diff --git a/bin/ansible b/bin/ansible
index f254eaf3ff9..844004ecc4d 100755
--- a/bin/ansible
+++ b/bin/ansible
@@ -98,11 +98,11 @@ class Cli(object):
 
     # ----------------------------------------------
 
-    def get_polling_runner(self, old_runner, hosts, jid):
+    def get_polling_runner(self, old_runner, jid):
         return ansible.runner.Runner(
             module_name='async_status', module_path=old_runner.module_path,
             module_args="jid=%s" % jid, remote_user=old_runner.remote_user,
-            remote_pass=old_runner.remote_pass, host_list=hosts,
+            remote_pass=old_runner.remote_pass, inventory=old_runner.inventory,
             timeout=old_runner.timeout, forks=old_runner.forks,
             remote_port=old_runner.remote_port, pattern='*', 
             callbacks=self.silent_callbacks, verbose=True,
@@ -138,8 +138,10 @@ class Cli(object):
 
             clock = options.seconds
             while (clock >= 0):
-                polling_runner = self.get_polling_runner(runner, poll_hosts, jid)
+                runner.inventory.restrict_to(poll_hosts)
+                polling_runner = self.get_polling_runner(runner, jid)
                 poll_results = polling_runner.run()
+                runner.inventory.lift_restrictions()
                 if poll_results is None:
                     break
                 for (host, host_result) in poll_results['contacted'].iteritems():
diff --git a/lib/ansible/inventory.py b/lib/ansible/inventory.py
new file mode 100644
index 00000000000..448ef372b04
--- /dev/null
+++ b/lib/ansible/inventory.py
@@ -0,0 +1,189 @@
+# (c) 2012, Michael DeHaan <michael.dehaan@gmail.com>
+#
+# This file is part of Ansible
+#
+# Ansible is free software: you can redistribute it and/or modify
+# it under the terms of the GNU General Public License as published by
+# the Free Software Foundation, either version 3 of the License, or
+# (at your option) any later version.
+#
+# Ansible is distributed in the hope that it will be useful,
+# but WITHOUT ANY WARRANTY; without even the implied warranty of
+# MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+# GNU General Public License for more details.
+#
+# You should have received a copy of the GNU General Public License
+# along with Ansible.  If not, see <http://www.gnu.org/licenses/>.
+
+#############################################
+
+import fnmatch
+import os
+import subprocess
+
+import constants as C
+from ansible import errors
+from ansible import utils
+
+class Inventory(object):
+    """ Host inventory for ansible.
+
+    The inventory is either a simple text file with systems and [groups] of 
+    systems, or a script that will be called with --list or --host.
+    """
+
+    def __init__(self, host_list=C.DEFAULT_HOST_LIST, extra_vars=None):
+
+        self._restriction = None
+
+        if type(host_list) == list:
+            self.host_list = host_list
+            self.groups = dict(ungrouped=host_list)
+            self._is_script = False
+            return
+
+        inventory_file = os.path.expanduser(host_list)
+        if not os.path.exists(inventory_file):
+            raise errors.AnsibleFileNotFound("inventory file not found: %s" % host_list)
+
+        self.inventory_file = os.path.abspath(inventory_file)
+
+        if os.access(self.inventory_file, os.X_OK):
+            self.host_list, self.groups = self._parse_from_script(extra_vars)
+            self._is_script = True
+        else:
+            self.host_list, self.groups = self._parse_from_file()
+            self._is_script = False
+
+    # *****************************************************
+    # Public API
+
+    def list_hosts(self, pattern="all"):
+        """ Return a list of hosts [matching the pattern] """
+        if self._restriction is None:
+            host_list = self.host_list
+        else:
+            host_list = [ h for h in self.host_list if h in self._restriction ]
+        return [ h for h in host_list if self._matches(h, pattern) ]
+
+    def restrict_to(self, restriction):
+        """ Restrict list operations to the hosts given in restriction """
+        if type(restriction)!=list:
+            restriction = [ restriction ]
+
+        self._restriction = restriction
+
+    def lift_restriction(self):
+        """ Do not restrict list operations """
+        self._restriction = None
