diff --git a/lib/ace/mode/_test/tokens_latex.json b/lib/ace/mode/_test/tokens_latex.json
index 0ac37725..4ae69afa 100644
--- a/lib/ace/mode/_test/tokens_latex.json
+++ b/lib/ace/mode/_test/tokens_latex.json
@@ -2,37 +2,37 @@
    "start",
   ["keyword","\\usepackage"],
   ["lparen","{"],
-  ["text","amsmath"],
+  ["storage.type","amsmath"],
   ["rparen","}"]
 ],[
    "start",
-  ["keyword","\\title"],
+  ["storage.type","\\title"],
   ["lparen","{"],
-  ["keyword","\\LaTeX"],
+  ["storage.type","\\LaTeX"],
   ["rparen","}"]
 ],[
    "start",
-  ["keyword","\\date"],
+  ["storage.type","\\date"],
   ["lparen","{"],
   ["rparen","}"]
 ],[
    "start",
-  ["keyword","\\begin"],
+  ["storage.type","\\begin"],
   ["lparen","{"],
-  ["text","document"],
+  ["variable.parameter","document"],
   ["rparen","}"]
 ],[
    "start",
   ["text","  "],
-  ["keyword","\\maketitle"]
+  ["storage.type","\\maketitle"]
 ],[
    "start",
   ["text","  "],
-  ["keyword","\\LaTeX"],
+  ["storage.type","\\LaTeX"],
   ["lparen","{"],
   ["rparen","}"],
   ["text"," is a document preparation system for the "],
-  ["keyword","\\TeX"],
+  ["storage.type","\\TeX"],
   ["lparen","{"],
   ["rparen","}"]
 ],[
@@ -50,26 +50,26 @@
 ],[
    "start",
   ["text","  and much more. "],
-  ["keyword","\\LaTeX"],
+  ["storage.type","\\LaTeX"],
   ["lparen","{"],
   ["rparen","}"],
   ["text"," was originally written in 1984 by Leslie"]
 ],[
    "start",
   ["text","  Lamport and has become the dominant method for using "],
-  ["keyword","\\TeX"],
+  ["storage.type","\\TeX"],
   ["text","; few"]
 ],[
    "start",
   ["text","  people write in plain "],
-  ["keyword","\\TeX"],
+  ["storage.type","\\TeX"],
   ["lparen","{"],
   ["rparen","}"],
   ["text"," anymore. The current version  is"]
 ],[
    "start",
   ["text","  "],
-  ["keyword","\\LaTeXe"],
+  ["storage.type","\\LaTeXe"],
   ["text","."]
 ],[
    "start",
@@ -85,26 +85,24 @@
 ],[
    "start",
   ["text","  "],
-  ["keyword","\\begin"],
+  ["storage.type","\\begin"],
   ["lparen","{"],
-  ["text","align"],
+  ["variable.parameter","align"],
   ["rparen","}"]
 ],[
    "start",
   ["text","    E &= mc^2                              "],
-  ["keyword","\\\\"]
-],[
-   "start",
+  ["constant.character.escape","\\\\"],
   ["text","    m &= "],
-  ["keyword","\\frac"],
+  ["storage.type","\\frac"],
   ["lparen","{"],
   ["text","m_0"],
   ["rparen","}"],
   ["lparen","{"],
-  ["keyword","\\sqrt"],
+  ["storage.type","\\sqrt"],
   ["lparen","{"],
   ["text","1-"],
-  ["keyword","\\frac"],
+  ["storage.type","\\frac"],
   ["lparen","{"],
   ["text","v^2"],
   ["rparen","}"],
@@ -114,14 +112,14 @@
 ],[
    "start",
   ["text","  "],
-  ["keyword","\\end"],
+  ["storage.type","\\end"],
   ["lparen","{"],
-  ["text","align"],
+  ["variable.parameter","align"],
   ["rparen","}"]
 ],[
    "start",
-  ["keyword","\\end"],
+  ["storage.type","\\end"],
   ["lparen","{"],
-  ["text","document"],
+  ["variable.parameter","document"],
   ["rparen","}"]
 ]]
\ No newline at end of file
diff --git a/lib/ace/mode/folding/latex.js b/lib/ace/mode/folding/latex.js
index b80775eb..6f20b22e 100644
--- a/lib/ace/mode/folding/latex.js
+++ b/lib/ace/mode/folding/latex.js
@@ -42,7 +42,7 @@ oop.inherits(FoldMode, BaseFoldMode);
 
