diff --git a/lib/redcloth3.rb b/lib/redcloth3.rb
index a4d33f804..6c1d9fd35 100644
--- a/lib/redcloth3.rb
+++ b/lib/redcloth3.rb
@@ -907,7 +907,7 @@ class RedCloth3 < String
     end
 
     IMAGE_RE = /
-            (<p>|\s|^)           # start of line?
+            (>|\s|^)           # start of line?
             \!                   # opening
             (\<|\=|\>)?          # optional alignment atts
             (#{C})               # optional style,class atts
diff --git a/test/unit/helpers/application_helper_test.rb b/test/unit/helpers/application_helper_test.rb
index a16202f86..09982e335 100644
--- a/test/unit/helpers/application_helper_test.rb
+++ b/test/unit/helpers/application_helper_test.rb
@@ -79,6 +79,19 @@ class ApplicationHelperTest < HelperTestCase
     to_test.each { |text, result| assert_equal "<p>#{result}</p>", textilizable(text) }
   end
   
+  def test_inline_images_inside_tags
+    raw = <<-RAW
+h1. !foo.png! Heading
+
+Centered image:
+
+p=. !bar.gif!
+RAW
+
+    assert textilizable(raw).include?('<img src="foo.png" alt="" />')
+    assert textilizable(raw).include?('<img src="bar.gif" alt="" />')
+  end
+  
   def test_acronyms
     to_test = {
       'this is an acronym: GPL(General Public License)' => 'this is an acronym: <acronym title="General Public License">GPL</acronym>',