+
+    def get_variables(self, host, extra_vars=None):
+        """ Return the variables associated with this host. """
+
+        if not self._is_script:
+            return {}
+
+        return self._get_variables_from_script(host, extra_vars)
+
+    # *****************************************************
+
+    def _parse_from_file(self):
+        ''' parse a textual host file '''
+
+        results = []
+        groups = dict(ungrouped=[])
+        lines = file(self.inventory_file).read().split("\n")
+        group_name = 'ungrouped'
+        for item in lines:
+            item = item.lstrip().rstrip()
+            if item.startswith("#"):
+                # ignore commented out lines
+                pass
+            elif item.startswith("["):
+                # looks like a group
+                group_name = item.replace("[","").replace("]","").lstrip().rstrip()
+                groups[group_name] = []
+            elif item != "":
+                # looks like a regular host
+                groups[group_name].append(item)
+                if not item in results:
+                    results.append(item)
+        return (results, groups)
+
+    # *****************************************************
+
+    def _parse_from_script(self, extra_vars=None):
+        ''' evaluate a script that returns list of hosts by groups '''
+
+        results = []
+        groups = dict(ungrouped=[])
+
+        cmd = [self.inventory_file, '--list']
+
+        if extra_vars:
+            cmd.extend(['--extra-vars', extra_vars])
+
+        cmd = subprocess.Popen(cmd, stdout=subprocess.PIPE, stderr=subprocess.PIPE, shell=False)
+        out, err = cmd.communicate()
+        rc = cmd.returncode
+        if rc:
+            raise errors.AnsibleError("%s: %s" % self.inventory_file, err)
+
+        try:
+            groups = utils.json_loads(out)
+        except:
+            raise errors.AnsibleError("invalid JSON response from script: %s" % self.inventory_file)
+
+        for (groupname, hostlist) in groups.iteritems():
+            for host in hostlist:
+                if host not in results:
+                    results.append(host)
+        return (results, groups)
+
+    # *****************************************************
+
+    def _get_variables_from_script(self, host, extra_vars=None):
+        ''' support per system variabes from external variable scripts, see web docs '''
+
+        cmd = [self.inventory_file, '--host', host]
+
+        if extra_vars:
+            cmd.extend(['--extra-vars', extra_vars])
+
+        cmd = subprocess.Popen(cmd,
+            stdout=subprocess.PIPE,
+            stderr=subprocess.PIPE,
+            shell=False
+        )
+        out, err = cmd.communicate()
+
+        variables = {}
+        try:
+            variables = utils.json_loads(out)
+        except:
+            raise errors.AnsibleError("%s returned invalid result when called with hostname %s" % (
+                self.inventory_file,
+                host
+            ))
+        return variables
+
+    def _matches(self, host_name, pattern):
+        ''' returns if a hostname is matched by the pattern '''
+
+        # a pattern is in fnmatch format but more than one pattern
+        # can be strung together with semicolons. ex:
+        #   atlanta-web*.example.com;dc-web*.example.com
+
+        if host_name == '':
+            return False
+        pattern = pattern.replace(";",":")
+        subpatterns = pattern.split(":")
+        for subpattern in subpatterns:
+            if subpattern == 'all':
+                return True
+            if fnmatch.fnmatch(host_name, subpattern):
+                return True
+            elif subpattern in self.groups:
+                if host_name in self.groups[subpattern]:
+                    return True
+        return False
diff --git a/lib/ansible/playbook.py b/lib/ansible/playbook.py
index ba5115d02d9..c3e195e0409 100755
--- a/lib/ansible/playbook.py
+++ b/lib/ansible/playbook.py
@@ -17,6 +17,7 @@
 
 #############################################
 
+import ansible.inventory
 import ansible.runner
 import ansible.constants as C
 from ansible import utils
@@ -68,7 +69,6 @@ class PlayBook(object):
         if playbook is None or callbacks is None or runner_callbacks is None or stats is None:
             raise Exception('missing required arguments')
 
