diff --git a/lib/ansible/playbook/__init__.py b/lib/ansible/playbook/__init__.py
index 53898f7b9c..ee8db143a3 100644
--- a/lib/ansible/playbook/__init__.py
+++ b/lib/ansible/playbook/__init__.py
@@ -18,7 +18,7 @@
 import ansible.inventory
 import ansible.constants as C
 import ansible.runner
-from ansible.utils.template import template, smush_braces
+from ansible.utils.template import template
 from ansible import utils
 from ansible import errors
 import ansible.callbacks
@@ -159,7 +159,7 @@ class PlayBook(object):
                 # a playbook (list of plays) decided to include some other list of plays
                 # from another file.  The result is a flat list of plays in the end.
 
-                tokens = shlex.split(smush_braces(play['include']))
+                tokens = shlex.split(play['include'])
 
                 incvars = vars.copy()
                 if 'vars' in play:
diff --git a/lib/ansible/playbook/play.py b/lib/ansible/playbook/play.py
index b3a42a54be..e7aceb5802 100644
--- a/lib/ansible/playbook/play.py
+++ b/lib/ansible/playbook/play.py
@@ -17,7 +17,7 @@
 
 #############################################
 
-from ansible.utils.template import template, smush_braces
+from ansible.utils.template import template
 from ansible import utils
 from ansible import errors
 from ansible.playbook.task import Task
@@ -239,7 +239,7 @@ class Play(object):
                 task_vars['_original_file'] = original_file
 
             if 'include' in x:
-                tokens = shlex.split(smush_braces(str(x['include'])))
+                tokens = shlex.split(str(x['include']))
                 items = ['']
                 included_additional_conditions = list(additional_conditions)
                 for k in x:
diff --git a/lib/ansible/playbook/task.py b/lib/ansible/playbook/task.py
index e4e001553d..af297b9f3a 100644
--- a/lib/ansible/playbook/task.py
+++ b/lib/ansible/playbook/task.py
@@ -58,9 +58,6 @@ class Task(object):
             # code to allow for saying "modulename: args" versus "action: modulename args"
             if x in utils.plugins.module_finder:
 
-                if 'include' in ds and isinstance(ds, basestring):
-                    ds['include'] = template.smush_braces(ds['include'])
-
                 if 'action' in ds:
                     raise errors.AnsibleError("multiple actions specified in task %s" % (ds.get('name', ds['action'])))
                 if isinstance(ds[x], dict):
diff --git a/lib/ansible/utils/__init__.py b/lib/ansible/utils/__init__.py
index 7a737acffe..ab143ff049 100644
--- a/lib/ansible/utils/__init__.py
+++ b/lib/ansible/utils/__init__.py
@@ -255,9 +255,31 @@ def parse_json(raw_data):
             return { "failed" : True, "parsed" : False, "msg" : orig_data }
         return results
 
+def smush_braces(data):
+    ''' smush Jinaj2 braces so unresolved templates like {{ foo }} don't get parsed weird by key=value code '''
+    while data.find('{{ ') != -1:
+        data = data.replace('{{ ', '{{')
+    while data.find(' }}') != -1:
+        data = data.replace(' }}', '}}')
+    return data
+
+def smush_ds(data):
+    # things like key={{ foo }} are not handled by shlex.split well, so preprocess any YAML we load
+    # so we do not have to call smush elsewhere
+    if type(data) == list:
+        return [ smush_ds(x) for x in data ]
+    elif type(data) == dict:
+        for (k,v) in data.items():
+            data[k] = smush_ds(v)
+        return data
+    elif isinstance(data, basestring):
+        return smush_braces(data)
+    else:
+        return data
+
 def parse_yaml(data):
     ''' convert a yaml string to a data structure '''
-    return yaml.safe_load(data)
+    return smush_ds(yaml.safe_load(data))
 
 def process_yaml_error(exc, data, path=None):
     if hasattr(exc, 'problem_mark'):
diff --git a/lib/ansible/utils/template.py b/lib/ansible/utils/template.py
index 0e14d802b2..03f7da3847 100644
--- a/lib/ansible/utils/template.py
+++ b/lib/ansible/utils/template.py
@@ -437,19 +437,9 @@ def template_from_file(basedir, path, vars):
         res = res + '\n'
     return template(basedir, res, vars)
 
-def smush_braces(data):
-    ''' smush Jinaj2 braces so unresolved templates like {{ foo }} don't get parsed weird by key=value code '''
-    while data.find('{{ ') != -1:
-        data = data.replace('{{ ', '{{')
-    while data.find(' }}') != -1:
-        data = data.replace(' }}', '}}')
-    return data
-
 def template_from_string(basedir, data, vars):
     ''' run a file through the (Jinja2) templating engine '''
 
-    data = smush_braces(data)
-
     try:
         if type(data) == str:
             data = unicode(data, 'utf-8')