compiler = new Handlebars.Compiler(string);
     var result   = compiler.compile();
-    return new Function("context", "fallback", "fallback = fallback || {}; var stack = [];var partials = {};" + result);
+    return new Function("context", "fallback", "fallback = fallback || {}; var stack = [];" + result);
   },
 
   isFunction: function(fn) {
@@ -90,7 +90,7 @@ Handlebars = {
       switch(parts[i]) {
         case "..":
           if (readDepth) {
-            throw new Handlebars.ParseError("Cannot jump out of context after moving into a context."); 
+            throw new Handlebars.Exception("Cannot jump out of context after moving into a context."); 
           } else {
             depth += 1;
           }
@@ -122,7 +122,7 @@ Handlebars.Compiler = function(string) {
   this.partial = false;
 };
 
-Handlebars.ParseError = function(message) {
+Handlebars.Exception = function(message) {
   this.message = message;
 };
 
@@ -252,8 +252,9 @@ Handlebars.Compiler.prototype = {
 
   addPartial: function(mustache, param) {
     // either used a cached copy of the partial or compile a new one
-    this.fn += "if (typeof partials['" + mustache + "'] === 'undefined') partials['" + mustache + "'] = Handlebars.compile(fallback['partials']['" + mustache + "']);";
-    this.fn += "out = out + partials['" + mustache + "'](" + param + ", fallback);";
+    this.fn += "if (typeof fallback['partials'] === 'undefined' || typeof fallback['partials']['" + mustache + "'] === 'undefined') throw new Handlebars.Exception('Attempted to render undefined partial: " + mustache + "');";  
+    this.fn += "if (!Handlebars.isFunction(fallback['partials']['" + mustache + "'])) fallback['partials']['" + mustache + "'] = Handlebars.compile(fallback['partials']['" + mustache + "']);";
+    this.fn += "out = out + fallback['partials']['" + mustache + "'](" + param + ", fallback);";
   },
 
   parseMustache: function() {
diff --git a/test/handlebars.js b/test/handlebars.js
index a394f3b9..36421004 100644
--- a/test/handlebars.js
+++ b/test/handlebars.js
@@ -64,7 +64,7 @@ test("bad idea nested paths", function() {
   try {
     Handlebars.compile("{{#goodbyes}}{{../name/../name}}{{/goodbyes}}"); 
   } catch (e) {
-    if (e instanceof Handlebars.ParseError) {
+    if (e instanceof Handlebars.Exception) {
       caught = true;
     }
   }
@@ -211,6 +211,19 @@ test("partial in a partial", function() {
   shouldCompileTo(string, [hash, {partials: {dude: dude, url: url}}], "Dudes: Yehuda <a href='http://yehuda'>http://yehuda</a> Alan <a href='http://alan'>http://alan</a> ", "Partials are rendered inside of other partials");
 });
 
+test("rendering undefined partial throws an exception", function() {
+ var caught = false;
+  try {
+    var template = Handlebars.compile("{{> whatever}}"); 
+    template();
+  } catch (e) {
+    if (e instanceof Handlebars.Exception) {
+      caught = true;
+    }
+  }
+  equals(caught, true);
+});
+
 module("safestring");
 
 test("constructing a safestring from a string and checking its type", function() {