diff --git a/platform/lang-api/src/com/intellij/psi/codeStyle/CodeStyleSettings.java b/platform/lang-api/src/com/intellij/psi/codeStyle/CodeStyleSettings.java
index a3a4de778af6..c6c2b7572eac 100644
--- a/platform/lang-api/src/com/intellij/psi/codeStyle/CodeStyleSettings.java
+++ b/platform/lang-api/src/com/intellij/psi/codeStyle/CodeStyleSettings.java
@@ -1095,6 +1095,11 @@ public class CodeStyleSettings implements Cloneable, JDOMExternalizable {
 
 
   // ---------------------------------- XML formatting options -------------------------
+
+  public final static int WS_AROUND_CDATA_PRESERVE = 0;
+  public final static int WS_AROUND_CDATA_NONE = 1;
+  public final static int WS_AROUND_CDATA_NEW_LINES = 2;
+
   public boolean XML_KEEP_WHITESPACES = false;
   public int XML_ATTRIBUTE_WRAP = WRAP_AS_NEEDED;
   public int XML_TEXT_WRAP = WRAP_AS_NEEDED;
@@ -1110,6 +1115,9 @@ public class CodeStyleSettings implements Cloneable, JDOMExternalizable {
   public boolean XML_SPACE_AFTER_TAG_NAME = false;
   public boolean XML_SPACE_INSIDE_EMPTY_TAG = false;
 
+  public boolean XML_KEEP_WHITE_SPACES_INSIDE_CDATA = false;
+  public int XML_WHITE_SPACE_AROUND_CDATA = WS_AROUND_CDATA_PRESERVE;
+
   // ---------------------------------------------------------------------------------------
 
   // ---------------------------------- HTML formatting options -------------------------
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/AbstractSyntheticBlock.java b/xml/impl/src/com/intellij/psi/formatter/xml/AbstractSyntheticBlock.java
index 5bb57c207c35..0eb42a2f0fc0 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/AbstractSyntheticBlock.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/AbstractSyntheticBlock.java
@@ -198,6 +198,11 @@ public abstract class AbstractSyntheticBlock implements Block {
     return node != null && node.getElementType() == XmlElementType.XML_CDATA;
   }
 
+  public boolean containsCDATA() {
+    return myStartTreeNode.getElementType() == XmlElementType.XML_CDATA_START &&
+           myEndTreeNode.getElementType() == XmlElementType.XML_CDATA_END;
+  }
+
   public boolean endsWithCDATA() {
     return isCDATA(myStartTreeNode.getLastChildNode());
   }
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/AbstractXmlBlock.java b/xml/impl/src/com/intellij/psi/formatter/xml/AbstractXmlBlock.java
index e21f7f74d3c2..fd0f52fd503f 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/AbstractXmlBlock.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/AbstractXmlBlock.java
@@ -414,4 +414,13 @@ public abstract class AbstractXmlBlock extends AbstractBlock {
 
     return false;
   }
+
+  public boolean isCDATAStart() {
+    return myNode.getElementType() == XmlElementType.XML_CDATA_START;
+  }
+
+  public boolean isCDATAEnd() {
+    return myNode.getElementType() == XmlElementType.XML_CDATA_END;
+  }
+
 }
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/HtmlPolicy.java b/xml/impl/src/com/intellij/psi/formatter/xml/HtmlPolicy.java
index f3e35acaff1d..be96c21df13d 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/HtmlPolicy.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/HtmlPolicy.java
@@ -211,6 +211,16 @@ public class HtmlPolicy extends XmlFormattingPolicy {
     return mySettings.HTML_KEEP_LINE_BREAKS_IN_TEXT;
   }
 
+  @Override
+  public boolean getKeepWhiteSpacesInsideCDATA() {
+    return true;
+  }
+
+  @Override
+  public int getWhiteSpaceAroundCDATAOption() {
+    return CodeStyleSettings.WS_AROUND_CDATA_PRESERVE;
+  }
+
   public CodeStyleSettings getSettings() {
     return mySettings;
   }
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/SyntheticBlock.java b/xml/impl/src/com/intellij/psi/formatter/xml/SyntheticBlock.java
index af5056555479..b4f878dd815b 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/SyntheticBlock.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/SyntheticBlock.java
@@ -62,6 +62,19 @@ public class SyntheticBlock extends AbstractSyntheticBlock implements Block, Rea
     boolean firstIsText = isTextFragment(node1);
     boolean secondIsText = isTextFragment(node2);
 
