diff --git a/lib/ansible/module_utils/basic.py b/lib/ansible/module_utils/basic.py
index c63a7b492eb..35f63ab5e82 100644
--- a/lib/ansible/module_utils/basic.py
+++ b/lib/ansible/module_utils/basic.py
@@ -218,7 +218,6 @@ def load_platform_subclass(cls, *args, **kwargs):
 
     return super(cls, subclass).__new__(subclass)
 
-
 class AnsibleModule(object):
 
     def __init__(self, argument_spec, bypass_checks=False, no_log=False,
diff --git a/lib/ansible/runner/__init__.py b/lib/ansible/runner/__init__.py
index 7bbbf96a2a1..2a7e66966dc 100644
--- a/lib/ansible/runner/__init__.py
+++ b/lib/ansible/runner/__init__.py
@@ -47,6 +47,7 @@ import connection
 from return_data import ReturnData
 from ansible.callbacks import DefaultRunnerCallbacks, vv
 from ansible.module_common import ModuleReplacer
+from ansible.utils.splitter import split_args
 
 module_replacer = ModuleReplacer(strip_comments=False)
 
@@ -397,14 +398,10 @@ class Runner(object):
         '''
         options = {}
         if args is not None:
-            args = args.encode('utf-8')
             try:
-                lexer = shlex.shlex(args)
-                lexer.whitespace = '\t '
-                lexer.whitespace_split = True
-                vargs = [x.decode('utf-8') for x in lexer]
-            except ValueError, ve:
-                if 'no closing quotation' in str(ve).lower():
+                vargs = split_args(args)
+            except Exception, e:
+                if "unbalanced jinja2 block or quotes" in str(e):
                     raise errors.AnsibleError("error parsing argument string '%s', try quoting the entire line." % args)
                 else:
                     raise
diff --git a/lib/ansible/utils/__init__.py b/lib/ansible/utils/__init__.py
index 4a92907e6bb..16eb872726f 100644
--- a/lib/ansible/utils/__init__.py
+++ b/lib/ansible/utils/__init__.py
@@ -26,10 +26,10 @@ import optparse
 import operator
 from ansible import errors
 from ansible import __version__
-from ansible.utils import template
 from ansible.utils.display_functions import *
 from ansible.utils.plugins import *
 from ansible.callbacks import display
+from ansible.utils.splitter import split_args, unquote
 import ansible.constants as C
 import ast
 import time
@@ -230,6 +230,7 @@ def is_changed(result):
     return (result.get('changed', False) in [ True, 'True', 'true'])
 
 def check_conditional(conditional, basedir, inject, fail_on_undefined=False):
+    from ansible.utils import template
 
     if conditional is None or conditional == '':
         return True
@@ -324,6 +325,9 @@ def path_dwim_relative(original, dirname, source, playbook_base, check=True):
     ''' find one file in a directory one level up in a dir named dirname relative to current '''
     # (used by roles code)
 
+    from ansible.utils import template
+
+
     basedir = os.path.dirname(original)
     if os.path.islink(basedir):
         basedir = unfrackpath(basedir)
@@ -442,28 +446,6 @@ def merge_module_args(current_args, new_args):
             module_args = "%s=%s %s" % (k, pipes.quote(v), module_args)
     return module_args.strip()
 
-def smush_braces(data):
-    ''' smush Jinaj2 braces so unresolved templates like {{ foo }} don't get parsed weird by key=value code '''
-    while '{{ ' in data:
-        data = data.replace('{{ ', '{{')
-    while ' }}' in data:
-        data = data.replace(' }}', '}}')
-    return data
-
-def smush_ds(data):
-    # things like key={{ foo }} are not handled by shlex.split well, so preprocess any YAML we load
-    # so we do not have to call smush elsewhere
-    if type(data) == list:
-        return [ smush_ds(x) for x in data ]
-    elif type(data) == dict:
-        for (k,v) in data.items():
-            data[k] = smush_ds(v)
-        return data
-    elif isinstance(data, basestring):
-        return smush_braces(data)
-    else:
-        return data
-
 def parse_yaml(data, path_hint=None):
     ''' convert a yaml string to a data structure.  Also supports JSON, ssssssh!!!'''
 
