diff --git a/lib/jekyll/page.rb b/lib/jekyll/page.rb
index 68d4b213..0de5e254 100644
--- a/lib/jekyll/page.rb
+++ b/lib/jekyll/page.rb
@@ -56,10 +56,16 @@ module Jekyll
     #
     # Returns the template String.
     def template
-      if self.site.permalink_style == :pretty && !index? && html?
-        "/:basename/"
+      if self.site.permalink_style == :pretty
+        if index? && html?
+          "/:path/"
+        elsif html?
+          "/:path/:basename/"
+        else
+          "/:path/:basename:output_ext"
+        end
       else
-        "/:basename:output_ext"
+        "/:path/:basename:output_ext"
       end
     end
 
@@ -73,6 +79,7 @@ module Jekyll
         permalink
       else
         {
+          "path"       => @dir,
           "basename"   => self.basename,
           "output_ext" => self.output_ext,
         }.inject(template) { |result, token|
@@ -116,7 +123,7 @@ module Jekyll
     # Returns the Hash representation of this Page.
     def to_liquid
       self.data.deep_merge({
-        "url"        => File.join(@dir, self.url),
+        "url"        => self.url,
         "content"    => self.content })
     end
 
@@ -128,7 +135,7 @@ module Jekyll
     def destination(dest)
       # The url needs to be unescaped in order to preserve the correct
       # filename.
-      path = File.join(dest, @dir, CGI.unescape(self.url))
+      path = File.join(dest, CGI.unescape(self.url))
       path = File.join(path, "index.html") if self.url =~ /\/$/
       path
     end
diff --git a/test/source/contacts/bar.html b/test/source/contacts/bar.html
new file mode 100644
index 00000000..1615afe2
--- /dev/null
+++ b/test/source/contacts/bar.html
@@ -0,0 +1,5 @@
+---
+title: Contact Information
+---
+
+Contact Information
diff --git a/test/source/contacts/index.html b/test/source/contacts/index.html
new file mode 100644
index 00000000..1615afe2
--- /dev/null
+++ b/test/source/contacts/index.html
@@ -0,0 +1,5 @@
+---
+title: Contact Information
+---
+
+Contact Information
diff --git a/test/test_page.rb b/test/test_page.rb
index 3c7c9fed..fda7cd9c 100644
--- a/test/test_page.rb
+++ b/test/test_page.rb
@@ -1,8 +1,10 @@
 require 'helper'
 
 class TestPage < Test::Unit::TestCase
-  def setup_page(file)
-    @page = Page.new(@site, source_dir, '', file)
+  def setup_page(*args)
+    dir, file = args
+    dir, file = ['', dir] if file.nil?
+    @page = Page.new(@site, source_dir, dir, file)
   end
 
   def do_render(page)
@@ -23,6 +25,18 @@ class TestPage < Test::Unit::TestCase
         assert_equal "/contacts.html", @page.url
       end
 
+      context "in a directory hierarchy" do
+        should "create url based on filename" do
+          @page = setup_page('/contacts', 'bar.html')
+          assert_equal "/contacts/bar.html", @page.url
+        end
+
+        should "create index url based on filename" do
+          @page = setup_page('/contacts', 'index.html')
+          assert_equal "/contacts/index.html", @page.url
+        end
+      end
+
       should "deal properly with extensions" do
         @page = setup_page('deal.with.dots.html')
         assert_equal ".html", @page.ext
@@ -47,6 +61,28 @@ class TestPage < Test::Unit::TestCase
           @page = setup_page('index.html')
           assert_equal '/', @page.dir
         end
+
+        context "in a directory hierarchy" do
+          should "create url based on filename" do
+            @page = setup_page('/contacts', 'bar.html')
+            assert_equal "/contacts/bar/", @page.url
+          end
+
+          should "create index url based on filename" do
+            @page = setup_page('/contacts', 'index.html')
+            assert_equal "/contacts/", @page.url
+          end
+
+          should "return dir correctly" do
+            @page = setup_page('/contacts', 'bar.html')
+            assert_equal '/contacts/bar/', @page.dir
+          end
+
+          should "return dir correctly for index page" do
+            @page = setup_page('/contacts', 'index.html')
+            assert_equal '/contacts/', @page.dir
+          end
+        end
       end
 
       context "with any other url style" do
@@ -131,6 +167,36 @@ class TestPage < Test::Unit::TestCase
         assert File.directory?(dest_dir)
         assert File.exists?(File.join(dest_dir, '.htaccess'))
       end
+
+      context "in a directory hierarchy" do
+        should "write properly the index" do
+          page = setup_page('/contacts', 'index.html')
+          do_render(page)
+          page.write(dest_dir)
+
+          assert File.directory?(dest_dir)
+          assert File.exists?(File.join(dest_dir, 'contacts', 'index.html'))
+        end
+
+        should "write properly" do
+          page = setup_page('/contacts', 'bar.html')
+          do_render(page)
+          page.write(dest_dir)
+
+          assert File.directory?(dest_dir)
+          assert File.exists?(File.join(dest_dir, 'contacts', 'bar.html'))
+        end
+
+        should "write properly without html extension" do
+          page = setup_page('/contacts', 'bar.html')
+          page.site.permalink_style = :pretty
+          do_render(page)
+          page.write(dest_dir)
+
+          assert File.directory?(dest_dir)
+          assert File.exists?(File.join(dest_dir, 'contacts', 'bar', 'index.html'))
+        end
+      end
     end
 
   end