+    if (type1 == XmlElementType.XML_CDATA_START || type2 == XmlElementType.XML_CDATA_END) {
+      if (myXmlFormattingPolicy.getKeepWhiteSpacesInsideCDATA()) {
+        return Spacing.getReadOnlySpacing();
+      }
+      if (type1 == XmlElementType.XML_CDATA_START && type2 == XmlElementType.XML_CDATA_END) {
+        return Spacing.createSpacing(0, 0, 0, myXmlFormattingPolicy.getShouldKeepLineBreaks(), 0); 
+      }
+      if (type1 == XmlElementType.XML_CDATA_START && child2 instanceof AnotherLanguageBlockWrapper ||
+          type2 == XmlElementType.XML_CDATA_END && child1 instanceof AnotherLanguageBlockWrapper) {
+        return Spacing.createSpacing(0, 0, 1, myXmlFormattingPolicy.getShouldKeepLineBreaks(), 0);
+      }
+    }
+
     boolean firstIsTag = node1.getPsi() instanceof XmlTag && !firstIsText;
     boolean secondIsTag = node2.getPsi() instanceof XmlTag && !secondIsText;
 
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/XmlBlock.java b/xml/impl/src/com/intellij/psi/formatter/xml/XmlBlock.java
index 88701d97e4ea..1686c7f53c12 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/XmlBlock.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/XmlBlock.java
@@ -56,7 +56,7 @@ public class XmlBlock extends AbstractXmlBlock {
 
   @NotNull
   public TextRange getTextRange() {
-    if (myTextRange != null) {
+    if (myTextRange != null && !(isCDATAStart() || isCDATAEnd())) {
       return myTextRange;
     }
     else {
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/XmlFormattingPolicy.java b/xml/impl/src/com/intellij/psi/formatter/xml/XmlFormattingPolicy.java
index c12815d7fa49..44ba07f43aff 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/XmlFormattingPolicy.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/XmlFormattingPolicy.java
@@ -115,6 +115,10 @@ public abstract class XmlFormattingPolicy {
 
   public abstract boolean getShouldKeepLineBreaksInText();
 
+  public abstract boolean getKeepWhiteSpacesInsideCDATA();
+
+  public abstract int getWhiteSpaceAroundCDATAOption();
+
   public abstract CodeStyleSettings getSettings();
 
   public boolean processJsp() {
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/XmlPolicy.java b/xml/impl/src/com/intellij/psi/formatter/xml/XmlPolicy.java
index aa74224778be..0ee2bf668eb6 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/XmlPolicy.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/XmlPolicy.java
@@ -102,6 +102,16 @@ public class XmlPolicy extends XmlFormattingPolicy{
     return mySettings.XML_KEEP_LINE_BREAKS_IN_TEXT;
   }
 
+  @Override
+  public boolean getKeepWhiteSpacesInsideCDATA() {
+    return mySettings.XML_KEEP_WHITE_SPACES_INSIDE_CDATA;
+  }
+
+  @Override
+  public int getWhiteSpaceAroundCDATAOption() {
+    return mySettings.XML_WHITE_SPACE_AROUND_CDATA;
+  }
+
   public CodeStyleSettings getSettings() {
     return mySettings;
   }
diff --git a/xml/impl/src/com/intellij/psi/formatter/xml/XmlTagBlock.java b/xml/impl/src/com/intellij/psi/formatter/xml/XmlTagBlock.java
index 9370145ae91b..6ece1da7a721 100644
--- a/xml/impl/src/com/intellij/psi/formatter/xml/XmlTagBlock.java
+++ b/xml/impl/src/com/intellij/psi/formatter/xml/XmlTagBlock.java
@@ -18,6 +18,7 @@ package com.intellij.psi.formatter.xml;
 import com.intellij.formatting.*;
 import com.intellij.lang.ASTNode;
 import com.intellij.psi.PsiElement;
+import com.intellij.psi.codeStyle.CodeStyleSettings;
 import com.intellij.psi.formatter.FormatterUtil;
 import com.intellij.psi.tree.IElementType;
 import com.intellij.psi.xml.XmlElementType;
@@ -206,6 +207,24 @@ public class XmlTagBlock extends AbstractXmlBlock{
       return Spacing.getReadOnlySpacing();
     }
 
