diff --git a/demo/docs/python.py b/demo/docs/python.py
index 719ba266..08a480b5 100644
--- a/demo/docs/python.py
+++ b/demo/docs/python.py
@@ -4,15 +4,16 @@ import string, sys
 
 # If no arguments were given, print a helpful message
 if len(sys.argv)==1:
-print 'Usage: celsius temp1 temp2 ...'
+print '''Usage:
+    celsius temp1 temp2 ...'''
 sys.exit(0)
 
 # Loop over the arguments
 for i in sys.argv[1:]:
-try:
-    fahrenheit=float(string.atoi(i))
-except string.atoi_error:
-    print repr(i), "not a numeric value"
-else:
-    celsius=(fahrenheit-32)*5.0/9.0
-    print '%i\260F = %i\260C' % (int(fahrenheit), int(celsius+.5))
\ No newline at end of file
+    try:
+        fahrenheit=float(string.atoi(i))
+    except string.atoi_error:
+        print repr(i), "not a numeric value"
+    else:
+        celsius=(fahrenheit-32)*5.0/9.0
+        print '%i\260F = %i\260C' % (int(fahrenheit), int(celsius+.5))
\ No newline at end of file
diff --git a/lib/ace/edit_session.js b/lib/ace/edit_session.js
index ed8c8420..e0cfd8cd 100644
--- a/lib/ace/edit_session.js
+++ b/lib/ace/edit_session.js
@@ -831,9 +831,8 @@ var EditSession = function(text, mode) {
 
     this.indentRows = function(startRow, endRow, indentString) {
         indentString = indentString.replace(/\t/g, this.getTabString());
-        for (var row=startRow; row<=endRow; row++) {
+        for (var row=startRow; row<=endRow; row++)
             this.insert({row: row, column:0}, indentString);
-        }
     };
 
     this.outdentRows = function (range) {
diff --git a/lib/ace/editor.js b/lib/ace/editor.js
index af3ec259..ee58111a 100644
--- a/lib/ace/editor.js
+++ b/lib/ace/editor.js
@@ -513,11 +513,9 @@ var Editor =function(renderer, session) {
                 session.remove(new Range(row, 0, row, i));
             }
             session.indentRows(cursor.row + 1, end.row, lineIndent);
-        } else {
-            if (shouldOutdent) {
-                mode.autoOutdent(lineState, session, cursor.row);
-            }
         }
+        if (shouldOutdent)
+            mode.autoOutdent(lineState, session, cursor.row);
     };
 
     this.onTextInput = function(text, notPasted) {
diff --git a/lib/ace/mode/python.js b/lib/ace/mode/python.js
index 2d8569e6..79ba43c9 100644
--- a/lib/ace/mode/python.js
+++ b/lib/ace/mode/python.js
@@ -47,7 +47,6 @@ var Range = require("ace/range").Range;
 
 var Mode = function() {
     this.$tokenizer = new Tokenizer(new PythonHighlightRules().getRules());
-    this.$outdent = new MatchingBraceOutdent();
 };
 oop.inherits(Mode, TextMode);
 
@@ -103,12 +102,43 @@ oop.inherits(Mode, TextMode);
         return indent;
     };
 
+    var outdents = {
+        "pass": 1,
+        "return": 1,
+        "raise": 1,
+        "break": 1,
+        "continue": 1
+    };
+    
     this.checkOutdent = function(state, line, input) {
-        return this.$outdent.checkOutdent(line, input);
+        if (input !== "\r\n" && input !== "\r" && input !== "\n")
+            return false;
+
+        var tokens = this.$tokenizer.getLineTokens(line.trim(), state).tokens;
+        
+        if (!tokens)
+            return false;
+        
+        // ignore trailing comments
+        do {
+            var last = tokens.pop();
+        } while (last && (last.type == "comment" || (last.type == "text" && last.value.match(/^\s+$/))));
+        
+        if (!last)
+            return false;
+        
+        return (last.type == "keyword" && outdents[last.value]);
     };
 
     this.autoOutdent = function(state, doc, row) {
-        this.$outdent.autoOutdent(doc, row);
+        // outdenting in python is slightly different because it always applies
+        // to the next line and only of a new line is inserted
+        
+        row += 1;
+        var indent = this.$getIndent(doc.getLine(row));
+        var tab = doc.getTabString();
+        if (indent.slice(-tab.length) == tab)
+            doc.remove(new Range(row, indent.length-tab.length, row, indent.length));
     };
 