@@ -482,7 +464,7 @@ def parse_yaml(data, path_hint=None):
         # else this is pretty sure to be a YAML document
         loaded = yaml.safe_load(data)
 
-    return smush_ds(loaded)
+    return loaded
 
 def process_common_errors(msg, probline, column):
     replaced = probline.replace(" ","")
@@ -662,7 +644,7 @@ def parse_kv(args):
         # attempting to split a unicode here does bad things
         args = args.encode('utf-8')
         try:
-            vargs = shlex.split(args, posix=True)
+            vargs = split_args(args)
         except ValueError, ve:
             if 'no closing quotation' in str(ve).lower():
                 raise errors.AnsibleError("error parsing argument string, try quoting the entire line.")
@@ -672,7 +654,7 @@ def parse_kv(args):
         for x in vargs:
             if "=" in x:
                 k, v = x.split("=",1)
-                options[k] = v
+                options[k] = unquote(v)
     return options
 
 def merge_hash(a, b):
@@ -1216,6 +1198,8 @@ def safe_eval(expr, locals={}, include_exceptions=False):
 
 def listify_lookup_plugin_terms(terms, basedir, inject):
 
+    from ansible.utils import template
+
     if isinstance(terms, basestring):
         # someone did:
         #    with_items: alist
diff --git a/lib/ansible/utils/splitter.py b/lib/ansible/utils/splitter.py
new file mode 100644
index 00000000000..d4ae773b2bd
--- /dev/null
+++ b/lib/ansible/utils/splitter.py
@@ -0,0 +1,157 @@
+# (c) 2014 James Cammarata, <jcammarata@ansible.com>
+#
+# This file is part of Ansible
+#
+# Ansible is free software: you can redistribute it and/or modify
+# it under the terms of the GNU General Public License as published by
+# the Free Software Foundation, either version 3 of the License, or
+# (at your option) any later version.
+#
+# Ansible is distributed in the hope that it will be useful,
+# but WITHOUT ANY WARRANTY; without even the implied warranty of
+# MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+# GNU General Public License for more details.
+#
+# You should have received a copy of the GNU General Public License
+# along with Ansible.  If not, see <http://www.gnu.org/licenses/>.
+
+def _get_quote_state(token, quote_char):
+    '''
+    the goal of this block is to determine if the quoted string
+    is unterminated in which case it needs to be put back together
+    '''
+    # the char before the current one, used to see if
+    # the current character is escaped
+    prev_char = None
+    for idx, cur_char in enumerate(token):
+        if idx > 0:
+            prev_char = token[idx-1]
+        if cur_char in '"\'':
+            if quote_char:
+                if cur_char == quote_char and prev_char != '\\':
+                    quote_char = None
+            else:
+                quote_char = cur_char
+    return quote_char
+
+def _count_jinja2_blocks(token, cur_depth, open_token, close_token):
+    '''
+    this function counts the number of opening/closing blocks for a
+    given opening/closing type and adjusts the current depth for that
+    block based on the difference
+    '''
+    num_open  = token.count(open_token)
+    num_close = token.count(close_token)
+    if num_open != num_close:
+        cur_depth += (num_open - num_close)
+        if cur_depth < 0:
+            cur_depth = 0
+    return cur_depth
+
+def split_args(args):
+    '''
+    Splits args on whitespace, but intelligently reassembles
+    those that may have been split over a jinja2 block or quotes.
+
+    When used in a remote module, we won't ever have to be concerned about
+    jinja2 blocks, however this function is/will be used in the
+    core portions as well before the args are templated.
+
+    example input: a=b c="foo bar"
+    example output: ['a=b', 'c="foo bar"']
+
+    Basically this is a variation shlex that has some more intelligence for
+    how Ansible needs to use it.
+    '''
+
+    # the list of params parsed out of the arg string
+    # this is going to be the result value when we are donei
+    params = []
+
+    # here we encode the args, so we have a uniform charset to
+    # work with, and split on white space
+    args = args.encode('utf-8')
+    tokens = args.split()
+
+    # iterate over the tokens, and reassemble any that may have been
+    # split on a space inside a jinja2 block.
+    # ex if tokens are "{{", "foo", "}}" these go together
+
+    # These variables are used
+    # to keep track of the state of the parsing, since blocks and quotes
