diff --git a/applications/test/dictionary/testDict b/applications/test/dictionary/testDict
index af6c565f6f..9aee1a35bf 100644
--- a/applications/test/dictionary/testDict
+++ b/applications/test/dictionary/testDict
@@ -38,6 +38,15 @@ inactive
     type            zeroGradient;
 }
 
+
+// Indirection
+varType active;
+
+// Indirection of values
+x 5;
+varName x;
+
+
 boundaryField
 {
     Default_Boundary_Region
@@ -52,7 +61,7 @@ boundaryField
     inlet_5  "a primitiveEntry is squashed by a directory entry";
     inlet_5  { $inactive }
     inlet_6  { $.inactive }     // Test scoping
-    inlet_7  { $inactive }
+    inlet_7  { ${inactive}}     // Test variable expansion
     inlet_8  { $inactive }
 
     #include "testDictInc"
@@ -63,14 +72,14 @@ boundaryField
         inletValue      $internalField;
         value           #include "value";
         // error           #remove self;
-        x               5;
+        x               ${${varName}};  // Test indirection/recursive expansion
         y               6;
     }
 
     // this should have no effect
     #remove inactive
 
-    inlet_7  { $active }
+    inlet_7  { ${${varType}}}   // Test indirection/recursive expansion
     #inputMode overwrite
     inlet_8  { $active }
 }
diff --git a/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.C b/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.C
index 04ed33f224..a3161386e6 100644
--- a/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.C
+++ b/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.C
@@ -2,7 +2,7 @@
   =========                 |
   \\      /  F ield         | OpenFOAM: The Open Source CFD Toolbox
    \\    /   O peration     |
-    \\  /    A nd           | Copyright (C) 2011 OpenFOAM Foundation
+    \\  /    A nd           | Copyright (C) 2011-2012 OpenFOAM Foundation
      \\/     M anipulation  |
 -------------------------------------------------------------------------------
 License
@@ -27,8 +27,6 @@ License
 #include "int.H"
 #include "token.H"
 #include <cctype>
-#include "IOstreams.H"
-
 
 // * * * * * * * * * * * * * * Member Functions  * * * * * * * * * * * * * * //
 
@@ -243,6 +241,44 @@ Foam::Istream& Foam::ISstream::read(token& t)
             }
         }
 
+        case '$':
+        {
+            // Look ahead
+            char nextC;
+            if (read(nextC).bad())
+            {
+                // Return $ as word
+                t = token(word(c));
+                return *this;
+            }
+            else if (nextC == token::BEGIN_BLOCK)
+            {
+                putback(nextC);
+                putback(c);
+
+                string* sPtr = new string;
+
+                if (readVariable(*sPtr).bad())
+                {
+                    delete sPtr;
+                    t.setBad();
+                }
+                else
+                {
+                    t = sPtr;
+                    t.type() = token::STRING;
+                }
+                return *this;
+            }
+            else
+            {
+                putback(nextC);
+                putback(c);
+                readWordToken(t);
+                return *this;
+            }
+        }
+
         // Number: integer or floating point
         //
         // ideally match the equivalent of this regular expression
@@ -549,6 +585,127 @@ Foam::Istream& Foam::ISstream::read(string& str)
 }
 
