From c8acccf37c7acdf58ee4d35580e22585fec16f9c Mon Sep 17 00:00:00 2001
From: fresh3nough <fresh3nough@users.noreply.github.com>
Date: Mon, 23 Feb 2026 10:53:57 -0500
Subject: [PATCH] fix: handle indented code fences in markdown transformation
 (#1389)

---
 src/md.ts       | 44 ++++++++++++++++++++++---------------------
 test/md.test.ts | 50 +++++++++++++++++++++++++++++++++++++++++++++++++
 2 files changed, 73 insertions(+), 21 deletions(-)

diff --git a/src/md.ts b/src/md.ts
index 3e88b95d75..ca7b83e3dc 100644
--- a/src/md.ts
+++ b/src/md.ts
@@ -26,29 +26,31 @@ export function transformMarkdown(buf: Buffer | string): string {
   for (const line of bufToString(buf).split(/\r?\n/)) {
     switch (state) {
       case 'root':
+        // Strip up to 3 leading spaces before checking for code fences (per CommonMark spec)
+        const stripped = line.replace(/^ {0,3}/, '')
+        const { fence, js, bash } = stripped.match(codeBlockRe)?.groups || {}
+        if (fence) {
+          codeBlockEnd = fence
+          if (js) {
+            state = 'js'
+            output.push('')
+          } else if (bash) {
+            state = 'bash'
+            output.push('await $`')
+          } else {
+            state = 'other'
+            output.push('')
+          }
+          break
+        }
         if (tabRe.test(line) && prevLineIsEmpty) {
           output.push(line)
           state = 'tab'
           continue
         }
-        const { fence, js, bash } = line.match(codeBlockRe)?.groups || {}
-        if (!fence) {
-          prevLineIsEmpty = line === ''
-          output.push('// ' + line)
-          continue
-        }
-        codeBlockEnd = fence
-        if (js) {
-          state = 'js'
-          output.push('')
-        } else if (bash) {
-          state = 'bash'
-          output.push('await $`')
-        } else {
-          state = 'other'
-          output.push('')
-        }
-        break
+        prevLineIsEmpty = line === ''
+        output.push('// ' + line)
+        continue
       case 'tab':
         if (line === '') {
           output.push('')
@@ -60,7 +62,7 @@ export function transformMarkdown(buf: Buffer | string): string {
         }
         break
       case 'js':
-        if (line === codeBlockEnd) {
+        if (line.replace(/^ {0,3}/, '') === codeBlockEnd) {
           output.push('')
           state = 'root'
         } else {
@@ -68,7 +70,7 @@ export function transformMarkdown(buf: Buffer | string): string {
         }
         break
       case 'bash':
-        if (line === codeBlockEnd) {
+        if (line.replace(/^ {0,3}/, '') === codeBlockEnd) {
           output.push('`')
           state = 'root'
         } else {
@@ -76,7 +78,7 @@ export function transformMarkdown(buf: Buffer | string): string {
         }
         break
       case 'other':
-        if (line === codeBlockEnd) {
+        if (line.replace(/^ {0,3}/, '') === codeBlockEnd) {
           output.push('')
           state = 'root'
         } else {
diff --git a/test/md.test.ts b/test/md.test.ts
index 412940d6c4..e26bc1f1d4 100644
--- a/test/md.test.ts
+++ b/test/md.test.ts
@@ -69,4 +69,54 @@ echo foo
 // 
 // `)
   })
+
+  test('transformMarkdown() handles indented code fences in list items (#1389)', () => {
+    // Code fences indented with up to 3 spaces (e.g. inside list items) should
+    // be recognized as fenced code blocks, not as tab-indented code.
+    const input = [
+      '# h1',
+      '',
+      'paragraph',
+      '',
+      '## h2',
+      '',
+      '### h3',
+      '',
+      '```bash',
+      'echo "1"',
+      '```',
+      '',
+      '### h3',
+      '',
+      '- item 1',
+      '',
+      '',
+      '  ```bash',
+      '  echo "2"',
+      '  ```',
+      '',
+      '',
+      '### h3',
+      '',
+      '```bash',
+      'echo "4"',
+      '```',
+    ].join('\n')
+
+    const result = transformMarkdown(input)
+
+    // The indented code fence must produce a valid $`` invocation,
+    // not raw backticks that cause "$(...) is not a function".
+    assert.ok(
+      !result.includes('  ```bash'),
+      'indented fence opener should not appear as raw code'
+    )
+    assert.ok(
+      result.includes('await $`'),
+      'indented bash fence should produce await $`'
+    )
+    // Verify all three bash blocks are converted
+    const bashBlocks = result.match(/await \$`/g)
+    assert.equal(bashBlocks?.length, 3, 'all three bash blocks should be converted')
+  })
 })