diff --git a/notebook/static/notebook/js/mathjaxutils.js b/notebook/static/notebook/js/mathjaxutils.js
index 20dbfa93e..1fc310ad9 100644
--- a/notebook/static/notebook/js/mathjaxutils.js
+++ b/notebook/static/notebook/js/mathjaxutils.js
@@ -113,9 +113,12 @@ define([
         var hasCodeSpans = /`/.test(text),
             de_tilde;
         if (hasCodeSpans) {
-            text = text.replace(/~/g, "~T").replace(/(^|[^\\])(`+)([^\n]*?[^`\n])\2(?!`)/gm, function (wholematch) {
+            var tilde = function (wholematch) {
                 return wholematch.replace(/\$/g, "~D");
-            });
+            }
+            text = text.replace(/~/g, "~T")
+                       .replace(/(^|[^\\])(`+)([^\n]*?[^`\n])\2(?!`)/gm, tilde)
+                       .replace(/^\s{0,3}(`{3,})(.|\n)*?\1/gm, tilde);
             de_tilde = function (text) {
                 return text.replace(/~([TD])/g, function (wholematch, character) {
                                                     return { T: "~", D: "$" }[character];
diff --git a/notebook/tests/notebook/markdown.js b/notebook/tests/notebook/markdown.js
index c552ae076..202379f0a 100644
--- a/notebook/tests/notebook/markdown.js
+++ b/notebook/tests/notebook/markdown.js
@@ -103,6 +103,12 @@ casper.notebook_test(function () {
     result = '<pre><code class="cm-s-ipython language-aaaa">x = 1</code></pre>'
     md_render_test(codeblock, result, 'Markdown code block unknown language');
 
+    codeblock = '```python\ns = "$"\nt = "$"\n```'
+    result = '<pre><code class="cm-s-ipython language-python">' + 
+             '<span class="cm-variable">s</span> <span class="cm-operator">=</span> <span class="cm-string">"$"</span>\n' +
+             '<span class="cm-variable">t</span> <span class="cm-operator">=</span> <span class="cm-string">"$"</span></code></pre>';
+    md_render_test(codeblock, result, 'Markdown code block python');
+
     function mathjax_render_test(input_string, result, message){
       casper.thenEvaluate(function (text){
         window._test_result = null;