diff --git a/lib/handlebars.js b/lib/handlebars.js
index fd08b5db..e310eded 100644
--- a/lib/handlebars.js
+++ b/lib/handlebars.js
@@ -83,7 +83,7 @@ var Handlebars = {
   },
 
   buildContext: function(context, stack) {
-    var contextWrapper = function(stack) { 
+    var ContextWrapper = function(stack) { 
       this.__stack__ = stack;
       this.__get__ = function(path) {
         var context = this;
@@ -91,7 +91,7 @@ var Handlebars = {
         var depth = parsedPath[0];
         var parts = parsedPath[1];
         if (depth > 0) {
-          context = this.__stack__[stack.length - depth];
+          context = this.__stack__[this.__stack__.length - depth];
         }
 
         for (var i = 0; i < parts.length; i++) {
@@ -102,8 +102,8 @@ var Handlebars = {
       };
     };
 
-    contextWrapper.prototype = context;
-    return new contextWrapper(stack);
+    ContextWrapper.prototype = context;
+    return new ContextWrapper(stack);
   },
 
   // Returns a two element array containing the numbers of contexts to back up the stack and
@@ -374,8 +374,7 @@ Handlebars.Compiler.prototype = {
     // each function made internally needs a unique IDs. These are locals, so they
     // don't need to be globally unique, just per compiler
     var fnId = "fn" + this.pointer.toString();
-    this.fn += "var proxy = Handlebars.buildContext(" + param + ", stack);";
-    this.fn += "var wrappedContext = Handlebars.buildContext(context);";
+    this.fn += "var wrappedContext = Handlebars.buildContext(context, stack);";
     this.fn += "var " + fnId + " = function(context) {" + result + "}; ";
     this.fn += "lookup = " + this.lookupFor(mustache) + "; ";
     
@@ -386,7 +385,7 @@ Handlebars.Compiler.prototype = {
     else {
       this.fn += " var " + fnId + "Not = null;";
     }
-    this.fn += "out = out + Handlebars.handleBlock(lookup, wrappedContext, proxy, " + fnId + ", " + fnId + "Not);"
+    this.fn += "out = out + Handlebars.handleBlock(lookup, wrappedContext, " + param + ", " + fnId + ", " + fnId + "Not);"
 
     this.fn += "stack.pop();";
     this.openBlock = false;
diff --git a/test/handlebars.js b/test/handlebars.js
index 03c9491d..3a521813 100644
--- a/test/handlebars.js
+++ b/test/handlebars.js
@@ -191,6 +191,15 @@ test("helper with complex lookup", function() {
   shouldCompileTo(string, [hash, fallback], "<a href='/root/goodbye'>Goodbye</a>")
 });
 
+test("helper with complex lookup and nested template", function() {
+  var string = "{{#goodbyes}}{{#link}}{{text}}{{/link}}{{/goodbyes}}";
+  var hash = {prefix: '/root', goodbyes: [{text: "Goodbye", url: "goodbye"}]};
+  var fallback = {link: function (context, fn) {
+      return "<a href='" + this.__get__("../../prefix") + "/" + context.url + "'>" + fn(context) + "</a>";
+  }};
+  shouldCompileTo(string, [hash, fallback], "<a href='/root/goodbye'>Goodbye</a>")
+});
+
 test("block with deep nested complex lookup", function() {
   var string = "{{#outer}}Goodbye {{#inner}}cruel {{../../omg}}{{/inner}}{{/outer}}";
   var hash = {omg: "OMG!", outer: [{ inner: [{ text: "goodbye" }] }] };