diff --git a/CHANGELOG.md b/CHANGELOG.md
index 694bae4..b88d9df 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,3 +1,9 @@
+8.3.2 / WIP
+------------------
+
+- Fix blockquote termination inside lists, #386.
+
+
 8.3.1 / 2017-03-06
 ------------------
 
diff --git a/lib/parser_block.js b/lib/parser_block.js
index 97afabf..10505c7 100644
--- a/lib/parser_block.js
+++ b/lib/parser_block.js
@@ -15,7 +15,7 @@ var _rules = [
   [ 'table',      require('./rules_block/table'),      [ 'paragraph', 'reference' ] ],
   [ 'code',       require('./rules_block/code') ],
   [ 'fence',      require('./rules_block/fence'),      [ 'paragraph', 'reference', 'blockquote', 'list' ] ],
-  [ 'blockquote', require('./rules_block/blockquote'), [ 'paragraph', 'reference', 'list' ] ],
+  [ 'blockquote', require('./rules_block/blockquote'), [ 'paragraph', 'reference', 'blockquote', 'list' ] ],
   [ 'hr',         require('./rules_block/hr'),         [ 'paragraph', 'reference', 'blockquote', 'list' ] ],
   [ 'list',       require('./rules_block/list'),       [ 'paragraph', 'reference', 'blockquote' ] ],
   [ 'reference',  require('./rules_block/reference') ],
diff --git a/lib/rules_block/blockquote.js b/lib/rules_block/blockquote.js
index 9283506..e41704d 100644
--- a/lib/rules_block/blockquote.js
+++ b/lib/rules_block/blockquote.js
@@ -10,7 +10,6 @@ module.exports = function blockquote(state, startLine, endLine, silent) {
       ch,
       i,
       initial,
-      isOutdented,
       l,
       lastLineEmpty,
       lines,
@@ -26,6 +25,7 @@ module.exports = function blockquote(state, startLine, endLine, silent) {
       terminate,
       terminatorRules,
       token,
+      wasOutdented,
       oldLineMax = state.lineMax,
       pos = state.bMarks[startLine] + state.tShift[startLine],
       max = state.eMarks[startLine];
@@ -106,6 +106,7 @@ module.exports = function blockquote(state, startLine, endLine, silent) {
 
   oldParentType = state.parentType;
   state.parentType = 'blockquote';
+  wasOutdented = false;
 
   // Search the end of the block
   //
@@ -134,7 +135,7 @@ module.exports = function blockquote(state, startLine, endLine, silent) {
     //    > current blockquote
     // 2. checking this line
     // ```
-    isOutdented = state.sCount[nextLine] < state.blkIndent;
+    if (state.sCount[nextLine] < state.blkIndent) wasOutdented = true;
 
     pos = state.bMarks[nextLine] + state.tShift[nextLine];
     max = state.eMarks[nextLine];
@@ -144,7 +145,7 @@ module.exports = function blockquote(state, startLine, endLine, silent) {
       break;
     }
 
-    if (state.src.charCodeAt(pos++) === 0x3E/* > */ && !isOutdented) {
+    if (state.src.charCodeAt(pos++) === 0x3E/* > */ && !wasOutdented) {
       // This line is inside the blockquote.
 
       // skip spaces after ">" and re-calculate offset
@@ -244,8 +245,6 @@ module.exports = function blockquote(state, startLine, endLine, silent) {
       break;
     }
 
-    if (isOutdented) break;
-
     oldBMarks.push(state.bMarks[nextLine]);
     oldBSCount.push(state.bsCount[nextLine]);
     oldTShift.push(state.tShift[nextLine]);
diff --git a/test/fixtures/markdown-it/commonmark_extras.txt b/test/fixtures/markdown-it/commonmark_extras.txt
index 705c003..f84601a 100644
--- a/test/fixtures/markdown-it/commonmark_extras.txt
+++ b/test/fixtures/markdown-it/commonmark_extras.txt
@@ -100,6 +100,26 @@ Those are two separate blockquotes:
 </blockquote>
 .
 
+Blockquote should terminate itself after paragraph continuation
+.
+- list
+    > blockquote
+blockquote continuation
+    - next list item
+.
+<ul>
+<li>list
+<blockquote>
+<p>blockquote
+blockquote continuation</p>
+</blockquote>
+<ul>
+<li>next list item</li>
+</ul>
+</li>
+</ul>
+.
+
 Regression test (code block + regular paragraph)
 .
 >     foo