diff --git a/lib/jekyll/site.rb b/lib/jekyll/site.rb
index 97b7b677..187effbe 100644
--- a/lib/jekyll/site.rb
+++ b/lib/jekyll/site.rb
@@ -2,7 +2,7 @@ module Jekyll
   
   class Site
     attr_accessor :source, :dest
-    attr_accessor :layouts, :posts
+    attr_accessor :layouts, :posts, :categories
     
     # Initialize the site
     #   +source+ is String path to the source directory containing
@@ -16,6 +16,7 @@ module Jekyll
       self.dest = dest
       self.layouts = {}
       self.posts = []
+      self.categories = Hash.new { |hash, key| hash[key] = Array.new }
     end
     
     # Do the actual work of processing the site and generating the
@@ -63,6 +64,7 @@ module Jekyll
         if Post.valid?(f)
           post = Post.new(self.source, dir, f)
           self.posts << post
+          post.categories.each { |c| self.categories[c] << post }
         end
       end
       
@@ -72,6 +74,7 @@ module Jekyll
       end
       
       self.posts.sort!
+      self.categories.values.map { |cats| cats.sort! { |a, b| b <=> a} }
     rescue Errno::ENOENT => e
       # ignore missing layout dir
     end
@@ -101,6 +104,8 @@ module Jekyll
       entries = entries.reject do |e|
         (e != '_posts') and ['.', '_'].include?(e[0..0]) unless ['.htaccess'].include?(e)
       end
+      directories = entries.select { |e| File.directory?(File.join(base, e)) }
+      files = entries.reject { |e| File.directory?(File.join(base, e)) }
 
       # we need to make sure to process _posts *first* otherwise they 
       # might not be available yet to other templates as {{ site.posts }}
@@ -108,23 +113,24 @@ module Jekyll
         entries.delete('_posts')
         read_posts(dir)
       end
-
-      entries.each do |f|
-        if File.directory?(File.join(base, f))
-          next if self.dest.sub(/\/$/, '') == File.join(base, f)
-          transform_pages(File.join(dir, f))
-        else
-          first3 = File.open(File.join(self.source, dir, f)) { |fd| fd.read(3) }
-
-          if first3 == "---"
-            # file appears to have a YAML header so process it as a page
-            page = Page.new(self.source, dir, f)
-            page.render(self.layouts, site_payload)
-            page.write(self.dest)
+      [directories, files].each do |entries|
+        entries.each do |f|
+          if File.directory?(File.join(base, f))
+            next if self.dest.sub(/\/$/, '') == File.join(base, f)
+            transform_pages(File.join(dir, f))
           else
-            # otherwise copy the file without transforming it
-            FileUtils.mkdir_p(File.join(self.dest, dir))
-            FileUtils.cp(File.join(self.source, dir, f), File.join(self.dest, dir, f))
+            first3 = File.open(File.join(self.source, dir, f)) { |fd| fd.read(3) }
+        
+            if first3 == "---"
+              # file appears to have a YAML header so process it as a page
+              page = Page.new(self.source, dir, f)
+              page.render(self.layouts, site_payload)
+              page.write(self.dest)
+            else
+              # otherwise copy the file without transforming it
+              FileUtils.mkdir_p(File.join(self.dest, dir))
+              FileUtils.cp(File.join(self.source, dir, f), File.join(self.dest, dir, f))
+            end
           end
         end
       end
diff --git a/test/source/category/_posts/2008-9-23-categories.textile b/test/source/category/_posts/2008-9-23-categories.textile
new file mode 100644
index 00000000..7b5bc39c
--- /dev/null
+++ b/test/source/category/_posts/2008-9-23-categories.textile
@@ -0,0 +1,6 @@
+---
+layout: default
+title: Categories
+---
+
+Categories _should_ work
\ No newline at end of file
diff --git a/test/source/z_category/_posts/2008-9-23-categories.textile b/test/source/z_category/_posts/2008-9-23-categories.textile
new file mode 100644
index 00000000..6a5e0090
--- /dev/null
+++ b/test/source/z_category/_posts/2008-9-23-categories.textile
@@ -0,0 +1,6 @@
+---
+layout: default
+title: Categories
+---
+
+Categories _should_ work. Even if ordered after index.
\ No newline at end of file
diff --git a/test/test_generated_site.rb b/test/test_generated_site.rb
index 56e5e422..24e5ef1a 100644
--- a/test/test_generated_site.rb
+++ b/test/test_generated_site.rb
@@ -11,6 +11,7 @@ class TestGeneratedSite < Test::Unit::TestCase
   
   def test_site_posts_in_index
     # confirm that {{ site.posts }} is working
+    puts @s.posts.size
     assert @index.include?("#{@s.posts.size} Posts")
   end