diff --git a/lib/tests/weblib_test.php b/lib/tests/weblib_test.php
index 1cdd34b6db0..ab5f019c970 100644
--- a/lib/tests/weblib_test.php
+++ b/lib/tests/weblib_test.php
@@ -117,15 +117,41 @@ class core_weblib_testcase extends advanced_testcase {
     }
 
     public function test_highlight() {
-        $this->assertSame('This is <span class="highlight">good</span>', highlight('good', 'This is good'));
-        $this->assertSame('<span class="highlight">span</span>', highlight('SpaN', 'span'));
-        $this->assertSame('<span class="highlight">SpaN</span>', highlight('span', 'SpaN'));
-        $this->assertSame('<span><span class="highlight">span</span></span>', highlight('span', '<span>span</span>'));
-        $this->assertSame('He <span class="highlight">is</span> <span class="highlight">good</span>', highlight('good is', 'He is good'));
-        $this->assertSame('This is <span class="highlight">good</span>', highlight('+good', 'This is good'));
-        $this->assertSame('This is good', highlight('-good', 'This is good'));
-        $this->assertSame('This is goodness', highlight('+good', 'This is goodness'));
-        $this->assertSame('This is <span class="highlight">good</span>ness', highlight('good', 'This is goodness'));
+        $this->assertSame('This is <span class="highlight">good</span>',
+                highlight('good', 'This is good'));
+
+        $this->assertSame('<span class="highlight">span</span>',
+                highlight('SpaN', 'span'));
+
+        $this->assertSame('<span class="highlight">SpaN</span>',
+                highlight('span', 'SpaN'));
+
+        $this->assertSame('<span><span class="highlight">span</span></span>',
+                highlight('span', '<span>span</span>'));
+
+        $this->assertSame('He <span class="highlight">is</span> <span class="highlight">good</span>',
+                highlight('good is', 'He is good'));
+
+        $this->assertSame('This is <span class="highlight">good</span>',
+                highlight('+good', 'This is good'));
+
+        $this->assertSame('This is good',
+                highlight('-good', 'This is good'));
+
+        $this->assertSame('This is goodness',
+                highlight('+good', 'This is goodness'));
+
+        $this->assertSame('This is <span class="highlight">good</span>ness',
+                highlight('good', 'This is goodness'));
+
+        $this->assertSame('<p><b>test</b> <b>1</b></p><p><b>1</b></p>',
+                highlight('test 1', '<p>test 1</p><p>1</p>', false, '<b>', '</b>'));
+
+        $this->assertSame('<p><b>test</b> <b>1</b></p><p><b>1</b></p>',
+                    highlight('test +1', '<p>test 1</p><p>1</p>', false, '<b>', '</b>'));
+
+        $this->assertSame('<p><b>test</b> 1</p><p>1</p>',
+                    highlight('test -1', '<p>test 1</p><p>1</p>', false, '<b>', '</b>'));
     }
 
     public function test_replace_ampersands() {
diff --git a/lib/weblib.php b/lib/weblib.php
index f2a6f153ee5..abeb2050fc3 100644
--- a/lib/weblib.php
+++ b/lib/weblib.php
@@ -1936,24 +1936,23 @@ function highlight($needle, $haystack, $matchcase = false,
         return $haystack;
     }
 
-    // Find all the HTML tags in the input, and store them in a placeholders array..
-    $placeholders = array();
-    $matches = array();
-    preg_match_all('/<[^>]*>/', $haystack, $matches);
-    foreach (array_unique($matches[0]) as $key => $htmltag) {
-        $placeholders['<|' . $key . '|>'] = $htmltag;
+    // Split the string into HTML tags and real content.
+    $chunks = preg_split('/((?:<[^>]*>)+)/', $haystack, -1, PREG_SPLIT_DELIM_CAPTURE);
+
+    // We have an array of alternating blocks of text, then HTML tags, then text, ...
+    // Loop through replacing search terms in the text, and leaving the HTML unchanged.
+    $ishtmlchunk = false;
+    $result = '';
+    foreach ($chunks as $chunk) {
+        if ($ishtmlchunk) {
+            $result .= $chunk;
+        } else {
+            $result .= preg_replace($regexp, $prefix . '$1' . $suffix, $chunk);
+        }
+        $ishtmlchunk = !$ishtmlchunk;
     }
 
-    // In $hastack, replace each HTML tag with the corresponding placeholder.
-    $haystack = str_replace($placeholders, array_keys($placeholders), $haystack);
-
-    // In the resulting string, Do the highlighting.
-    $haystack = preg_replace($regexp, $prefix . '$1' . $suffix, $haystack);
-
-    // Turn the placeholders back into HTML tags.
-    $haystack = str_replace(array_keys($placeholders), $placeholders, $haystack);
-
-    return $haystack;
+    return $result;
 }
 
 /**