diff --git a/lib/ansible/playbook/play.py b/lib/ansible/playbook/play.py
index cd7a461867..40274c5108 100644
--- a/lib/ansible/playbook/play.py
+++ b/lib/ansible/playbook/play.py
@@ -70,36 +70,31 @@ class Play(object):
     def _load_tasks(self, ds, keyname):
         ''' handle task and handler include statements '''
 
-        items = ds.get(keyname, [])
+        tasks = ds.get(keyname, [])
         results = []
-        for x in items:
+        for x in tasks:
+            task_vars = self.vars.copy()
             if 'include' in x:
-                task_vars = self.vars.copy() 
                 tokens = shlex.split(x['include'])
                 for t in tokens[1:]:
                     (k,v) = t.split("=", 1)
                     task_vars[k]=v
                 include_file = tokens[0]
                 data = utils.parse_yaml_from_file(utils.path_dwim(self.playbook.basedir, include_file))
-                for y in data:
-                    items = y.get('with_items',None)
-                    if items is None:
-                        items = [ '' ]
-                    for item in items:
-                        mv = self.vars.copy()
-                        mv.update(task_vars)
-                        mv['item'] = item
-                        results.append(Task(self,y,module_vars=mv))
             elif type(x) == dict:
-                items = x.get('with_items', None)
-                if items is None:
-                    items = [ '' ]
-                for item in items:
-                    mv = self.vars.copy()
-                    mv['item'] = item
-                    results.append(Task(self,x,module_vars=mv))
+                data = [x]
             else:
                 raise Exception("unexpected task type")
+            for y in data:
+                items = y.get('with_items',None)
+                if items is None:
+                    items = [ '' ]
+                elif isinstance(items, basestring):
+                    items = utils.varLookup(items, task_vars)
+                for item in items:
+                    mv = task_vars.copy()
+                    mv['item'] = item
+                    results.append(Task(self,y,module_vars=mv))
         return results
 
     # *************************************************
diff --git a/lib/ansible/utils.py b/lib/ansible/utils.py
index d9805b1304..1f7c9e85bb 100644
--- a/lib/ansible/utils.py
+++ b/lib/ansible/utils.py
@@ -201,7 +201,7 @@ def parse_json(data):
 
 _LISTRE = re.compile(r"(\w+)\[(\d+)\]")
 
-def varLookup(name, vars):
+def _varLookup(name, vars):
     ''' find the contents of a possibly complex variable in vars. '''
     path = name.split('.')
     space = vars
@@ -223,6 +223,12 @@ def varLookup(name, vars):
 _KEYCRE = re.compile(r"\$(?P<complex>\{){0,1}((?(complex)[\w\.\[\]]+|\w+))(?(complex)\})")
 #                        if { -> complex     if complex, allow . and need trailing }
 
+def varLookup(varname, vars):
+    m = _KEYCRE.search(varname)
+    if not m:
+        return None
+    return _varLookup(m.group(2), vars)
+
 def varReplace(raw, vars):
     '''Perform variable replacement of $vars
 
@@ -245,7 +251,7 @@ def varReplace(raw, vars):
         # original)
         varname = m.group(2)
 
-        replacement = unicode(varLookup(varname, vars) or m.group())
+        replacement = unicode(_varLookup(varname, vars) or m.group())
 
         start, end = m.span()
         done.append(raw[:start])    # Keep stuff leading up to token
diff --git a/test/TestUtils.py b/test/TestUtils.py
index 7d03e17c47..006a687e8b 100644
--- a/test/TestUtils.py
+++ b/test/TestUtils.py
@@ -17,7 +17,7 @@ class TestUtils(unittest.TestCase):
             }
         }
 
-        res = ansible.utils.varLookup('data.who', vars)
+        res = ansible.utils._varLookup('data.who', vars)
 
         assert sorted(res) == sorted(vars['data']['who'])