diff --git a/examples/lambdas.mustache b/examples/lambdas.mustache
new file mode 100644
index 0000000..7eb4ea2
--- /dev/null
+++ b/examples/lambdas.mustache
@@ -0,0 +1,3 @@
+{{#replace_foo_with_bar}}
+    foo != bar. oh, it does!
+{{/replace_foo_with_bar}}
\ No newline at end of file
diff --git a/examples/lambdas.py b/examples/lambdas.py
new file mode 100644
index 0000000..01a3697
--- /dev/null
+++ b/examples/lambdas.py
@@ -0,0 +1,30 @@
+import pystache
+
+def rot(s, n=13):
+    r = ""
+    for c in s:
+        cc = c
+        if cc.isalpha():
+            cc = cc.lower()
+            o = ord(cc)
+            ro = (o+n) % 122
+            if ro == 0: ro = 122
+            if ro < 97: ro += 96
+            cc = chr(ro)
+        r = ''.join((r,cc))
+    return r
+
+def replace(subject, this='foo', with_this='bar'):
+    return subject.replace(this, with_this)
+
+class Lambdas(pystache.View):
+    template_path = 'examples'
+
+    def replace_foo_with_bar(self, text=None):
+        return replace
+
+    def rot13(self, text=None):
+        return rot
+
+    def sort(self, text=None):
+        return lambda text: ''.join(sorted(text))
diff --git a/pystache/template.py b/pystache/template.py
index 75bf7a6..d8220cb 100644
--- a/pystache/template.py
+++ b/pystache/template.py
@@ -67,7 +67,9 @@ class Template(object):
 
             it = context.get(section_name, None)
             replacer = ''
-            if it and not hasattr(it, '__iter__'):
+            if it and hasattr(it, '__call__'):
+                replacer = it(inner)
+            elif it and not hasattr(it, '__iter__'):
                 replacer = inner
             elif it:
                 insides = []
diff --git a/tests/test_view.py b/tests/test_view.py
index d0e2968..bcdbb90 100644
--- a/tests/test_view.py
+++ b/tests/test_view.py
@@ -3,6 +3,7 @@ import pystache
 
 from examples.simple import Simple
 from examples.complex_view import ComplexView
+from examples.lambdas import Lambdas
 
 class TestView(unittest.TestCase):
     def test_basic(self):
@@ -16,7 +17,7 @@ class TestView(unittest.TestCase):
     def test_template_load(self):
         view = Simple(thing='world')
         self.assertEquals(view.render(), "Hi world!")
-    
+
     def test_template_load_from_multiple_path(self):
         path = Simple.template_path
         Simple.template_path = ('examples/nowhere','examples',)
@@ -59,6 +60,21 @@ class TestView(unittest.TestCase):
   </ul>
 """)
 
+    def test_higher_order_replace(self):
+        view = Lambdas()
+        self.assertEquals(view.render(),
+                          'bar != bar. oh, it does!')
+
+    def test_higher_order_rot13(self):
+        view = Lambdas()
+        view.template = '{{#rot13}}abcdefghijklm{{/rot13}}'
+        self.assertEquals(view.render(), 'nopqrstuvwxyz')
+
+    def test_higher_order_lambda(self):
+        view = Lambdas()
+        view.template = '{{#sort}}zyxwvutsrqponmlkjihgfedcba{{/sort}}'
+        self.assertEquals(view.render(), 'abcdefghijklmnopqrstuvwxyz')
+
 
 if __name__ == '__main__':
     unittest.main()