diff --git a/CHANGELOG.md b/CHANGELOG.md
index 33e6fae47..8a80c2907 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -2,8 +2,8 @@
 
 ## [Unreleased]
 
-### Added
-- Your feature here!
+### Fixed
+- Fixed resolving of inline partials and partial blocks with failover content (#106, #135)
 
 ## [1.6.0] - 2017-09-01 ##
 
diff --git a/index.js b/index.js
index cdb05560f..afbd08489 100644
--- a/index.js
+++ b/index.js
@@ -136,6 +136,26 @@ module.exports = function(source) {
 
   hb.JavaScriptCompiler = MyJavaScriptCompiler;
 
+  // Define custom visitor for further template AST parsing
+  var Visitor = handlebars.Visitor;
+  function InternalBlocksVisitor() {
+    this.partialBlocks = [];
+    this.inlineBlocks = [];
+  }
+
+  InternalBlocksVisitor.prototype = new Visitor();
+  InternalBlocksVisitor.prototype.PartialBlockStatement = function(partial) {
+    this.partialBlocks.push(partial.name.original);
+    Visitor.prototype.PartialBlockStatement.call(this, partial);
+  };
+  InternalBlocksVisitor.prototype.DecoratorBlock = function(partial) {
+    if (partial.path.original === 'inline') {
+      this.inlineBlocks.push(partial.params[0].value);
+    }
+
+    Visitor.prototype.DecoratorBlock.call(this, partial);
+  };
+
   // This is an async loader
   var loaderAsyncCallback = this.async();
 
@@ -167,16 +187,23 @@ module.exports = function(source) {
     // Precompile template
     var template = '';
 
+    // AST holder for current template
+    var ast = null;
+
+    // Compile options
+    var opts = assign({
+      knownHelpersOnly: !firstCompile,
+      // TODO: Remove these in next major release
+      preventIndent: !!query.preventIndent,
+      compat: !!query.compat
+    }, precompileOptions, {
+      knownHelpers: knownHelpers,
+    });
+
     try {
       if (source) {
-        template = hb.precompile(source, assign({
-          knownHelpersOnly: !firstCompile,
-          // TODO: Remove these in next major release
-          preventIndent: !!query.preventIndent,
-          compat: !!query.compat
-        }, precompileOptions, {
-          knownHelpers: knownHelpers,
-        }));
+        ast = hb.parse(source, opts);
+        template = hb.precompile(ast, opts);
       }
     } catch (err) {
       return loaderAsyncCallback(err);
@@ -286,7 +313,19 @@ module.exports = function(source) {
       } else {
         partialResolver(request, function(err, resolved){
           if(err) {
-            return partialCallback(err);
+            var visitor = new InternalBlocksVisitor();
+
+            visitor.accept(ast);
+
+            if (
+              visitor.inlineBlocks.indexOf(request) !== -1 ||
+              visitor.partialBlocks.indexOf(request) !== -1
+            ) {
+              return partialCallback();
+            } else {
+              return partialCallback(err);
+            }
+
           }
           foundPartials[partial] = resolved;
           needRecompile = true;
diff --git a/test/test.js b/test/test.js
index faba1e36e..600bfcf07 100644
--- a/test/test.js
+++ b/test/test.js
@@ -542,4 +542,18 @@ describe('handlebars-loader', function () {
     });
   });
 
+  it('should use failover content of the partial block if it refers to non-existent partial', function (done) {
+    testTemplate(loader, './with-partial-block.handlebars', {}, function (err, output, require) {
+      assert.ok(output, 'generated output');
+      done();
+    });
+  });
+
+  it('should recognize and render inline partials', function (done) {
+    testTemplate(loader, './with-inline-partial.handlebars', {}, function (err, output, require) {
+      assert.ok(output, 'generated output');
+      done();
+    });
+  });
+
 });
diff --git a/test/with-inline-partial.handlebars b/test/with-inline-partial.handlebars
new file mode 100644
index 000000000..f5049d153
--- /dev/null
+++ b/test/with-inline-partial.handlebars
@@ -0,0 +1,5 @@
+{{#*inline "printFoo"}}
+  Foo
+{{/inline}}
+
+{{> printFoo}}
\ No newline at end of file
diff --git a/test/with-partial-block.handlebars b/test/with-partial-block.handlebars
new file mode 100644
index 000000000..346929497
--- /dev/null
+++ b/test/with-partial-block.handlebars
@@ -0,0 +1,3 @@
+{{#> non-existent}}
+  <div>Failover</div>
+{{/non-existent}}
\ No newline at end of file