diff --git a/CHANGELOG.md b/CHANGELOG.md
index 2fce164b..4152d6d2 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,3 +1,6 @@
+## 1.3.2
+ * Fix: `<form>` processing in `<template>` (GH [#40](https://github.com/inikulin/parse5/issues/40))
+
 ## 1.3.1
  * Fix: text node in `<template>` serialization problem with custom tree adapter (GH [#38](https://github.com/inikulin/parse5/issues/38))
 
diff --git a/lib/tree_construction/parser.js b/lib/tree_construction/parser.js
index 42cf8e15..b291a3bf 100644
--- a/lib/tree_construction/parser.js
+++ b/lib/tree_construction/parser.js
@@ -1814,7 +1814,12 @@ function formEndTagInBody(p, token) {
 
     if ((formElement || inTemplate) && p.openElements.hasInScope($.FORM)) {
         p.openElements.generateImpliedEndTags();
-        p.openElements.remove(formElement);
+
+        if (inTemplate)
+            p.openElements.popUntilTagNamePopped($.FORM);
+
+        else
+            p.openElements.remove(formElement);
     }
 }
 
diff --git a/package.json b/package.json
index 2154c40a..12d7c199 100644
--- a/package.json
+++ b/package.json
@@ -1,7 +1,7 @@
 {
   "name": "parse5",
   "description": "WHATWG HTML5 specification-compliant, fast and ready for production HTML parsing/serialization toolset for Node.",
-  "version": "1.3.1",
+  "version": "1.3.2",
   "author": "Ivan Nikulin <ifaaan@gmail.com> (https://github.com/inikulin)",
   "contributors": [
     "Sebastian Mayr <sebmaster16@gmail.com> (http://blog.smayr.name)",
diff --git a/test/fixtures/parser_test.js b/test/fixtures/parser_test.js
index 1469fe09..bd8bf886 100644
--- a/test/fixtures/parser_test.js
+++ b/test/fixtures/parser_test.js
@@ -1,10 +1,25 @@
 var assert = require('assert'),
     path = require('path'),
     HTML = require('../../lib/common/html'),
-    Parser = require('../../index').Parser,
-    TestUtils = require('../test_utils');
+    parse5 = require('../../index'),
+    TestUtils = require('../test_utils'),
+    Parser = parse5.Parser,
+    Serializer = parse5.Serializer;
 
 TestUtils.generateTestsForEachTreeAdapter(module.exports, function (_test, adapterName, treeAdapter) {
+
+    _test['Regression - <form> in <template> (GH-40)'] = function () {
+        var parser = new Parser(treeAdapter),
+            serializer = new Serializer(treeAdapter),
+            src = '<template><form><input name="q"></form><div>second</div></template>',
+            fragment = parser.parseFragment(src),
+            actual = serializer.serialize(fragment);
+
+        assert.strictEqual(actual, src, TestUtils.getStringDiffMsg(actual, src));
+    };
+
+    //html5lib test suite
+    //------------------------------------------------------------------------------
     function getFullTestName(test) {
         return ['Parser - ', test.idx, '.', test.setName, ' - ', test.input].join('');
     }
diff --git a/test/fixtures/serializer_test.js b/test/fixtures/serializer_test.js
index dd6377be..9aa22270 100644
--- a/test/fixtures/serializer_test.js
+++ b/test/fixtures/serializer_test.js
@@ -44,17 +44,17 @@ exports['Regression - SYSTEM-only doctype serialization'] = function () {
 
 exports['Regression - Escaping of doctypes with quotes in them'] = function () {
     var htmlStrs = [
-                '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" ' +
-                '"http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">' +
-                '<html><head></head><body></body></html>',
+            '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" ' +
+            '"http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">' +
+            '<html><head></head><body></body></html>',
 
-                '<!DOCTYPE html PUBLIC \'-//W3C//"DTD" XHTML 1.0 Transitional//EN\' ' +
-                '"http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">' +
-                '<html><head></head><body></body></html>',
+            '<!DOCTYPE html PUBLIC \'-//W3C//"DTD" XHTML 1.0 Transitional//EN\' ' +
+            '"http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">' +
+            '<html><head></head><body></body></html>',
 
-                '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" ' +
-                '\'http://www.w3.org/TR/xhtml1/DTD/"xhtml1-transitional.dtd"\'>' +
-                '<html><head></head><body></body></html>'
+            '<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" ' +
+            '\'http://www.w3.org/TR/xhtml1/DTD/"xhtml1-transitional.dtd"\'>' +
+            '<html><head></head><body></body></html>'
         ],
         parser = new Parser(),
         serializer = new Serializer();
@@ -93,24 +93,24 @@ exports['Regression - new line in <pre> tag'] = function () {
 exports['Options - encodeHtmlEntities'] = function () {
     var testHtmlCases = [
             {
-                options: { encodeHtmlEntities: true },
+                options: {encodeHtmlEntities: true},
                 src: '<!DOCTYPE html><html><head></head><body>&</body></html>',
                 expected: '<!DOCTYPE html><html><head></head><body>&amp;</body></html>'
             },
 
             {
-                options: { encodeHtmlEntities: false },
+                options: {encodeHtmlEntities: false},
                 src: '<!DOCTYPE html><html><head></head><body>&</body></html>',
                 expected: '<!DOCTYPE html><html><head></head><body>&</body></html>'
             },
             {
-                options: { encodeHtmlEntities: true },
+                options: {encodeHtmlEntities: true},
                 src: '<!DOCTYPE html><html><head></head><body><a href="http://example.com?hello=1&world=2"></a></body></html>',
                 expected: '<!DOCTYPE html><html><head></head><body><a href="http://example.com?hello=1&amp;world=2"></a></body></html>'
             },
 
             {
-                options: { encodeHtmlEntities: false },
+                options: {encodeHtmlEntities: false},
                 src: '<!DOCTYPE html><html><head></head><body><a href="http://example.com?hello=1&world=2"></a></body></html>',
                 expected: '<!DOCTYPE html><html><head></head><body><a href="http://example.com?hello=1&world=2"></a></body></html>'
             }
