diff --git a/html2text/__init__.py b/html2text/__init__.py
index 2ee872f..48d4454 100644
--- a/html2text/__init__.py
+++ b/html2text/__init__.py
@@ -3,6 +3,7 @@
 """html2text: Turn HTML into equivalent Markdown-structured text."""
 from __future__ import division
 import re
+import cgi
 
 try:
     from textwrap import wrap
@@ -160,10 +161,16 @@ def close(self):
         return outtext
 
     def handle_charref(self, c):
-        self.o(self.charref(c), 1)
+        charref = self.charref(c)
+        if not self.code and not self.pre:
+            charref = cgi.escape(charref)
+        self.o(charref, 1)
 
     def handle_entityref(self, c):
-        self.o(self.entityref(c), 1)
+        entityref = self.entityref(c)
+        if not self.code and not self.pre and entityref != '&nbsp_place_holder;':
+            entityref = cgi.escape(entityref)
+        self.o(entityref, 1)
 
     def handle_starttag(self, tag, attrs):
         self.handle_tag(tag, attrs, 1)
@@ -351,6 +358,7 @@ def handle_tag(self, tag, attrs, start):
 
         if tag in ["code", "tt"] and not self.pre:
             self.o('`')  # TODO: `` `this` ``
+            self.code = not self.code
         if tag == "abbr":
             if start:
                 self.abbr_title = None
@@ -416,7 +424,7 @@ def handle_tag(self, tag, attrs, start):
                     else:
                         self.o("[")
                         self.maybe_automatic_link = None
-                        self.empty_link = False                   
+                        self.empty_link = False
 
                 # If we have images_to_alt, we discard the image itself,
                 # considering only the alt text.
diff --git a/test/html-escaping.html b/test/html-escaping.html
new file mode 100644
index 0000000..b6f1da7
--- /dev/null
+++ b/test/html-escaping.html
@@ -0,0 +1,3 @@
+<p>Escaped HTML like &lt;div&gt; or &amp; should remain escaped on output</p>
+<pre>...unless that escaped HTML is in a &lt;pre&gt; tag</pre>
+<code>...or a &lt;code&gt; tag</code>
\ No newline at end of file
diff --git a/test/html-escaping.md b/test/html-escaping.md
new file mode 100644
index 0000000..19e91ee
--- /dev/null
+++ b/test/html-escaping.md
@@ -0,0 +1,8 @@
+Escaped HTML like &lt;div&gt; or &amp; should remain escaped on output
+
+    
+    
+    ...unless that escaped HTML is in a <pre> tag
+
+`...or a <code> tag`
+