diff --git a/lib/ansible/inventory/ini.py b/lib/ansible/inventory/ini.py
index 024eb9a9a0..718fee1338 100644
--- a/lib/ansible/inventory/ini.py
+++ b/lib/ansible/inventory/ini.py
@@ -123,12 +123,22 @@ class InventoryParser(object):
                                 (k,v) = t.split("=", 1)
                             except ValueError, e:
                                 raise errors.AnsibleError("Invalid ini entry: %s - %s" % (t, str(e)))
-                            try:
-                                host.set_variable(k,ast.literal_eval(v))
-                            except:
-                                # most likely a string that literal_eval
-                                # doesn't like, so just set it
-                                host.set_variable(k,v)
+
+                            # If there is a hash in the value don't pass it through to ast at ast will split at the hash.
+                            if "#" in v:
+                                host.set_variable(k, v)
+                            else:
+                                try:
+                                    host.set_variable(k,ast.literal_eval(v))
+                                # Using explicit exceptions.
+                                # Likely a string that literal_eval does not like. We wil then just set it.
+                                except ValueError:
+                                    # For some reason this was thought to be malformed.
+                                    host.set_variable(k, v)
+                                except SyntaxError:
+                                    # Is this a hash with an equals at the end?
+                                    host.set_variable(k, v)
+
                     self.groups[active_group_name].add_host(host)
 
     # [southeast:children]
diff --git a/test/units/TestInventory.py b/test/units/TestInventory.py
index 2ae6256e62..bd2f24c063 100644
--- a/test/units/TestInventory.py
+++ b/test/units/TestInventory.py
@@ -417,15 +417,17 @@ class TestInventory(unittest.TestCase):
         auth = inventory.get_variables('neptun')['auth']
         assert auth == 'YWRtaW46YWRtaW4='
 
-    # test disabled as needs to be updated to model desired behavior
-    #
-    #def test_dir_inventory(self):
-    #    inventory = self.dir_inventory()
-    #    vars = inventory.get_variables('zeus')
-    #
-    #   print "VARS=%s" % vars
-    #
-    #    assert vars == {'inventory_hostname': 'zeus',
-    #                    'inventory_hostname_short': 'zeus',
-    #                    'group_names': ['greek', 'major-god', 'ungrouped'],
-    #                    'var_a': '1#2'}
+    def test_dir_inventory(self):
+        inventory = self.dir_inventory()
+
+        host_vars = inventory.get_variables('zeus')
+
+        expected_vars = {'inventory_hostname': 'zeus',
+                         'inventory_hostname_short': 'zeus',
+                         'group_names': ['greek', 'major-god', 'ungrouped'],
+                         'var_a': '3#4'}
+
+        print "HOST     VARS=%s" % host_vars
+        print "EXPECTED VARS=%s" % expected_vars
+
+        assert host_vars == expected_vars
\ No newline at end of file
diff --git a/test/units/inventory_test_data/inventory_dir/0hosts b/test/units/inventory_test_data/inventory_dir/0hosts
index 27fc46e853..6f78a33a22 100644
--- a/test/units/inventory_test_data/inventory_dir/0hosts
+++ b/test/units/inventory_test_data/inventory_dir/0hosts
@@ -1,3 +1,3 @@
-zeus var_a=2
+zeus var_a=0
 morpheus
 thor
diff --git a/test/units/inventory_test_data/inventory_dir/2levels b/test/units/inventory_test_data/inventory_dir/2levels
index 22f06bcd43..363294923e 100644
--- a/test/units/inventory_test_data/inventory_dir/2levels
+++ b/test/units/inventory_test_data/inventory_dir/2levels
@@ -1,5 +1,5 @@
 [major-god]
-zeus var_a=1
+zeus var_a=2
 thor
 
 [minor-god]
diff --git a/test/units/inventory_test_data/inventory_dir/3comments b/test/units/inventory_test_data/inventory_dir/3comments
index 74642f13cc..e11b5e416b 100644
--- a/test/units/inventory_test_data/inventory_dir/3comments
+++ b/test/units/inventory_test_data/inventory_dir/3comments
@@ -1,5 +1,5 @@
 [major-god] # group with inline comments
-zeus var_a="1#2" # host with inline comments and "#" in the var string
+zeus var_a="3\#4" # host with inline comments and "#" in the var string
 # A comment
 thor