-        self.host_list        = host_list
         self.module_path      = module_path
         self.forks            = forks
         self.timeout          = timeout
@@ -88,9 +88,13 @@ class PlayBook(object):
         self.basedir          = os.path.dirname(playbook)
         self.playbook         = self._parse_playbook(playbook)
 
-        self.host_list, self.groups = ansible.runner.Runner.parse_hosts(
-            host_list, override_hosts=self.override_hosts, extra_vars=self.extra_vars)
-   
+        if override_hosts is not None:
+            if type(override_hosts) != list:
+                raise errors.AnsibleError("override hosts must be a list")
+            self.inventory = ansible.inventory.Inventory(override_hosts)
+        else:
+            self.inventory = ansible.inventory.Inventory(host_list)
+
     # *****************************************************
 
     def _get_vars(self, play, dirname):
@@ -233,7 +237,6 @@ class PlayBook(object):
     def _async_poll(self, runner, hosts, async_seconds, async_poll_interval, only_if):
         ''' launch an async job, if poll_interval is set, wait for completion '''
 
-        runner.host_list = hosts
         runner.background = async_seconds
         results = runner.run()
         self.stats.compute(results, poll=True)
@@ -257,7 +260,7 @@ class PlayBook(object):
             return results
 
         clock = async_seconds
-        runner.host_list = self.hosts_to_poll(results)
+        host_list = self.hosts_to_poll(results)
 
         poll_results = results
         while (clock >= 0):
@@ -267,11 +270,13 @@ class PlayBook(object):
             runner.module_name = 'async_status'
             runner.background  = 0  
             runner.pattern     = '*'
+            self.inventory.restrict_to(host_list)
             poll_results       = runner.run()
             self.stats.compute(poll_results, poll=True)
-            runner.host_list       = self.hosts_to_poll(poll_results)
+            host_list          = self.hosts_to_poll(poll_results)
+            self.inventory.lift_restriction()
 
-            if len(runner.host_list) == 0:
+            if len(host_list) == 0:
                 break
             if poll_results is None:
                 break
@@ -298,15 +303,16 @@ class PlayBook(object):
 
     # *****************************************************
 
-    def _run_module(self, pattern, host_list, module, args, vars, remote_user, 
+    def _run_module(self, pattern, module, args, vars, remote_user, 
         async_seconds, async_poll_interval, only_if, sudo, transport):
         ''' run a particular module step in a playbook '''
 
-        hosts = [ h for h in host_list if (h not in self.stats.failures) and (h not in self.stats.dark)]
+        hosts = [ h for h in self.inventory.list_hosts() if (h not in self.stats.failures) and (h not in self.stats.dark)]
+        self.inventory.restrict_to(hosts)
 
         runner = ansible.runner.Runner(
-            pattern=pattern, groups=self.groups, module_name=module,
-            module_args=args, host_list=hosts, forks=self.forks,
+            pattern=pattern, inventory=self.inventory, module_name=module,
+            module_args=args, forks=self.forks,
             remote_pass=self.remote_pass, module_path=self.module_path,
             timeout=self.timeout, remote_user=remote_user, 
             remote_port=self.remote_port, module_vars=vars,
@@ -317,13 +323,16 @@ class PlayBook(object):
         )
 
         if async_seconds == 0:
-            return runner.run()
+            results = runner.run()
         else:
-            return self._async_poll(runner, hosts, async_seconds, async_poll_interval, only_if)
+            results = self._async_poll(runner, hosts, async_seconds, async_poll_interval, only_if)
+
+        self.inventory.lift_restriction()
+        return results
 
     # *****************************************************
 
-    def _run_task(self, pattern=None, host_list=None, task=None, 
+    def _run_task(self, pattern=None, task=None, 
         remote_user=None, handlers=None, conditional=False, sudo=False, transport=None):
         ''' run a single task in the playbook and recursively run any subtasks.  '''
 
@@ -354,7 +363,7 @@ class PlayBook(object):
 
