diff --git a/lib/ansible/inventory/__init__.py b/lib/ansible/inventory/__init__.py
index 2de5634da1b..7d1dfbb0a28 100644
--- a/lib/ansible/inventory/__init__.py
+++ b/lib/ansible/inventory/__init__.py
@@ -85,15 +85,22 @@ class Inventory(object):
         patterns = pattern.replace(";",":").split(":")
 
         groups = self.get_groups()
-        for group in groups:
-             for host in group.get_hosts():
-                 for pat in patterns:
-                     if group.name == pat or pat == 'all' or self._match(host.name, pat):
-                         #must test explicitly for None because [] means no hosts allowed
-                         if self._restriction==None: 
-                             hosts[host.name] = host
-                         elif host.name in self._restriction:
-                             hosts[host.name] = host
+        for pat in patterns:
+            if pat.startswith("!"):
+                pat = pat[1:]
+                inverted = True
+            else:
+                inverted = False
+            for group in groups:
+                for host in group.get_hosts():
+                    if group.name == pat or pat == 'all' or self._match(host.name, pat):
+                        #must test explicitly for None because [] means no hosts allowed
+                        if self._restriction==None or host.name in self._restriction: 
+                            if inverted:
+                                if host.name in hosts:
+                                    del hosts[host.name]
+                            else:
+                                hosts[host.name] = host
         return sorted(hosts.values(), key=lambda x: x.name)
 
     def get_groups(self):
diff --git a/test/TestInventory.py b/test/TestInventory.py
index a88236e75d8..883af98dcd8 100644
--- a/test/TestInventory.py
+++ b/test/TestInventory.py
@@ -99,6 +99,17 @@ class TestInventory(unittest.TestCase):
         print expected_hosts
         assert sorted(hosts) == sorted(expected_hosts)
 
+    def test_simple_exclude(self):
+        inventory = self.simple_inventory()
+
+        hosts = inventory.list_hosts("all:!greek")
+        expected_hosts=['jupiter', 'saturn', 'thor', 'odin', 'loki']
+        assert sorted(hosts) == sorted(expected_hosts)
+
+        hosts = inventory.list_hosts("all:!norse:!greek")
+        expected_hosts=['jupiter', 'saturn']
+        assert sorted(hosts) == sorted(expected_hosts)
+
     def test_simple_vars(self):
         inventory = self.simple_inventory()
         vars = inventory.get_variables('thor')
@@ -136,6 +147,13 @@ class TestInventory(unittest.TestCase):
         print expected
         assert vars == expected
 
+    def test_complex_exclude(self):
+        inventory = self.complex_inventory()
+
+        hosts = inventory.list_hosts("nc:!triangle:florida:!orlando")
+        expected_hosts=['rtp_a', 'rtp_b', 'rtb_c', 'miami']
+        assert sorted(hosts) == sorted(expected_hosts)
+
 
 
     ###################################################