 }).call(Mode.prototype);
diff --git a/lib/ace/mode/python_test.js b/lib/ace/mode/python_test.js
new file mode 100644
index 00000000..8980afca
--- /dev/null
+++ b/lib/ace/mode/python_test.js
@@ -0,0 +1,85 @@
+/* ***** BEGIN LICENSE BLOCK *****
+ * Version: MPL 1.1/GPL 2.0/LGPL 2.1
+ *
+ * The contents of this file are subject to the Mozilla Public License Version
+ * 1.1 (the "License"); you may not use this file except in compliance with
+ * the License. You may obtain a copy of the License at
+ * http://www.mozilla.org/MPL/
+ *
+ * Software distributed under the License is distributed on an "AS IS" basis,
+ * WITHOUT WARRANTY OF ANY KIND, either express or implied. See the License
+ * for the specific language governing rights and limitations under the
+ * License.
+ *
+ * The Original Code is Ajax.org Code Editor (ACE).
+ *
+ * The Initial Developer of the Original Code is
+ * Ajax.org B.V.
+ * Portions created by the Initial Developer are Copyright (C) 2010
+ * the Initial Developer. All Rights Reserved.
+ *
+ * Contributor(s):
+ *      Fabian Jakobs <fabian AT ajax DOT org>
+ *
+ * Alternatively, the contents of this file may be used under the terms of
+ * either the GNU General Public License Version 2 or later (the "GPL"), or
+ * the GNU Lesser General Public License Version 2.1 or later (the "LGPL"),
+ * in which case the provisions of the GPL or the LGPL are applicable instead
+ * of those above. If you wish to allow use of your version of this file only
+ * under the terms of either the GPL or the LGPL, and not to allow others to
+ * use your version of this file under the terms of the MPL, indicate your
+ * decision by deleting the provisions above and replace them with the notice
+ * and other provisions required by the GPL or the LGPL. If you do not delete
+ * the provisions above, a recipient may use your version of this file under
+ * the terms of any one of the MPL, the GPL or the LGPL.
+ *
+ * ***** END LICENSE BLOCK ***** */
+
+if (typeof process !== "undefined") {
+    require("../../../support/paths");
+}
+
+define(function(require, exports, module) {
+
+var EditSession = require("ace/edit_session").EditSession;
+var Tokenizer = require("ace/tokenizer").Tokenizer;
+var Mode = require("ace/mode/python").Mode;
+var assert = require("ace/test/assertions");
+
+module.exports = {
+    setUp : function() {    
+        this.mode = new Mode();
+    },
+
+    "test: getTokenizer() (smoke test)" : function() {
+        var tokenizer = this.mode.getTokenizer();
+
+        assert.ok(tokenizer instanceof Tokenizer);
+
+        var tokens = tokenizer.getLineTokens("'juhu'", "start").tokens;
+        assert.equal("string", tokens[0].type);
+    },
+
+    "test: auto outdent after 'pass', 'return' and 'raise'" : function() {
+        assert.ok(this.mode.checkOutdent("start", "        pass", "\n"));
+        assert.ok(this.mode.checkOutdent("start", "        pass  ", "\n"));
+        assert.ok(this.mode.checkOutdent("start", "        return", "\n"));
+        assert.ok(this.mode.checkOutdent("start", "        raise", "\n"));
+        assert.equal(this.mode.checkOutdent("start", "        raise", " "), false);
+        assert.ok(this.mode.checkOutdent("start", "        pass # comment", "\n"));
+        assert.equal(this.mode.checkOutdent("start", "'juhu'", "\n"), false);
+    },
+    
+    "test: auto outdent" : function() {
+        var session = new EditSession(["    if True:", "        pass", "        "]);
+        this.mode.autoOutdent("start", session, 1);
+        assert.equal("    ", session.getLine(2));
+    }
+
+};
+
+});
+
+if (typeof module !== "undefined" && module === require.main) {
+    require("asyncjs").test.testcase(module.exports).exec()
+}
\ No newline at end of file