diff --git a/flow/compiler.js b/flow/compiler.js
index a3dc1c920fd..5c4edeb48c6 100644
--- a/flow/compiler.js
+++ b/flow/compiler.js
@@ -7,6 +7,8 @@ declare type CompilerOptions = {
   canBeLeftOpenTag?: (tag: string) => ?boolean; // check if a tag can be left opened
   isReservedTag?: (tag: string) => ?boolean; // check if a tag is a native for the platform
   preserveWhitespace?: boolean; // preserve whitespace between elements?
+  trimTextWhitespace?: boolean; // trim whitespaces from text nodes?
+  collapseTextWhitespace?: boolean; // collapse multiple whitespaces into one within text nodes?
   optimize?: boolean; // optimize static content?
 
   // web specific
diff --git a/src/compiler/parser/index.js b/src/compiler/parser/index.js
index ba1b726870a..0970f4d6cb0 100644
--- a/src/compiler/parser/index.js
+++ b/src/compiler/parser/index.js
@@ -78,13 +78,16 @@ export function parse (
   delimiters = options.delimiters
 
   const stack = []
-  const preserveWhitespace = options.preserveWhitespace !== false
   let root
   let currentParent
   let inVPre = false
   let inPre = false
   let warned = false
 
+  const preserveWhitespace = options.preserveWhitespace !== false
+  const trimTextWhitespace = options.trimTextWhitespace === true
+  const collapseTextWhitespace = options.collapseTextWhitespace === true
+
   function warnOnce (msg) {
     if (!warned) {
       warned = true
@@ -258,10 +261,27 @@ export function parse (
         return
       }
       const children = currentParent.children
-      text = inPre || text.trim()
-        ? isTextTag(currentParent) ? text : decodeHTMLCached(text)
-        // only preserve whitespace if its not right after a starting tag
-        : preserveWhitespace && children.length ? ' ' : ''
+      if (inPre || text.trim()) {
+        text = isTextTag(currentParent) ? text : decodeHTMLCached(text)
+      } else {
+        text = ''
+      }
+      // disable text optimizations within pre-elements
+      if (!inPre) {
+        if (trimTextWhitespace) {
+          text = text.trim()
+        }
+        if (collapseTextWhitespace) {
+          // replace spaces around newlines with just the newline
+          text = text.replace(/\s*\n\s*/g, '\n')
+          // collapse more than one sequential whitespace into one space
+          text = text.replace(/\s{2,}/g, ' ')
+        }
+      }
+      // only preserve whitespace if its not right after a starting tag
+      if (text === '' && preserveWhitespace && children.length) {
+        text = ' '
+      }
       if (text) {
         let res
         if (!inVPre && text !== ' ' && (res = parseText(text, delimiters))) {
diff --git a/test/unit/modules/compiler/parser.spec.js b/test/unit/modules/compiler/parser.spec.js
index 750e371105f..b859bfd9b36 100644
--- a/test/unit/modules/compiler/parser.spec.js
+++ b/test/unit/modules/compiler/parser.spec.js
@@ -717,4 +717,19 @@ describe('parser', () => {
     expect(ast.children[1].isComment).toBe(true) // parse comment with ASTText
     expect(ast.children[1].text).toBe('comment here')
   })
+
+  it('trims and collapses whitespaces in text nodes when configured to do so', () => {
+    const html = `\t<div>\n\t\tTest 1 <br/>\n\t\t <p>\n\t\t\t Test 2\n\t\t\t Test \t \t 3 \n\t\t</p> \n\t</div>`
+    const options = extend({ preserveWhitespace: false, trimTextWhitespace: true, collapseTextWhitespace: true }, baseOptions)
+    const ast = parse(html, options)
+
+    expect(ast.tag).toBe('div')
+    expect(ast.children.length).toBe(3)
+    expect(ast.children[0].type).toBe(3)
+    expect(ast.children[0].text).toBe('Test 1')
+    expect(ast.children[1].tag).toBe('br')
+    expect(ast.children[2].tag).toBe('p')
+    expect(ast.children[2].children[0].type).toBe(3)
+    expect(ast.children[2].children[0].text).toBe('Test 2\nTest 3')
+  })
 })