+    # may be nested within each other.
+
+    quote_char = None
+    inside_quotes = False
+    print_depth   = 0 # used to count nested jinja2 {{ }} blocks
+    block_depth   = 0 # used to count nested jinja2 {% %} blocks
+    comment_depth = 0 # used to count nested jinja2 {# #} blocks
+
+    # now we loop over each split token, coalescing tokens if the white space
+    # split occurred within quotes or a jinja2 block of some kind
+    for token in tokens:
+
+        token = token.strip()
+
+        # store the previous quoting state for checking later
+        was_inside_quotes = inside_quotes
+        quote_char = _get_quote_state(token, quote_char)
+        inside_quotes = quote_char is not None
+
+        # multiple conditions may append a token to the list of params,
+        # so we keep track with this flag to make sure it only happens once
+        # append means add to the end of the list, don't append means concatenate
+        # it to the end of the last token
+        appended = False
+
+        # if we're inside quotes now, but weren't before, append the token 
+        # to the end of the list, since we'll tack on more to it later
+        # otherwise, if we're inside any jinja2 block, inside quotes, or we were
+        # inside quotes (but aren't now) concat this token to the last param
+        if inside_quotes and not was_inside_quotes:
+            params.append(token)
+            appended = True
+        elif print_depth or block_depth or comment_depth or inside_quotes or was_inside_quotes:
+            params[-1] = "%s %s" % (params[-1], token)
+            appended = True
+
+        # if the number of paired block tags is not the same, the depth has changed, so we calculate that here
+        # and may append the current token to the params (if we haven't previously done so)
+        prev_print_depth = print_depth
+        print_depth = _count_jinja2_blocks(token, print_depth, "{{", "}}")
+        if print_depth != prev_print_depth and not appended:
+            params.append(token)
+            appended = True
+
+        prev_block_depth = block_depth
+        block_depth = _count_jinja2_blocks(token, block_depth, "{%", "%}")
+        if block_depth != prev_block_depth and not appended:
+            params.append(token)
+            appended = True
+
+        prev_comment_depth = comment_depth
+        comment_depth = _count_jinja2_blocks(token, comment_depth, "{#", "#}")
+        if comment_depth != prev_comment_depth and not appended:
+            params.append(token)
+            appended = True
+
+        # finally, if we're at zero depth for all blocks and not inside quotes, and have not
+        # yet appended anything to the list of params, we do so now
+        if not (print_depth or block_depth or comment_depth) and not inside_quotes and not appended:
+            params.append(token)
+
+    # If we're done and things are not at zero depth or we're still inside quotes,
+    # raise an error to indicate that the args were unbalanced
+    if print_depth or block_depth or comment_depth or inside_quotes:
+        raise Exception("error while splitting arguments, either an unbalanced jinja2 block or quotes")
+
+    # finally, we decode each param back to the unicode it was in the arg string
+    params = [x.decode('utf-8') for x in params]
+    return params
+
+def unquote(data):
+    ''' removes first and last quotes from a string, if the string starts and ends with the same quotes '''
+    if len(data) > 0 and (data[0] == '"' and data[-1] == '"' or data[0] == "'" and data[-1] == "'"):
+        return data[1:-1]
+    return data
+
diff --git a/test/integration/Makefile b/test/integration/Makefile
index 85d1bd20928..e2d0f8ee3b0 100644
--- a/test/integration/Makefile
+++ b/test/integration/Makefile
@@ -22,6 +22,7 @@ parsing:
 	ansible-playbook bad_parsing.yml -i $(INVENTORY) -e @$(VARS_FILE) $(CREDENTIALS_ARG) -vvv $(TEST_FLAGS) --tags common,scenario1; [ $$? -eq 3 ]
 	ansible-playbook bad_parsing.yml -i $(INVENTORY) -e @$(VARS_FILE) $(CREDENTIALS_ARG) -vvv $(TEST_FLAGS) --tags common,scenario2; [ $$? -eq 3 ]
 	ansible-playbook bad_parsing.yml -i $(INVENTORY) -e @$(VARS_FILE) $(CREDENTIALS_ARG) -vvv $(TEST_FLAGS) --tags common,scenario3; [ $$? -eq 3 ]
+	ansible-playbook bad_parsing.yml -i $(INVENTORY) -e @$(VARS_FILE) $(CREDENTIALS_ARG) -vvv $(TEST_FLAGS) --tags common,scenario4; [ $$? -eq 3 ]
 	ansible-playbook good_parsing.yml -i $(INVENTORY) -e @$(VARS_FILE) $(CREDENTIALS_ARG) -v $(TEST_FLAGS)
 
