diff --git a/packages/coffeescript/coffeescript_tests.js b/packages/coffeescript/coffeescript_tests.js
index 6baa3ca189..dad72f95fa 100644
--- a/packages/coffeescript/coffeescript_tests.js
+++ b/packages/coffeescript/coffeescript_tests.js
@@ -3,9 +3,10 @@ Tinytest.add("coffeescript - presence", function(test) {
 });
 Tinytest.add("literate coffeescript - presence", function(test) {
   test.isTrue(Meteor.__LITCOFFEESCRIPT_PRESENT);
+  test.isTrue(Meteor.__COFFEEMDSCRIPT_PRESENT);
 });
 
 Tinytest.add("coffeescript - exported variable", function(test) {
   test.equal(COFFEESCRIPT_EXPORTED, 123);
   test.equal(Package['coffeescript-test-helper'].COFFEESCRIPT_EXPORTED, 123);
-});
+});
\ No newline at end of file
diff --git a/packages/coffeescript/package.js b/packages/coffeescript/package.js
index 2a13f962fb..e31e47b9db 100644
--- a/packages/coffeescript/package.js
+++ b/packages/coffeescript/package.js
@@ -16,9 +16,10 @@ Package.on_test(function (api) {
   api.use(['coffeescript-test-helper'], ['client', 'server']);
   api.add_files([
     'coffeescript_test_setup.js',
-    'coffeescript_tests.coffee',
-    'coffeescript_strict_tests.coffee',
-    'litcoffeescript_tests.litcoffee',
+    'tests/coffeescript_tests.coffee',
+    'tests/coffeescript_strict_tests.coffee',
+    'tests/litcoffeescript_tests.litcoffee',
+    'tests/litcoffeescript_tests.coffee.md',
     'coffeescript_tests.js'
   ], ['client', 'server']);
 });
diff --git a/packages/coffeescript/plugin/compile-coffeescript.js b/packages/coffeescript/plugin/compile-coffeescript.js
index 3270a2912e..b0c94ce870 100644
--- a/packages/coffeescript/plugin/compile-coffeescript.js
+++ b/packages/coffeescript/plugin/compile-coffeescript.js
@@ -113,13 +113,14 @@ var addSharedHeader = function (source, sourceMap) {
   };
 };
 
-var handler = function (compileStep) {
+var handler = function (compileStep, isLiterate) {
   var source = compileStep.read().toString('utf8');
   var outputFile = compileStep.inputPath + ".js";
+
   var options = {
     bare: true,
     filename: compileStep.inputPath,
-    literate: path.extname(compileStep.inputPath) === '.litcoffee',
+    literate: !!isLiterate,
     // Return a source map.
     sourceMap: true,
     // Include the original source in the source map (sourcesContent field).
@@ -152,6 +153,11 @@ var handler = function (compileStep) {
   });
 };
 
-Plugin.registerSourceHandler("coffee", handler);
-Plugin.registerSourceHandler("litcoffee", handler);
+var literateHandler = function (compileStep) {
+  return handler(compileStep, true);
+}
+
+Plugin.registerSourceHandler("coffee", handler);
+Plugin.registerSourceHandler("litcoffee", literateHandler);
+Plugin.registerSourceHandler("coffee.md", literateHandler);
 
diff --git a/packages/coffeescript/coffeescript_strict_tests.coffee b/packages/coffeescript/tests/coffeescript_strict_tests.coffee
similarity index 100%
rename from packages/coffeescript/coffeescript_strict_tests.coffee
rename to packages/coffeescript/tests/coffeescript_strict_tests.coffee
diff --git a/packages/coffeescript/coffeescript_tests.coffee b/packages/coffeescript/tests/coffeescript_tests.coffee
similarity index 100%
rename from packages/coffeescript/coffeescript_tests.coffee
rename to packages/coffeescript/tests/coffeescript_tests.coffee
diff --git a/packages/coffeescript/tests/litcoffeescript_tests.coffee.md b/packages/coffeescript/tests/litcoffeescript_tests.coffee.md
new file mode 100644
index 0000000000..e68b845a96
--- /dev/null
+++ b/packages/coffeescript/tests/litcoffeescript_tests.coffee.md
@@ -0,0 +1,6 @@
+This file is just the same as `coffeescript_tests.coffee`, first we set a 
+property, which we check for in `coffeescript_tests.js`, and then a trivial
+testcase.
+
+    Meteor.__COFFEEMDSCRIPT_PRESENT = true
+    Tinytest.add "markdown coffeescript - compile", (test) -> test.isTrue true
diff --git a/packages/coffeescript/litcoffeescript_tests.litcoffee b/packages/coffeescript/tests/litcoffeescript_tests.litcoffee
similarity index 100%
rename from packages/coffeescript/litcoffeescript_tests.litcoffee
rename to packages/coffeescript/tests/litcoffeescript_tests.litcoffee
diff --git a/tools/packages.js b/tools/packages.js
index 09290ac63d..41832c04fd 100644
--- a/tools/packages.js
+++ b/tools/packages.js
@@ -236,8 +236,8 @@ _.extend(Slice.prototype, {
       var relPath = source.relPath;
       var fileOptions = _.clone(source.fileOptions) || {};
       var absPath = path.resolve(self.pkg.sourceRoot, relPath);
-      var ext = path.extname(relPath).substr(1);
-      var handler = !fileOptions.isAsset && self._getSourceHandler(ext);
+      var filename = path.basename(relPath);
+      var handler = !fileOptions.isAsset && self._getSourceHandler(filename);
       var contents = watch.readAndWatchFile(self.watchSet, absPath);
 
       if (contents === null) {
@@ -723,12 +723,17 @@ _.extend(Slice.prototype, {
 
   // Find the function that should be used to handle a source file for
   // this slice, or return null if there isn't one. We'll use handlers
-  // that are defined in this package and in its immediate
-  // dependencies. ('extension' should be the extension of the file
-  // without a leading dot.)
-  _getSourceHandler: function (extension) {
+  // that are defined in this package and in its immediate dependencies.
+  _getSourceHandler: function (filename) {
     var self = this;
-    return (self._allHandlers())[extension] || null;
+    var handlers = self._allHandlers();
+    var parts = filename.split('.');
+    for (var i = 0; i < parts.length; i++) {
+      var extension = parts.slice(i).join('.');
+      if (_.has(handlers, extension))
+        return handlers[extension];
+    }
+    return null;
   }
 });
 
@@ -946,7 +951,8 @@ _.extend(Package.prototype, {
       return;
 
     var Plugin = {
-      // 'extension' is a file extension without a dot (eg 'js', 'coffee')
+      // 'extension' is a file extension without the separation dot 
+      // (eg 'js', 'coffee', 'coffee.md')
       //
       // 'handler' is a function that takes a single argument, a
       // CompileStep (#CompileStep)