         # load up an appropriate ansible runner to
         # run the task in parallel
-        results = self._run_module(pattern, host_list, module_name, 
+        results = self._run_module(pattern, module_name, 
             module_args, module_vars, remote_user, async_seconds, 
             async_poll_interval, only_if, sudo, transport)
 
@@ -406,7 +415,7 @@ class PlayBook(object):
 
     # *****************************************************
 
-    def _do_conditional_imports(self, vars_files, host_list):
+    def _do_conditional_imports(self, vars_files):
         ''' handle the vars_files section, which can contain variables '''
         
         # FIXME: save parsed variable results in memory to avoid excessive re-reading/parsing
@@ -417,7 +426,7 @@ class PlayBook(object):
  
         if type(vars_files) != list:
             raise errors.AnsibleError("vars_files must be a list")
-        for host in host_list:
+        for host in self.inventory.list_hosts():
             cache_vars = SETUP_CACHE.get(host,{}) 
             SETUP_CACHE[host] = cache_vars
             for filename in vars_files:
@@ -460,16 +469,18 @@ class PlayBook(object):
 
         if vars_files is not None:
             self.callbacks.on_setup_secondary()
-            self._do_conditional_imports(vars_files, self.host_list)
+            self._do_conditional_imports(vars_files)
         else:
             self.callbacks.on_setup_primary()
 
-        host_list = [ h for h in self.host_list if not (h in self.stats.failures or h in self.stats.dark) ]
+        host_list = [ h for h in self.inventory.list_hosts(pattern) 
+                        if not (h in self.stats.failures or h in self.stats.dark) ]
+        self.inventory.restrict_to(host_list)
 
         # push any variables down to the system
         setup_results = ansible.runner.Runner(
-            pattern=pattern, groups=self.groups, module_name='setup',
-            module_args=vars, host_list=host_list,
+            pattern=pattern, module_name='setup',
+            module_args=vars, inventory=self.inventory,
             forks=self.forks, module_path=self.module_path,
             timeout=self.timeout, remote_user=user,
             remote_pass=self.remote_pass, remote_port=self.remote_port,
@@ -479,6 +490,8 @@ class PlayBook(object):
         ).run()
         self.stats.compute(setup_results, setup=True)
 
+        self.inventory.lift_restriction()
+
         # now for each result, load into the setup cache so we can
         # let runner template out future commands
         setup_ok = setup_results.get('contacted', {})
@@ -494,7 +507,6 @@ class PlayBook(object):
                     SETUP_CACHE[h].update(extra_vars)
                 except:
                     SETUP_CACHE[h] = extra_vars
-        return host_list
 
     # *****************************************************
 
@@ -530,7 +542,6 @@ class PlayBook(object):
         for task in tasks:
             self._run_task(
                 pattern=pattern,
-                host_list=self.host_list,
                 task=task, 
                 handlers=handlers,
                 remote_user=user,
@@ -547,16 +558,17 @@ class PlayBook(object):
         for task in handlers:
             triggered_by = task.get('run', None)
             if type(triggered_by) == list:
+                self.inventory.restrict_to(triggered_by)
                 self._run_task(
                    pattern=pattern, 
                    task=task,
                    handlers=[],
-                   host_list=triggered_by,
                    conditional=True,
                    remote_user=user,
                    sudo=sudo,
                    transport=transport
                 )
+                self.inventory.lift_restriction()
 
         # end of execution for this particular pattern.  Multiple patterns
         # can be in a single playbook file
diff --git a/lib/ansible/runner.py b/lib/ansible/runner.py
index 418a069ba8c..50c4029a45d 100755
--- a/lib/ansible/runner.py
+++ b/lib/ansible/runner.py
@@ -18,7 +18,6 @@
 
 ################################################
 
-import fnmatch
 import multiprocessing
 import signal
 import os
@@ -27,10 +26,10 @@ import Queue
 import random
 import traceback
 import tempfile
-import subprocess
 
 import ansible.constants as C 
 import ansible.connection
+import ansible.inventory
 from ansible import utils
 from ansible import errors
 from ansible import callbacks as ans_callbacks
@@ -67,8 +66,6 @@ def _executor_hook(job_queue, result_queue):
 
 class Runner(object):
 
