diff --git a/phpBB/includes/template/filter.php b/phpBB/includes/template/filter.php
index f73ad28ba1..9e8ad2fef0 100644
--- a/phpBB/includes/template/filter.php
+++ b/phpBB/includes/template/filter.php
@@ -843,7 +843,18 @@ class phpbb_template_filter extends php_user_filter
 			return 'unset(' . (($match[1]) ? $this->generate_block_data_ref(substr($match[1], 0, -1), true, true) . '[\'' . $match[2] . '\']' : '$_tpldata[\'DEFINE\'][\'.\'][\'' . $match[2] . '\']') . ');';
 		}
 
-		$parsed_statement = implode(' ', $this->compile_expression($match[3]));
+		/*
+		* Define tags that contain template variables (enclosed in curly brackets)
+		* need to be treated differently.
+		*/
+		if (substr($match[3], 1, 1) == '{' && substr($match[3], -2, 1) == '}')
+		{
+			$parsed_statement = implode(' ', $this->compile_expression(substr($match[3], 2, -2)));
+		}
+		else
+		{
+			$parsed_statement = implode(' ', $this->compile_expression($match[3]));
+		}
 
 		return (($match[1]) ? $this->generate_block_data_ref(substr($match[1], 0, -1), true, true) . '[\'' . $match[2] . '\']' : '$_tpldata[\'DEFINE\'][\'.\'][\'' . $match[2] . '\']') . ' = ' . $parsed_statement . ';';
 	}
diff --git a/tests/template/template_test.php b/tests/template/template_test.php
index f43157775a..56cc7a9de5 100644
--- a/tests/template/template_test.php
+++ b/tests/template/template_test.php
@@ -197,8 +197,6 @@ class phpbb_template_template_test extends phpbb_template_template_test_case
 				array('loop'),
 				'',
 			),
-			/* Currently fail on develop:
-			http://tracker.phpbb.com/browse/PHPBB3-11323
 			array(
 				'include_define_variable.html',
 				array('VARIABLE' => 'variable.html'),
@@ -213,7 +211,6 @@ class phpbb_template_template_test extends phpbb_template_template_test_case
 				array(),
 				'value',
 			),
-			*/
 			/* no top level nested loops
 			array(
 				'loop_vars.html',