diff --git a/bench/throughput.js b/bench/throughput.js
index 308446a09..d27a94d31 100644
--- a/bench/throughput.js
+++ b/bench/throughput.js
@@ -28,11 +28,13 @@ function makeSuite(bench, name, template, handlebarsOnly) {
       partials = template.partials,
 
       handlebarsOut,
+      compatOut,
       dustOut,
       ecoOut,
       mustacheOut;
 
   var handlebar = Handlebars.compile(template.handlebars, {data: false}),
+      compat =  Handlebars.compile(template.handlebars, {data: false, compat: true}),
       options = {helpers: template.helpers};
   _.each(template.partials && template.partials.handlebars, function(partial, name) {
     Handlebars.registerPartial(name, Handlebars.compile(partial, {data: false}));
@@ -43,6 +45,11 @@ function makeSuite(bench, name, template, handlebarsOnly) {
     handlebar(context, options);
   });
 
+  compatOut = compat(context, options);
+  bench("compat", function() {
+    compat(context, options);
+  });
+
   if (handlebarsOnly) {
     return;
   }
@@ -107,6 +114,7 @@ function makeSuite(bench, name, template, handlebarsOnly) {
     }
   }
 
+  compare(compatOut, 'compat');
   compare(dustOut, 'dust');
   compare(ecoOut, 'eco');
   compare(mustacheOut, 'mustache');
diff --git a/lib/handlebars/compiler/compiler.js b/lib/handlebars/compiler/compiler.js
index 131cb981b..ffddec432 100644
--- a/lib/handlebars/compiler/compiler.js
+++ b/lib/handlebars/compiler/compiler.js
@@ -214,7 +214,8 @@ Compiler.prototype = {
     if (partial.context) {
       this.accept(partial.context);
     } else {
-      this.opcode('push', 'depth0');
+      this.opcode('getContext', 0);
+      this.opcode('pushContext');
     }
 
     this.opcode('invokePartial', partialName.name, partial.indent || '');
@@ -307,7 +308,7 @@ Compiler.prototype = {
       // Context reference, i.e. `{{foo .}}` or `{{foo ..}}`
       this.opcode('pushContext');
     } else {
-      this.opcode('lookupOnContext', id.parts, id.falsy);
+      this.opcode('lookupOnContext', id.parts, id.falsy, id.isScoped);
     }
   },
 
@@ -423,6 +424,9 @@ export function precompile(input, options, env) {
   if (!('data' in options)) {
     options.data = true;
   }
+  if (options.compat) {
+    options.useDepths = true;
+  }
 
   var ast = env.parse(input);
   var environment = new env.Compiler().compile(ast, options);
@@ -439,6 +443,9 @@ export function compile(input, options, env) {
   if (!('data' in options)) {
     options.data = true;
   }
+  if (options.compat) {
+    options.useDepths = true;
+  }
 
   var compiled;
 
diff --git a/lib/handlebars/compiler/javascript-compiler.js b/lib/handlebars/compiler/javascript-compiler.js
index c92cf58ad..b9b858dbd 100644
--- a/lib/handlebars/compiler/javascript-compiler.js
+++ b/lib/handlebars/compiler/javascript-compiler.js
@@ -17,6 +17,11 @@ JavaScriptCompiler.prototype = {
       return parent + "['" + name + "']";
     }
   },
+  depthedLookup: function(name) {
+    this.aliases.lookup = 'this.lookup';
+
+    return 'lookup(depths, "' + name + '")';
+  },
 
   compilerInfo: function() {
     var revision = COMPILER_REVISION,
@@ -69,6 +74,8 @@ JavaScriptCompiler.prototype = {
 
     this.compileChildren(environment, options);
 
+    this.useDepths = this.useDepths || environment.depths.list.length || this.options.compat;
+
     var opcodes = environment.opcodes,
         opcode,
         i,
@@ -115,6 +122,9 @@ JavaScriptCompiler.prototype = {
       if (this.options.data) {
         ret.useData = true;
       }
+      if (this.useDepths) {
+        ret.depths = true;
+      }
 
       if (!asObject) {
         ret.compiler = JSON.stringify(ret.compiler);
@@ -151,8 +161,8 @@ JavaScriptCompiler.prototype = {
 
     var params = ["depth0", "helpers", "partials", "data"];
 
-    for(var i=0, l=this.environment.depths.list.length; i<l; i++) {
-      params.push("depth" + this.environment.depths.list[i]);
+    if (this.useDepths) {
+      params.push('depths');
     }
 
     // Perform a second pass over the output to merge content when possible
@@ -230,7 +240,7 @@ JavaScriptCompiler.prototype = {
   blockValue: function(name) {
     this.aliases.blockHelperMissing = 'helpers.blockHelperMissing';
 
