diff --git a/django/template/loader_tags.py b/django/template/loader_tags.py
index f847ea123f..7f22f207b6 100644
--- a/django/template/loader_tags.py
+++ b/django/template/loader_tags.py
@@ -50,6 +50,8 @@ class ExtendsNode(Node):
             if self.parent_name_expr:
                 error_msg += " Got this from the %r variable." % self.parent_name_expr #TODO nice repr.
             raise TemplateSyntaxError, error_msg
+        if hasattr(parent, 'render'):
+            return parent
         try:
             source, origin = find_template_source(parent, self.template_dirs)
         except TemplateDoesNotExist:
@@ -137,8 +139,9 @@ def do_extends(parser, token):
 
     This tag may be used in two ways: ``{% extends "base" %}`` (with quotes)
     uses the literal value "base" as the name of the parent template to extend,
-    or ``{% extends variable %}`` uses the value of ``variable`` as the name
-    of the parent template to extend.
+    or ``{% extends variable %}`` uses the value of ``variable`` as either the
+    name of the parent template to extend (if it evaluates to a string,) or as
+    the parent tempate itelf (if it evaluates to a Template object).
     """
     bits = token.contents.split()
     if len(bits) != 2:
diff --git a/docs/templates.txt b/docs/templates.txt
index 6117bf7b84..d33575f7fd 100644
--- a/docs/templates.txt
+++ b/docs/templates.txt
@@ -363,10 +363,14 @@ extends
 
 Signal that this template extends a parent template.
 
-This tag may be used in two ways: ``{% extends "base.html" %}`` (with quotes)
-uses the literal value "base.html" as the name of the parent template to
-extend, or ``{% extends variable %}`` uses the value of ``variable`` as the
-name of the parent template to extend.
+This tag may be used in two ways: 
+
+   * ``{% extends "base.html" %}`` (with quotes) uses the literal value
+     "base.html" as the name of the parent template to extend
+
+   * ``{% extends variable %}`` uses the value of ``variable`` as either the
+     name of the parent template to extend (if it evaluates to a string,) or
+     as the parent tempate itelf (if it evaluates to a Template object).
 
 See `Template inheritance`_ for more information.
 
diff --git a/tests/othertests/templates.py b/tests/othertests/templates.py
index 3d23d8123b..9975f3b05c 100644
--- a/tests/othertests/templates.py
+++ b/tests/othertests/templates.py
@@ -410,6 +410,12 @@ TEMPLATE_TESTS = {
     # Three-level inheritance with {{ block.super }} from parent and grandparent
     'inheritance23': ("{% extends 'inheritance20' %}{% block first %}{{ block.super }}b{% endblock %}", {}, '1_ab3_'),
 
+    # Inheritance from local context without use of template loader
+    'inheritance24': ("{% extends context_template %}{% block first %}2{% endblock %}{% block second %}4{% endblock %}", {'context_template': template.Template("1{% block first %}_{% endblock %}3{% block second %}_{% endblock %}")}, '1234'),
+
+    # Inheritance from local context with variable parent template
+    'inheritance25': ("{% extends context_template.1 %}{% block first %}2{% endblock %}{% block second %}4{% endblock %}", {'context_template': [template.Template("Wrong"), template.Template("1{% block first %}_{% endblock %}3{% block second %}_{% endblock %}")]}, '1234'),
+
     ### I18N ##################################################################
 
     # {% spaceless %} tag