 
+// Special handling of '{' in variables
+Foam::Istream& Foam::ISstream::readVariable(string& str)
+{
+    static const int maxLen = 1024;
+    static const int errLen = 80; // truncate error message for readability
+    static char buf[maxLen];
+
+    register int nChar = 0;
+    register int blockCount = 0;
+    char c;
+
+    if (!get(c) || c != '$')
+    {
+        FatalIOErrorIn("ISstream::readVariable(string&)", *this)
+            << "invalid first character found : " << c
+            << exit(FatalIOError);
+    }
+
+    buf[nChar++] = c;
+
+    // Read next character to see if '{'
+    if (get(c) && c == token::BEGIN_BLOCK)
+    {
+        // Read, counting brackets
+        buf[nChar++] = c;
+
+        while
+        (
+            get(c)
+         && (
+                c == token::BEGIN_BLOCK
+             || c == token::END_BLOCK
+             || word::valid(c)
+            )
+        )
+        {
+            buf[nChar++] = c;
+            if (nChar == maxLen)
+            {
+                buf[errLen] = '\0';
+
+                FatalIOErrorIn("ISstream::readVariable(string&)", *this)
+                    << "word '" << buf << "...'\n"
+                    << "    is too long (max. " << maxLen << " characters)"
+                    << exit(FatalIOError);
+
+                return *this;
+            }
+
+            if (c == token::BEGIN_BLOCK)
+            {
+                blockCount++;
+            }
+            else if (c == token::END_BLOCK)
+            {
+                if (blockCount)
+                {
+                    blockCount--;
+                }
+                else
+                {
+                    break;
+                }
+            }
+        }
+    }
+    else
+    {
+        buf[nChar++] = c;
+
+        while (get(c) && word::valid(c))
+        {
+            buf[nChar++] = c;
+            if (nChar == maxLen)
+            {
+                buf[errLen] = '\0';
+
+                FatalIOErrorIn("ISstream::readVariable(string&)", *this)
+                    << "word '" << buf << "...'\n"
+                    << "    is too long (max. " << maxLen << " characters)"
+                    << exit(FatalIOError);
+
+                return *this;
+            }
+        }
+    }
+
+    // we could probably skip this check
+    if (bad())
+    {
+        buf[errLen] = buf[nChar] = '\0';
+
+        FatalIOErrorIn("ISstream::readVariable(string&)", *this)
+            << "problem while reading string '" << buf << "...' after "
+            << nChar << " characters\n"
+            << exit(FatalIOError);
+
+        return *this;
+    }
+
+    if (nChar == 0)
+    {
+        FatalIOErrorIn("ISstream::readVariable(string&)", *this)
+            << "invalid first character found : " << c
+            << exit(FatalIOError);
+    }
+
+    // done reading
+    buf[nChar] = '\0';
+    str = buf;
+
+    // Note: check if we exited due to '}' or just !word::valid.
+    if (c != token::END_BLOCK)
+    {
+        putback(c);
+    }
+
+    return *this;
+}
+
+
 Foam::Istream& Foam::ISstream::readVerbatim(string& str)
 {
     static const int maxLen = 8000;
diff --git a/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.H b/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.H
index 9e1bb29610..3f6ebb42cd 100644
--- a/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.H
+++ b/src/OpenFOAM/db/IOstreams/Sstreams/ISstream.H
@@ -71,6 +71,8 @@ class ISstream
         //- Read a verbatim string (excluding block delimiters).
         Istream& readVerbatim(string&);
 
+        //- Read a variable name (includes '{')
+        Istream& readVariable(string&);
 
         //- Disallow default bitwise assignment
         void operator=(const ISstream&);
diff --git a/src/OpenFOAM/db/dictionary/entry/entryIO.C b/src/OpenFOAM/db/dictionary/entry/entryIO.C
index dd16f4e6ed..c958b8f949 100644
--- a/src/OpenFOAM/db/dictionary/entry/entryIO.C
+++ b/src/OpenFOAM/db/dictionary/entry/entryIO.C
@@ -28,6 +28,7 @@ License
 #include "functionEntry.H"
 #include "includeEntry.H"
 #include "inputModeEntry.H"
+#include "stringOps.H"
 
 // * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * //
 
@@ -110,8 +111,19 @@ bool Foam::entry::New(dictionary& parentDict, Istream& is)
         else if
         (
            !disableFunctionEntries
-         && keyword[0] == '$')      // ... Substitution entry
+         && keyword[0] == '$'
+        )                           // ... Substitution entry
         {
+            if (keyword.size() > 2 && keyword[1] == token::BEGIN_BLOCK)
+            {
+                // Recursive substitution mode. Replace between {} with
+                // expansion.
+                string s(keyword(2, keyword.size()-3));
+                // Substitute dictionary and environment variables. Allow
+                // empty substitutions.
+                stringOps::inplaceExpand(s, parentDict, true, true);
+                keyword.std::string::replace(1, keyword.size()-1, s);
+            }
             parentDict.substituteScopedKeyword(keyword);
             return true;
         }
diff --git a/src/OpenFOAM/db/dictionary/functionEntries/includeEntry/includeEntry.C b/src/OpenFOAM/db/dictionary/functionEntries/includeEntry/includeEntry.C
index ee191e4eeb..bf57b9e3c8 100644
--- a/src/OpenFOAM/db/dictionary/functionEntries/includeEntry/includeEntry.C
+++ b/src/OpenFOAM/db/dictionary/functionEntries/includeEntry/includeEntry.C
@@ -74,7 +74,8 @@ Foam::fileName Foam::functionEntries::includeEntry::includeFileName
 )
 {
     fileName fName(is);
-    // Substitute dictionary and environment variables
+    // Substitute dictionary and environment variables. Allow empty
+    // substitutions.
     stringOps::inplaceExpand(fName, dict, true, true);
 
     if (fName.empty() || fName.isAbsolute())
diff --git a/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.C b/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.C
index 1349e66ebf..0566b8f350 100644
--- a/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.C
+++ b/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.C
@@ -26,6 +26,7 @@ License
 #include "primitiveEntry.H"
 #include "dictionary.H"
 #include "OSspecific.H"
+#include "stringOps.H"
 