-    _external_variable_script = None
-
     def __init__(self, host_list=C.DEFAULT_HOST_LIST, module_path=C.DEFAULT_MODULE_PATH,
         module_name=C.DEFAULT_MODULE_NAME, module_args=C.DEFAULT_MODULE_ARGS, 
         forks=C.DEFAULT_FORKS, timeout=C.DEFAULT_TIMEOUT, pattern=C.DEFAULT_PATTERN,
@@ -76,7 +73,7 @@ class Runner(object):
         sudo_pass=C.DEFAULT_SUDO_PASS, remote_port=C.DEFAULT_REMOTE_PORT, background=0, 
         basedir=None, setup_cache=None, transport=C.DEFAULT_TRANSPORT, 
         conditional='True', groups={}, callbacks=None, verbose=False,
-        debug=False, sudo=False, extra_vars=None, module_vars=None):
+        debug=False, sudo=False, extra_vars=None, module_vars=None, inventory=None):
    
         if setup_cache is None:
             setup_cache = {}
@@ -92,11 +89,10 @@ class Runner(object):
         self.transport = transport
         self.connector = ansible.connection.Connection(self, self.transport)
 
-        if type(host_list) == str:
-            self.host_list, self.groups = self.parse_hosts(host_list)
+        if inventory is None:
+            self.inventory = ansible.inventory.Inventory(host_list, extra_vars)
         else:
-            self.host_list = host_list
-            self.groups    = groups
+            self.inventory = inventory
 
         self.setup_cache = setup_cache
         self.conditional = conditional
@@ -130,106 +126,6 @@ class Runner(object):
 
     # *****************************************************
 
-    @classmethod
-    def parse_hosts_from_regular_file(cls, host_list):
-        ''' parse a textual host file '''
-
-        results = []
-        groups = dict(ungrouped=[])
-        lines = file(host_list).read().split("\n")
-        group_name = 'ungrouped'
-        for item in lines:
-            item = item.lstrip().rstrip()
-            if item.startswith("#"):
-                # ignore commented out lines
-                pass
-            elif item.startswith("["):
-                # looks like a group
-                group_name = item.replace("[","").replace("]","").lstrip().rstrip()
-                groups[group_name] = []
-            elif item != "":
-                # looks like a regular host
-                groups[group_name].append(item)
-                if not item in results:
-                    results.append(item)
-        return (results, groups)
-
-    # *****************************************************
-
-    @classmethod
-    def parse_hosts_from_script(cls, host_list, extra_vars):
-        ''' evaluate a script that returns list of hosts by groups '''
-
-        results = []
-        groups = dict(ungrouped=[])
-        host_list = os.path.abspath(host_list)
-        cls._external_variable_script = host_list
-        cmd = [host_list, '--list']
-        if extra_vars:
-            cmd.extend(['--extra-vars', extra_vars])
-        cmd = subprocess.Popen(cmd, stdout=subprocess.PIPE, stderr=subprocess.PIPE, shell=False)
-        out, err = cmd.communicate()
-        rc = cmd.returncode
-        if rc:
-            raise errors.AnsibleError("%s: %s" % (host_list, err))
-        try:
-            groups = utils.json_loads(out)
-        except:
-            raise errors.AnsibleError("invalid JSON response from script: %s" % host_list)
-        for (groupname, hostlist) in groups.iteritems():
-            for host in hostlist:
-                if host not in results:
-                    results.append(host)
-        return (results, groups)
-
-    # *****************************************************
-
-    @classmethod
-    def parse_hosts(cls, host_list, override_hosts=None, extra_vars=None):
-        ''' parse the host inventory file, returns (hosts, groups) '''
-
-        if override_hosts is not None:
-            if type(override_hosts) != list:
-                raise errors.AnsibleError("override hosts must be a list")
-            return (override_hosts, dict(ungrouped=override_hosts))
-
-        if type(host_list) == list:
-            raise Exception("function can only be called on inventory files")
-
-        host_list = os.path.expanduser(host_list)
-        if not os.path.exists(host_list):
-            raise errors.AnsibleFileNotFound("inventory file not found: %s" % host_list)
-
-        if not os.access(host_list, os.X_OK):
-            return Runner.parse_hosts_from_regular_file(host_list)
-        else:
-            return Runner.parse_hosts_from_script(host_list, extra_vars)
-
-    # *****************************************************
-
-    def _matches(self, host_name, pattern):
-        ''' returns if a hostname is matched by the pattern '''
-
-        # a pattern is in fnmatch format but more than one pattern
-        # can be strung together with semicolons. ex:
-        #   atlanta-web*.example.com;dc-web*.example.com
-
-        if host_name == '':
-            return False
-        pattern = pattern.replace(";",":")
-        subpatterns = pattern.split(":")
-        for subpattern in subpatterns:
-            if subpattern == 'all':
-                return True
-            if fnmatch.fnmatch(host_name, subpattern):
-                return True
-            elif subpattern in self.groups:
-                if host_name in self.groups[subpattern]:
-                    return True
-        return False
-
-    # *****************************************************
-
     def _connect(self, host):
         ''' connects to a host, returns (is_successful, connection_object OR traceback_string) '''
 
