diff --git a/lib/ejs.js b/lib/ejs.js
index d65b8aae..0044d8f1 100755
--- a/lib/ejs.js
+++ b/lib/ejs.js
@@ -669,9 +669,9 @@ Template.prototype = {
 
     if (opts.rmWhitespace) {
       // Have to use two separate replace here as `^` and `$` operators don't
-      // work well with `\r`.
+      // work well with `\r` and empty lines don't work well with the `m` flag.
       this.templateText =
-        this.templateText.replace(/\r/g, '').replace(/^\s+|\s+$/gm, '');
+        this.templateText.replace(/[\r\n]+/g, '\n').replace(/^\s+|\s+$/gm, '');
     }
 
     // Slurp spaces and tabs before <%_ and after _%>
@@ -775,11 +775,6 @@ Template.prototype = {
       line = line.replace(/^(?:\r\n|\r|\n)/, '');
       this.truncate = false;
     }
-    else if (this.opts.rmWhitespace) {
-      // rmWhitespace has already removed trailing spaces, just need
-      // to remove linebreaks
-      line = line.replace(/^\n/, '');
-    }
     if (!line) {
       return line;
     }
diff --git a/test/fixtures/rmWhitespace.ejs b/test/fixtures/rmWhitespace.ejs
index 5da0d896..ff2f78f8 100644
--- a/test/fixtures/rmWhitespace.ejs
+++ b/test/fixtures/rmWhitespace.ejs
@@ -8,7 +8,16 @@ adsffadsfadsfad<%= f %>
 piece of text.
 <% var a = 'a' %>  
 Text again.
+<% var aa = a + 'a' %>
+Raw output:
+<%- aa %>
+Blank
+
+Line
 <% var b = 'b' %>
 <% var c = 'c'
 var d = 'd' %>
-Another text. <%= c %>  
+Another text. <%= c %>
+After escaped
+<% /* newline slurp */ -%>
+Last line
diff --git a/test/fixtures/rmWhitespace.html b/test/fixtures/rmWhitespace.html
index 4beb5fa9..85bc77ae 100644
--- a/test/fixtures/rmWhitespace.html
+++ b/test/fixtures/rmWhitespace.html
@@ -2,7 +2,19 @@
 <tag2>
 A very long piece of text very long piece of text very long piece of
 text very long piece of text very long piece of
-text very long piece oftext very long
-adsffadsfadsfadfpiece of text.
+tex
+t very long piece oftext very long
+adsffadsfadsfadf
+piece of text.
+
 Text again.
-Another text. c
\ No newline at end of file
+
+Raw output:
+aa
+Blank
+Line
+
+
+Another text. c
+After escaped
+Last line
\ No newline at end of file