diff --git a/NEWS b/NEWS
index 566ec795..922ffd36 100644
--- a/NEWS
+++ b/NEWS
@@ -1,3 +1,6 @@
+    - handle embedded "$smarty.config.foo.tpl" correctly (Monte)
+    - add $smarty.config.varname variable for accessing config vars (Paul
+      Lockaby, Monte)
     - silence PHP warnings in function.fetch.php (Eduardo,
       Monte)
     - added get_config_vars(), same basic functionality as
diff --git a/libs/Smarty_Compiler.class.php b/libs/Smarty_Compiler.class.php
index 87697428..451ab599 100644
--- a/libs/Smarty_Compiler.class.php
+++ b/libs/Smarty_Compiler.class.php
@@ -1446,7 +1446,7 @@ class Smarty_Compiler extends Smarty {
     function _expand_quoted_text($var_expr)
     {
 		// if contains unescaped $, expand it
-		if(preg_match_all('%(?<!\\\\)\$(?:smarty(?:\.\w+)+|\w+(?:' . $this->_var_bracket_regexp . ')*)%', $var_expr, $match)) {
+		if(preg_match_all('%(?<!\\\\)\$(?:smarty(?:\.\w+){1,2}|\w+(?:' . $this->_var_bracket_regexp . ')*)%', $var_expr, $match)) {
 			rsort($match[0]);
 			reset($match[0]);
 			foreach($match[0] as $var) {
@@ -1770,6 +1770,14 @@ class Smarty_Compiler extends Smarty {
 				$compiled_ref = '(defined("' . substr($indexes[0],1) . '") ? ' . substr($indexes[0],1) . ' : null)';
                 break;
 
+            case 'config':
+                array_shift($indexes);
+                $name = substr($indexes[0], 1);
+                $compiled_ref = "\$this->_config[0]['vars']";
+                if ($name = substr($indexes[0], 1))
+                    $compiled_ref .= "['$name']";
+                break;
+
             default:
                 $this->_syntax_error('$smarty.' . $ref . ' is an unknown reference', E_USER_ERROR, __FILE__, __LINE__);
                 break;