-    var params = ["depth0"];
+    var params = [this.contextName(0)];
     this.setupParams(name, 0, params);
 
     this.replaceStack(function(current) {
@@ -249,7 +259,7 @@ JavaScriptCompiler.prototype = {
     this.aliases.blockHelperMissing = 'helpers.blockHelperMissing';
 
     // We're being a bit cheeky and reusing the options value from the prior exec
-    var params = ["depth0"];
+    var params = [this.contextName(0)];
     this.setupParams('', 0, params, true);
 
     this.flushInline();
@@ -341,7 +351,7 @@ JavaScriptCompiler.prototype = {
   //
   // Pushes the value of the current context onto the stack.
   pushContext: function() {
-    this.pushStackLiteral('depth' + this.lastContext);
+    this.pushStackLiteral(this.contextName(this.lastContext));
   },
 
   // [lookupOnContext]
@@ -351,15 +361,20 @@ JavaScriptCompiler.prototype = {
   //
   // Looks up the value of `name` on the current context and pushes
   // it onto the stack.
-  lookupOnContext: function(parts, falsy) {
+  lookupOnContext: function(parts, falsy, scoped) {
     /*jshint -W083 */
-    this.pushContext();
-    if (!parts) {
-      return;
+    var i = 0,
+        len = parts.length;
+
+    if (!scoped && this.isChild && this.options.compat && !this.lastContext) {
+      // The depthed query is expected to handle the undefined logic for the root level that
+      // is implemented below, so we evaluate that directly in compat mode
+      this.pushStackLiteral(this.depthedLookup(parts[i++]));
+    } else {
+      this.pushContext();
     }
 
-    var len = parts.length;
-    for (var i = 0; i < len; i++) {
+    for (; i < len; i++) {
       this.replaceStack(function(current) {
         var lookup = this.nameLookup(current, parts[i], 'context');
         // We want to ensure that zero and false are handled properly for the first element
@@ -410,7 +425,7 @@ JavaScriptCompiler.prototype = {
   resolvePossibleLambda: function() {
     this.aliases.lambda = 'this.lambda';
 
-    this.push('lambda(' + this.popStack() + ', depth0)');
+    this.push('lambda(' + this.popStack() + ', ' + this.contextName(0) + ')');
   },
 
   // [pushStringParam]
@@ -422,8 +437,7 @@ JavaScriptCompiler.prototype = {
   // provides the string value of a parameter along with its
   // depth rather than resolving it immediately.
   pushStringParam: function(string, type) {
-    this.pushStackLiteral('depth' + this.lastContext);
-
+    this.pushContext();
     this.pushString(type);
 
     // If it's a subexpression, the string result
@@ -669,6 +683,8 @@ JavaScriptCompiler.prototype = {
         child.name = 'program' + index;
         this.context.programs[index] = compiler.compile(child, options, this.context, !this.precompile);
         this.context.environments[index] = child;
+
+        this.useDepths = this.useDepths || compiler.useDepths;
       } else {
         child.index = index;
         child.name = 'program' + index;
@@ -690,17 +706,17 @@ JavaScriptCompiler.prototype = {
     }
 
     var child = this.environment.children[guid],
-        depths = child.depths.list, depth;
+        depths = child.depths.list,
+        useDepths = this.useDepths,
+        depth;
 
     var programParams = [child.index, 'data'];
 
-    for(var i=0, l = depths.length; i<l; i++) {
-      depth = depths[i];
-
-      programParams.push('depth' + (depth - 1));
+    if (useDepths) {
+      programParams.push('depths');
     }
 
-    return (depths.length === 0 ? 'this.program(' : 'this.programWithDepth(') + programParams.join(', ') + ')';
+    return 'this.program(' + programParams.join(', ') + ')';
   },
 
   useRegister: function(name) {
@@ -847,6 +863,14 @@ JavaScriptCompiler.prototype = {
     }
   },
 
+  contextName: function(context) {
+    if (this.useDepths && context) {
+      return 'depths[' + context + ']';
+    } else {
+      return 'depth' + context;
+    }
+  },
+
   quotedString: function(str) {
     return '"' + str
       .replace(/\\/g, '\\\\')
@@ -878,7 +902,7 @@ JavaScriptCompiler.prototype = {
       params: params,
       paramsInit: paramsInit,
       name: foundHelper,
-      callParams: ["depth0"].concat(params).join(", ")
+      callParams: [this.contextName(0)].concat(params).join(", ")
     };
   },
 
diff --git a/lib/handlebars/runtime.js b/lib/handlebars/runtime.js
index 9b61afe2f..ec54f532f 100644
--- a/lib/handlebars/runtime.js
+++ b/lib/handlebars/runtime.js
@@ -63,6 +63,14 @@ export function template(templateSpec, env) {
 
