diff --git a/lib/coffee_script/CoffeeScript.tmbundle/Syntaxes/CoffeeScript.tmLanguage b/lib/coffee_script/CoffeeScript.tmbundle/Syntaxes/CoffeeScript.tmLanguage
index 88bb3bff..e2922226 100644
--- a/lib/coffee_script/CoffeeScript.tmbundle/Syntaxes/CoffeeScript.tmLanguage
+++ b/lib/coffee_script/CoffeeScript.tmbundle/Syntaxes/CoffeeScript.tmLanguage
@@ -39,7 +39,7 @@
 			<key>comment</key>
 			<string>match stuff like: funcName: =&gt; … </string>
 			<key>match</key>
-			<string>([a-zA-Z0-9_?.$]*)\s*(=|:)\s*([\w,\s]*?)\s*(=&gt;)</string>
+			<string>([a-zA-Z0-9_?.$*]*)\s*(=|:)\s*([\w,\s]*?)\s*(=&gt;)</string>
 			<key>name</key>
 			<string>meta.function.coffee</string>
 		</dict>
@@ -60,7 +60,7 @@
 			<key>comment</key>
 			<string>match stuff like: a =&gt; … </string>
 			<key>match</key>
-			<string>([a-zA-Z0-9_?., $]*)\s*(=&gt;)</string>
+			<string>([a-zA-Z0-9_?., $*]*)\s*(=&gt;)</string>
 			<key>name</key>
 			<string>meta.inline.function.coffee</string>
 		</dict>
diff --git a/lib/coffee_script/grammar.y b/lib/coffee_script/grammar.y
index 2b747738..049482f3 100644
--- a/lib/coffee_script/grammar.y
+++ b/lib/coffee_script/grammar.y
@@ -5,7 +5,7 @@ token IF ELSE UNLESS
 token NUMBER STRING REGEX
 token TRUE FALSE YES NO ON OFF
 token IDENTIFIER PROPERTY_ACCESS
-token CODE PARAM NEW RETURN
+token CODE PARAM SPLAT NEW RETURN
 token TRY CATCH FINALLY THROW
 token BREAK CONTINUE
 token FOR IN WHILE
@@ -187,8 +187,13 @@ rule
 
   # The parameters to a function definition.
   ParamList:
-    PARAM                             { result = val }
-  | ParamList "," PARAM               { result = val[0] << val[2] }
+    Param                             { result = val }
+  | ParamList "," Param               { result = val[0] << val[2] }
+  ;
+
+  Param:
+    PARAM
+  | SPLAT                             { result = SplatNode.new(val[0]) }
   ;
 
   # Expressions that can be treated as values.
diff --git a/lib/coffee_script/lexer.rb b/lib/coffee_script/lexer.rb
index 48a0a32f..02341497 100644
--- a/lib/coffee_script/lexer.rb
+++ b/lib/coffee_script/lexer.rb
@@ -190,15 +190,23 @@ module CoffeeScript
 
     # A source of ambiguity in our grammar was parameter lists in function
     # definitions (as opposed to argument lists in function calls). Tag
-    # parameter identifiers in order to avoid this.
+    # parameter identifiers in order to avoid this. Also, parameter lists can
+    # make use of splats.
     def tag_parameters
-      index = 0
+      i = 0
       loop do
-        tok = @tokens[index -= 1]
+        i -= 1
+        tok, prev = @tokens[i], @tokens[i - 1]
         return if !tok
         next if tok[0] == ','
         return if tok[0] != :IDENTIFIER
-        tok[0] = :PARAM
+        if prev && prev[0] == '*'
+          tok[0] = :SPLAT
+          @tokens.delete_at(i - 1)
+          i -= 1
+        else
+          tok[0] = :PARAM
+        end
       end
     end
 
diff --git a/lib/coffee_script/nodes.rb b/lib/coffee_script/nodes.rb
index 060ae24d..d2683292 100644
--- a/lib/coffee_script/nodes.rb
+++ b/lib/coffee_script/nodes.rb
@@ -64,6 +64,11 @@ module CoffeeScript
       self
     end
 
+    def unshift(node)
+      @expressions.unshift(node)
+      self
+    end
+
     # If this Expressions consists of a single node, pull it back out.
     def unwrap
       @expressions.length == 1 ? @expressions.first : self
@@ -389,7 +394,7 @@ module CoffeeScript
       o[:scope].find(name) unless @variable.properties?
       return write(@value.compile(o)) if @value.custom_assign?
       val = "#{name} = #{@value.compile(o)}"
-      write(o[:return] && !@value.custom_return? ? "return (#{val})" : val)
+      write(o[:return] && !@value.custom_return? ? "#{o[:indent]}return (#{val})" : val)
     end
   end
 
@@ -459,12 +464,35 @@ module CoffeeScript
       o.delete(:no_wrap)
       name = o.delete(:immediate_assign)
       @params.each {|id| o[:scope].parameter(id.to_s) }
+      if @params.last.is_a?(SplatNode)
+        splat = @params.pop
+        splat.index = @params.length
+        @body.unshift(splat)
+      end
       code = @body.compile(o, :code)
       name_part = name ? " #{name}" : ''
       write("function#{name_part}(#{@params.join(', ')}) {\n#{code}\n#{indent}}")
     end
   end
 
+  # A parameter splat in a function definition.
+  class SplatNode < Node
+    attr_accessor :index
+    attr_reader :name
+
+    def initialize(name)
+      @name = name
+    end
+
+    def to_s
+      @name
+    end
+
+    def compile(o={})
+      "var #{@name} = Array.prototype.slice.call(arguments, #{@index})"
+    end
+  end
+
   # An object literal.
   class ObjectNode < Node
     attr_reader :properties
diff --git a/test/fixtures/execution/test_splats.coffee b/test/fixtures/execution/test_splats.coffee
new file mode 100644
index 00000000..6b273137
--- /dev/null
+++ b/test/fixtures/execution/test_splats.coffee
@@ -0,0 +1,6 @@
+func: first, second, *rest =>
+  rest.join(' ')
+
+result: func(1, 2, 3, 4, 5)
+
+print(result is "3 4 5")
\ No newline at end of file