@@ -296,34 +192,6 @@ class Runner(object):
 
     # *****************************************************
 
-    def _add_variables_from_script(self, conn, inject):
-        ''' support per system variabes from external variable scripts, see web docs '''
-
-        host = conn.host
-
-        cmd = [Runner._external_variable_script, '--host', host]
-        if self.extra_vars:
-            cmd.extend(['--extra-vars', self.extra_vars])
-
-        cmd = subprocess.Popen(cmd,
-            stdout=subprocess.PIPE,
-            stderr=subprocess.PIPE,
-            shell=False
-        )
-        out, err = cmd.communicate()
-        inject2 = {}
-        try:
-            inject2 = utils.json_loads(out)
-        except:
-            raise errors.AnsibleError("%s returned invalid result when called with hostname %s" % (
-                Runner._external_variable_script,
-                host
-            ))
-        # store injected variables in the templates
-        inject.update(inject2)
-
-    # *****************************************************
-
     def _add_setup_vars(self, inject, args):
         ''' setup module variables need special handling '''
 
@@ -377,8 +245,9 @@ class Runner(object):
         if not eval(conditional):
             return [ utils.smjson(dict(skipped=True)), None, 'skipped' ]
 
-        if Runner._external_variable_script is not None:
-            self._add_variables_from_script(conn, inject)
+        host_variables = self.inventory.get_variables(conn.host, self.extra_vars)
+        inject.update(host_variables)
+
         if self.module_name == 'setup':
             args = self._add_setup_vars(inject, args)
             args = self._add_setup_metadata(args)
@@ -692,13 +561,6 @@ class Runner(object):
 
     # *****************************************************
 
-    def _match_hosts(self, pattern):
-        ''' return all matched hosts fitting a pattern '''
-
-        return [ h for h in self.host_list if self._matches(h, pattern) ]
-
-    # *****************************************************
-
     def _parallel_exec(self, hosts):
         ''' handles mulitprocessing when more than 1 fork is required '''
 
@@ -745,7 +607,7 @@ class Runner(object):
                 results2["dark"][host] = result
 
         # hosts which were contacted but never got a chance to return
-        for host in self._match_hosts(self.pattern):
+        for host in self.inventory.list_hosts(self.pattern):
             if not (host in results2['dark'] or host in results2['contacted']):
                 results2["dark"][host] = {}
 
@@ -757,7 +619,7 @@ class Runner(object):
         ''' xfer & run module on all matched hosts '''
        
         # find hosts that match the pattern
-        hosts = self._match_hosts(self.pattern)
+        hosts = self.inventory.list_hosts(self.pattern)
         if len(hosts) == 0:
             self.callbacks.on_no_hosts()
             return dict(contacted={}, dark={})