+    if (syntheticBlock1.containsCDATA() && syntheticBlock2.isTagDescription()
+        || syntheticBlock1.isTagDescription() && syntheticBlock2.containsCDATA()) {
+      int lineFeeds = 0;
+      switch(myXmlFormattingPolicy.getWhiteSpaceAroundCDATAOption()) {
+        case CodeStyleSettings.WS_AROUND_CDATA_NONE:
+          break;
+        case CodeStyleSettings.WS_AROUND_CDATA_NEW_LINES:
+          lineFeeds = 1;
+          break;
+        case CodeStyleSettings.WS_AROUND_CDATA_PRESERVE:
+          return Spacing.getReadOnlySpacing();
+        default:
+          assert false : "Unexpected whitespace around CDATA code style option.";
+      }
+      return Spacing.createSpacing(0, 0, lineFeeds, myXmlFormattingPolicy.getShouldKeepLineBreaks(),
+                                   myXmlFormattingPolicy.getKeepBlankLines());
+    }
+
     if (syntheticBlock2.isJspTextBlock() || syntheticBlock1.isJspTextBlock()) {
       return Spacing.createSafeSpacing(myXmlFormattingPolicy.getShouldKeepLineBreaks(), myXmlFormattingPolicy.getKeepBlankLines());
     }
diff --git a/xml/impl/src/com/intellij/psi/impl/source/xml/XmlTextImpl.java b/xml/impl/src/com/intellij/psi/impl/source/xml/XmlTextImpl.java
index ff759239a353..fb627d5bf548 100644
--- a/xml/impl/src/com/intellij/psi/impl/source/xml/XmlTextImpl.java
+++ b/xml/impl/src/com/intellij/psi/impl/source/xml/XmlTextImpl.java
@@ -366,15 +366,23 @@ public class XmlTextImpl extends XmlElementImpl implements XmlText, PsiLanguageI
   public TextRange getCDATAInterior() {
     PsiElement[] elements = getChildren();
     int start = 0;
-    if (elements.length != 0 && elements[0].getNode().getElementType() == XmlElementType.XML_CDATA) {
-      ASTNode startNode = elements[0].getNode().findChildByType(XmlTokenType.XML_CDATA_START);
+    int first = 0;
+    if (elements.length > 0 && elements[0] instanceof PsiWhiteSpace) {
+      first ++;
+    }
+    if (elements.length > first && elements[first].getNode().getElementType() == XmlElementType.XML_CDATA) {
+      ASTNode startNode = elements[first].getNode().findChildByType(XmlTokenType.XML_CDATA_START);
       if (startNode != null) {
         start = startNode.getTextRange().getEndOffset() - getTextRange().getStartOffset();
       }
     }
     int end = getTextLength();
-    if (elements.length != 0 && elements[elements.length-1].getNode().getElementType() == XmlElementType.XML_CDATA) {
-      ASTNode startNode = elements[elements.length-1].getNode().findChildByType(XmlTokenType.XML_CDATA_END);
+    int last = elements.length - 1;
+    if (last > 0 && elements[last] instanceof PsiWhiteSpace) {
+      last --;
+    }
+    if (last >= 0 && elements[last].getNode().getElementType() == XmlElementType.XML_CDATA) {
+      ASTNode startNode = elements[last].getNode().findChildByType(XmlTokenType.XML_CDATA_END);
       if (startNode != null) {
         end = startNode.getTextRange().getStartOffset() - getTextRange().getStartOffset();
       }