   // Just add water
   var container = {
+    lookup: function(depths, name) {
+      var len = depths.length;
+      for (var i = 0; i < len; i++) {
+        if (depths[i] && depths[i][name] != null) {
+          return depths[i][name];
+        }
+      }
+    },
     lambda: function(current, context) {
       return typeof current === 'function' ? current.call(context) : current;
     },
@@ -75,17 +83,16 @@ export function template(templateSpec, env) {
     },
 
     programs: [],
-    program: function(i, data) {
+    program: function(i, data, depths) {
       var programWrapper = this.programs[i],
           fn = this.fn(i);
-      if(data) {
-        programWrapper = program(this, i, fn, data);
+      if (data || depths) {
+        programWrapper = program(this, i, fn, data, depths);
       } else if (!programWrapper) {
         programWrapper = this.programs[i] = program(this, i, fn);
       }
       return programWrapper;
     },
-    programWithDepth: env.VM.programWithDepth,
 
     data: function(data, depth) {
       while (data && depth--) {
@@ -117,7 +124,12 @@ export function template(templateSpec, env) {
     if (!options.partial && templateSpec.useData) {
       data = initData(context, data);
     }
-    return templateSpec.main.call(container, context, container.helpers, container.partials, data);
+    var depths;
+    if (templateSpec.depths) {
+      depths = [context];
+    }
+
+    return templateSpec.main.call(container, context, container.helpers, container.partials, data, depths);
   };
 
   ret._setup = function(options) {
@@ -134,35 +146,23 @@ export function template(templateSpec, env) {
   };
 
   ret._child = function(i) {
+    if (templateSpec.depth) {
+      throw new Exception('_child can not be used with depthed methods');
+    }
+
     return container.programWithDepth(i);
   };
   return ret;
 }
 
-export function programWithDepth(i, data /*, $depth */) {
-  /*jshint -W040 */
-  var args = Array.prototype.slice.call(arguments, 2),
-      container = this,
-      fn = container.fn(i);
-
-  var prog = function(context, options) {
-    options = options || {};
-
-    return fn.apply(container, [context, container.helpers, container.partials, options.data || data].concat(args));
-  };
-  prog.program = i;
-  prog.depth = args.length;
-  return prog;
-}
-
-export function program(container, i, fn, data) {
+export function program(container, i, fn, data, depths) {
   var prog = function(context, options) {
     options = options || {};
 
-    return fn.call(container, context, container.helpers, container.partials, options.data || data);
+    return fn.call(container, context, container.helpers, container.partials, options.data || data, depths && [context].concat(depths));
   };
   prog.program = i;
-  prog.depth = 0;
+  prog.depth = depths ? depths.length : 0;
   return prog;
 }
 
diff --git a/spec/blocks.js b/spec/blocks.js
index c57a67eee..a13cce2a4 100644
--- a/spec/blocks.js
+++ b/spec/blocks.js
@@ -94,4 +94,25 @@ describe('blocks', function() {
         'No people\n');
     });
   });
+
+  describe('compat mode', function() {
+    it("block with deep recursive lookup lookup", function() {
+      var string = "{{#outer}}Goodbye {{#inner}}cruel {{omg}}{{/inner}}{{/outer}}";
+      var hash = {omg: "OMG!", outer: [{ inner: [{ text: "goodbye" }] }] };
+
+      shouldCompileTo(string, [hash, undefined, undefined, true], "Goodbye cruel OMG!");
+    });
+    it("block with deep recursive pathed lookup", function() {
+      var string = "{{#outer}}Goodbye {{#inner}}cruel {{omg.yes}}{{/inner}}{{/outer}}";
+      var hash = {omg: {yes: "OMG!"}, outer: [{ inner: [{ yes: 'no', text: "goodbye" }] }] };
+
+      shouldCompileTo(string, [hash, undefined, undefined, true], "Goodbye cruel OMG!");
+    });
+    it("block with missed recursive lookup", function() {
+      var string = "{{#outer}}Goodbye {{#inner}}cruel {{omg.yes}}{{/inner}}{{/outer}}";
+      var hash = {omg: {no: "OMG!"}, outer: [{ inner: [{ yes: 'no', text: "goodbye" }] }] };
+
+      shouldCompileTo(string, [hash, undefined, undefined, true], "Goodbye cruel ");
+    });
+  });
 });
diff --git a/spec/env/common.js b/spec/env/common.js
index 03eef93e2..a603fc0ef 100644
--- a/spec/env/common.js
+++ b/spec/env/common.js
@@ -17,7 +17,7 @@ global.compileWithPartials = function(string, hashOrArray, partials) {
   if(Object.prototype.toString.call(hashOrArray) === "[object Array]") {
     ary = [];
     ary.push(hashOrArray[0]);
-    ary.push({ helpers: hashOrArray[1], partials: hashOrArray[2], compat: hashOrArray[3] });
+    ary.push({ helpers: hashOrArray[1], partials: hashOrArray[2] });
     options = {compat: hashOrArray[3]};
   } else {
     ary = [hashOrArray];