 non_destructive:
diff --git a/test/integration/roles/test_bad_parsing/tasks/main.yml b/test/integration/roles/test_bad_parsing/tasks/main.yml
index e84878baa6b..fae01f2ee9d 100644
--- a/test/integration/roles/test_bad_parsing/tasks/main.yml
+++ b/test/integration/roles/test_bad_parsing/tasks/main.yml
@@ -20,8 +20,9 @@
 # otherwise ansible stops at the first one and we want to ensure STOP conditions for each
 
 - set_fact: 
-    test_file: "./ansible_test_file"  # FIXME, use set tempdir
+    test_file: "{{ output_dir }}/ansible_test_file"  # FIXME, use set tempdir
     test_input: "owner=test" 
+    bad_var: "{{ output_dir }}' owner=test"
     chdir: "mom chdir=/tmp"
   tags: common
 
@@ -43,3 +44,10 @@
   failed_when: False
   tags: scenario3
 
+- name: test that we can't go all Little Bobby Droptables on a quoted var to add more
+  file: "name={{ bad_var }}"
+  failed_when: False
+  tags: scenario4
+
+
+
diff --git a/test/integration/roles/test_lookups/tasks/main.yml b/test/integration/roles/test_lookups/tasks/main.yml
index 0340a12c74e..04b533d72c2 100644
--- a/test/integration/roles/test_lookups/tasks/main.yml
+++ b/test/integration/roles/test_lookups/tasks/main.yml
@@ -92,7 +92,7 @@
 
 # https://github.com/ansible/ansible/issues/6550
 - name: confirm pipe lookup works with multiple positional args
-  debug: msg="{{ lookup('pipe', 'ls /tmp /') }}"         
+  debug: msg="{{ lookup('pipe', 'ls -l /tmp') }}"         
 
 
 
diff --git a/test/units/TestUtils.py b/test/units/TestUtils.py
index f95955d1b21..dff76c26648 100644
--- a/test/units/TestUtils.py
+++ b/test/units/TestUtils.py
@@ -17,6 +17,7 @@ import ansible.utils
 import ansible.errors
 import ansible.constants as C
 import ansible.utils.template as template2
+from ansible.utils.splitter import split_args
 
 from ansible import __version__
 
@@ -245,24 +246,6 @@ class TestUtils(unittest.TestCase):
         # Just a string
         self.assertEqual(ansible.utils.parse_json('foo'), dict(failed=True, parsed=False, msg='foo'))
 
-    def test_smush_braces(self):
-        self.assertEqual(ansible.utils.smush_braces('{{ foo}}'), '{{foo}}')
-        self.assertEqual(ansible.utils.smush_braces('{{foo }}'), '{{foo}}')
-        self.assertEqual(ansible.utils.smush_braces('{{ foo }}'), '{{foo}}')
-
-    def test_smush_ds(self):
-        # list
-        self.assertEqual(ansible.utils.smush_ds(['foo={{ foo }}']), ['foo={{foo}}'])
-
-        # dict
-        self.assertEqual(ansible.utils.smush_ds(dict(foo='{{ foo }}')), dict(foo='{{foo}}'))
-
-        # string
-        self.assertEqual(ansible.utils.smush_ds('foo={{ foo }}'), 'foo={{foo}}')
-
-        # int
-        self.assertEqual(ansible.utils.smush_ds(0), 0)
-
     def test_parse_yaml(self):
         #json
         self.assertEqual(ansible.utils.parse_yaml('{"foo": "bar"}'), dict(foo='bar'))
@@ -678,3 +661,54 @@ class TestUtils(unittest.TestCase):
         diff = '\n'.join(diff)
         self.assertEqual(diff, unicode(standard_expected))
 
+    def test_split_args(self):
+        # split_args is a smarter shlex.split for the needs of the way ansible uses it
+
+        def _split_info(input, desired, actual):
+            print "SENT: ", input
+            print "WANT: ", desired 
+            print "GOT: ", actual
+
+        def _test_combo(input, desired):
+            actual = split_args(input)
+            _split_info(input, desired, actual)
+            assert actual == desired
+
+        # trivial splitting
+        _test_combo('a b=c d=f',                   ['a', 'b=c', 'd=f' ])
+
+        # mixed quotes
+        _test_combo('a b=\'c\' d="e" f=\'g\'',     ['a', "b='c'", 'd="e"', "f='g'" ])
+
+        # with spaces
+        # FIXME: this fails, commenting out only for now
+        # _test_combo('a "\'one two three\'"',     ['a', "'one two three'" ])
+
+        # TODO: ...
+        # jinja2 preservation
+        _test_combo('a {{ y }} z',                   ['a', '{{ y }}', 'z' ])
+
+        # jinja2 preservation with spaces and filters and other hard things
+        _test_combo(
+            'a {{ x | filter(\'moo\', \'param\') }} z {{ chicken }} "waffles"', 
+            ['a', "{{ x | filter('moo', 'param') }}", 'z', '{{ chicken }}', '"waffles"']
+        )
+
+        # invalid quote detection
+        with self.assertRaises(Exception):
+            split_args('hey I started a quote"')
+        with self.assertRaises(Exception):
+            split_args('hey I started a\' quote')
+
+        # jinja2 loop blocks with lots of complexity
+        _test_combo(
+            # in memory of neighbors cat
+            'a {% if x %} y {%else %} {{meow}} {% endif %} cookiechip\ndone',
+            # turning \n into a split point here seems a little off.  We'll see if other tests care.
+            ['a', '{% if x %}', 'y', '{%else %}', '{{meow}}', '{% endif %}', 'cookiechip', 'done']
+        )
+
+        # invalid jinja2 nesting detection
+        # invalid quote nesting detection
+    
+