diff --git a/lib/compass/sass_extensions/sprites/image_row.rb b/lib/compass/sass_extensions/sprites/image_row.rb
index 51ae0d7391..945e680e90 100644
--- a/lib/compass/sass_extensions/sprites/image_row.rb
+++ b/lib/compass/sass_extensions/sprites/image_row.rb
@@ -23,7 +23,7 @@ def add(image)
         alias :<< :add
         
         def height
-          images.map(&:height).max
+          images.map {|i| i.height + i.spacing}.max
         end
         
         def width
@@ -31,7 +31,7 @@ def width
         end
 
         def total_width
-          images.inject(0) {|sum, img| sum + img.width }
+          images.inject(0) {|sum, img| sum + img.width + 2 * img.spacing}
         end
         
         def efficiency
@@ -39,7 +39,7 @@ def efficiency
         end
 
         def will_fit?(image)
-          (total_width + image.width) <= max_width
+          (total_width + image.width + 2 * image.spacing) <= max_width
         end
       end
     end
diff --git a/lib/compass/sass_extensions/sprites/layout/smart.rb b/lib/compass/sass_extensions/sprites/layout/smart.rb
index 14bfb29b00..5c8d37f653 100644
--- a/lib/compass/sass_extensions/sprites/layout/smart.rb
+++ b/lib/compass/sass_extensions/sprites/layout/smart.rb
@@ -13,12 +13,14 @@ def layout!
           def calculate_positions!
             fitter = ::Compass::SassExtensions::Sprites::RowFitter.new(@images)
             current_y = 0
+            spacing = 0
             fitter.fit!.each do |row|
               current_x = 0
               row.images.each_with_index do |image, index|
                 image.left = current_x
                 image.top = current_y
-                current_x += image.width
+                current_x += image.width + image.spacing + spacing
+                spacing = image.spacing
               end
               current_y += row.height
             end
diff --git a/lib/compass/sass_extensions/sprites/row_fitter.rb b/lib/compass/sass_extensions/sprites/row_fitter.rb
index 834c57fa2f..a2788d4216 100644
--- a/lib/compass/sass_extensions/sprites/row_fitter.rb
+++ b/lib/compass/sass_extensions/sprites/row_fitter.rb
@@ -26,11 +26,11 @@ def fit!(style = :scan)
         end
 
         def width
-          @width ||= @images.collect(&:width).max
+          @width ||= @images.collect(&:width).max + @images.collect(&:spacing).max
         end
         
         def height
-          @height ||= @rows.inject(0) {|sum, row| sum += row.height}
+          @height ||= @rows.inject(0) {|sum, row| sum += row.height} + @images[0].spacing
         end
 
         def efficiency
@@ -39,13 +39,16 @@ def efficiency
 
         private
         def new_row(image = nil)
-          row = Compass::SassExtensions::Sprites::ImageRow.new(width)
+          spacing = image ? image.spacing : @images[0].spacing
+          row = Compass::SassExtensions::Sprites::ImageRow.new(width + 2 * spacing)
+          
           row.add(image) if image
           row
         end
 
         def fast_fit
           row = new_row
+
           @images.each do |image|
             if !row.add(image)
               @rows << row
@@ -58,7 +61,6 @@ def fast_fit
 
         def scan_fit
           fast_fit
-
           moved_images = []
 
           begin
diff --git a/test/units/sprites/smart_layout_spacing_test.rb b/test/units/sprites/smart_layout_spacing_test.rb
new file mode 100644
index 0000000000..5c5cfb4b94
--- /dev/null
+++ b/test/units/sprites/smart_layout_spacing_test.rb
@@ -0,0 +1,40 @@
+require 'test_helper'
+require 'compass/sass_extensions/sprites/layout'
+require 'compass/sass_extensions/sprites/layout/smart'
+
+class SmartLayoutSpacingTest < Test::Unit::TestCase
+  include SpriteHelper
+
+  def setup
+    file = StringIO.new("images_path = #{@images_src_path.inspect}\n")
+    Compass.add_configuration(file, "sprite_config")
+  end
+
+
+  def create_images_with_spacing(dims)
+    dims.collect { |width, height, spacing|
+      image = Compass::SassExtensions::Sprites::Image.new('blah', 'blah', {"spacing" => Sass::Script::Number.new(10, ['px'])})
+      image.stubs(:width => width, :height => height)
+      image 
+    }
+  end
+
+  def spacing_dims
+    [
+      [ 100, 10, 10 ],
+      [ 80, 10, 20 ],
+      [ 50, 10, 20 ],
+      [ 35, 10, 10 ],
+      [ 20, 10, 10 ]
+    ]
+  end
+
+  it 'should correctly space the images according to the spacing' do
+  	images = create_images_with_spacing(spacing_dims)
+
+  	computed_images, width, height = Compass::SassExtensions::Sprites::Layout::Smart.new(images, nil).properties
+
+  	assert_equal 110, width
+  	assert_equal 90, height
+  end
+end
\ No newline at end of file