 (function() {
 
-    this.foldingStartMarker = /^\s*\\(begin)|(section|subsection)\b|{\s*$/;
+    this.foldingStartMarker = /^\s*\\(begin)|(section|subsection|paragraph)\b|{\s*$/;
     this.foldingStopMarker = /^\s*\\(end)\b|^\s*}/;
 
     this.getFoldWidgetRange = function(session, foldStyle, row) {
@@ -74,7 +74,7 @@ oop.inherits(FoldMode, BaseFoldMode);
 
         var stream = new TokenIterator(session, row, column);
         var token = stream.getCurrentToken();
-        if (!token || token.type !== "keyword")
+        if (!token || !(token.type == "storage.type" || token.type == "constant.character.escape"))
             return;
 
         var val = token.value;
@@ -96,7 +96,7 @@ oop.inherits(FoldMode, BaseFoldMode);
 
         stream.step = dir === -1 ? stream.stepBackward : stream.stepForward;
         while(token = stream.step()) {
-            if (token.type !== "keyword")
+            if (!token || !(token.type == "storage.type" || token.type == "constant.character.escape"))
                 continue;
             var level = keywords[token.value];
             if (!level)
@@ -119,11 +119,11 @@ oop.inherits(FoldMode, BaseFoldMode);
     };
 
     this.latexSection = function(session, row, column) {
-        var keywords = ["\\subsection", "\\section", "\\begin", "\\end"];
+        var keywords = ["\\subsection", "\\section", "\\begin", "\\end", "\\paragraph"];
 
         var stream = new TokenIterator(session, row, column);
         var token = stream.getCurrentToken();
-        if (!token || token.type != "keyword")
+        if (!token || token.type != "storage.type")
             return;
 
         var startLevel = keywords.indexOf(token.value);
@@ -131,7 +131,7 @@ oop.inherits(FoldMode, BaseFoldMode);
         var endRow = row;
 
         while(token = stream.stepForward()) {
-            if (token.type !== "keyword")
+            if (token.type !== "storage.type")
                 continue;
             var level = keywords.indexOf(token.value);
 
diff --git a/lib/ace/mode/latex_highlight_rules.js b/lib/ace/mode/latex_highlight_rules.js
index 3057c0de..f3238bfb 100644
--- a/lib/ace/mode/latex_highlight_rules.js
+++ b/lib/ace/mode/latex_highlight_rules.js
@@ -4,12 +4,30 @@ define(function(require, exports, module) {
 var oop = require("../lib/oop");
 var TextHighlightRules = require("./text_highlight_rules").TextHighlightRules;
 
-var LatexHighlightRules = function() {   
+var LatexHighlightRules = function() {  
+
     this.$rules = {
         "start" : [{
+            // A comment. Tex comments start with % and go to 
+            // the end of the line
+            token : "comment",
+            regex : "%.*$"
+        }, {
+            // Documentclass and usepackage
+            token : ["keyword", "lparen", "variable.parameter", "rparen", "lparen", "storage.type", "rparen"],
+            regex : "(\\\\(?:documentclass|usepackage|input))(?:(\\[)([^\\]]*)(\\]))?({)([^}]*)(})"
+        }, {
+            // A label
+            token : ["keyword","lparen", "variable.parameter", "rparen"],
+            regex : "(\\\\label)(?:({)([^}]*)(}))?"
+        }, {
+            // A block
+            token : ["storage.type", "lparen", "variable.parameter", "rparen"],
+            regex : "(\\\\(?:begin|end))({)(\\w*)(})"
+        }, {
             // A tex command e.g. \foo
-            token : "keyword",
-            regex : "\\\\(?:[^a-zA-Z]|[a-zA-Z]+)"
+            token : "storage.type",
+            regex : "\\\\[a-zA-Z]+"
         }, {
             // Curly and square braces
             token : "lparen",
@@ -19,18 +37,35 @@ var LatexHighlightRules = function() {
             token : "rparen",
             regex : "[\\])}]"
         }, {
-            // Inline math between two $ symbols
-            token : "string",
-            regex : "\\$(?:(?:\\\\.)|(?:[^\\$\\\\]))*?\\$"
+            // Escaped character (including new line)
+            token : "constant.character.escape",
+            regex : "\\\\[^a-zA-Z]?"
         }, {
-            // A comment. Tex comments start with % and go to 
-            // the end of the line
+            // An equation
+            token : "string",
+            regex : "\\${1,2}",
+            next  : "equation"
+        }],
+        "equation" : [{
             token : "comment",
             regex : "%.*$"
+        }, {
+            token : "string",
+            regex : "\\${1,2}",
+            next  : "start"
+        }, {
+            token : "constant.character.escape",
+            regex : "\\\\(?:[^a-zA-Z]|[a-zA-Z]+)"
+        }, {
+            token : "error", 
+            regex : "^\\s*$", 
+            next : "start" 
+        }, {
+            defaultToken : "string"
         }]
+
     };
 };
-
 oop.inherits(LatexHighlightRules, TextHighlightRules);
 
 exports.LatexHighlightRules = LatexHighlightRules;