 // * * * * * * * * * * * * * Private Member Functions  * * * * * * * * * * * //
 
@@ -40,35 +41,52 @@ void Foam::primitiveEntry::append(const UList<token>& varTokens)
 
 bool Foam::primitiveEntry::expandVariable
 (
-    const word& w,
+    const string& w,
     const dictionary& dict
 )
 {
-    word varName = w(1, w.size()-1);
-
-    // lookup the variable name in the given dictionary....
-    // Note: allow wildcards to match? For now disabled since following
-    // would expand internalField to wildcard match and not expected
-    // internalField:
-    //      internalField XXX;
-    //      boundaryField { ".*" {YYY;} movingWall {value $internalField;}
-    const entry* ePtr = dict.lookupScopedEntryPtr(varName, true, false);
-
-    // ...if defined append its tokens into this
-    if (ePtr)
+    if (w.size() > 2 && w[0] == '$' && w[1] == token::BEGIN_BLOCK)
     {
-        append(ePtr->stream());
+        // Recursive substitution mode. Replace between {} with
+        // expansion.
+        string s(w(2, w.size()-3));
+        // Substitute dictionary and environment variables. Allow
+        // empty substitutions.
+        stringOps::inplaceExpand(s, dict, true, true);
+
+        string newW(w);
+        newW.std::string::replace(1, newW.size()-1, s);
+
+        return expandVariable(newW, dict);
     }
     else
     {
-        // not in the dictionary - try an environment variable
-        string envStr = getEnv(varName);
+        string varName = w(1, w.size()-1);
 
-        if (envStr.empty())
+        // lookup the variable name in the given dictionary....
+        // Note: allow wildcards to match? For now disabled since following
+        // would expand internalField to wildcard match and not expected
+        // internalField:
+        //      internalField XXX;
+        //      boundaryField { ".*" {YYY;} movingWall {value $internalField;}
+        const entry* ePtr = dict.lookupScopedEntryPtr(varName, true, false);
+
+        // ...if defined append its tokens into this
+        if (ePtr)
         {
-            return false;
+            append(ePtr->stream());
+        }
+        else
+        {
+            // not in the dictionary - try an environment variable
+            string envStr = getEnv(varName);
+
+            if (envStr.empty())
+            {
+                return false;
+            }
+            append(tokenList(IStringStream('(' + envStr + ')')()));
         }
-        append(tokenList(IStringStream('(' + envStr + ')')()));
     }
     return true;
 }
diff --git a/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.H b/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.H
index 06f680acaf..aa2c2ed36a 100644
--- a/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.H
+++ b/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntry.H
@@ -2,7 +2,7 @@
   =========                 |
   \\      /  F ield         | OpenFOAM: The Open Source CFD Toolbox
    \\    /   O peration     |
-    \\  /    A nd           | Copyright (C) 2011 OpenFOAM Foundation
+    \\  /    A nd           | Copyright (C) 2011-2012 OpenFOAM Foundation
      \\/     M anipulation  |
 -------------------------------------------------------------------------------
 License
@@ -79,7 +79,7 @@ class primitiveEntry
         );
 
         //- Expand the given variable (keyword starts with $)
-        bool expandVariable(const word&, const dictionary&);
+        bool expandVariable(const string&, const dictionary&);
 
         //- Expand the given function (keyword starts with #)
         bool expandFunction
diff --git a/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntryIO.C b/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntryIO.C
index 763981488c..d5626972cc 100644
--- a/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntryIO.C
+++ b/src/OpenFOAM/db/dictionary/primitiveEntry/primitiveEntryIO.C
@@ -55,6 +55,24 @@ void Foam::primitiveEntry::append
             newElmt(tokenIndex()++) = currToken;
         }
     }
+    else if (currToken.isString())
+    {
+        const string& w = currToken.stringToken();
+
+        if
+        (
+            disableFunctionEntries
+         || w.size() <= 3
+         || !(
+                w[0] == '$'
+             && w[1] == token::BEGIN_BLOCK
+             && expandVariable(w, dict)
+            )
+        )
+        {
+            newElmt(tokenIndex()++) = currToken;
+        }
+    }
     else
     {
         newElmt(tokenIndex()++) = currToken;