diff --git a/lib/inline-css-url.js b/lib/inline-css-url.js
index 19a95d0..5e71a82 100644
--- a/lib/inline-css-url.js
+++ b/lib/inline-css-url.js
@@ -1,5 +1,6 @@
 var datauri = require('datauri');
 var isLocalPath = require('is-local-path');
+var isTemplateExpression = require('./is-template-expression');
 var path = require('path');
 var postcss = require('postcss');
 var postcssUrl = require('postcss-url');
@@ -33,7 +34,7 @@ var inline = function (css, filename) {
 	var result = postcss()
 		.use(postcssUrl({
 			url: function (urlPath) {
-				if (isLocalPath(urlPath)) {
+				if (isLocalPath(urlPath) && !isTemplateExpression(urlPath)) {
 					urlPath = clean(urlPath);
 					urlPath = path.resolve(basePath, urlPath);
 					files.push(urlPath);
diff --git a/lib/inline-img.js b/lib/inline-img.js
index e7758cc..f68c1f6 100644
--- a/lib/inline-img.js
+++ b/lib/inline-img.js
@@ -1,6 +1,7 @@
 var cheerio = require('cheerio');
 var datauri = require('datauri');
 var isLocalPath = require('is-local-path');
+var isTemplateExpression = require('./is-template-expression');
 var path = require('path');
 
 var inline = function (html, filename) {
@@ -8,7 +9,8 @@ var inline = function (html, filename) {
 	var basedir = path.dirname(filename);
 	var $ = cheerio.load(html, {decodeEntities: false});
 	var images = $('img').filter(function (index, element) {
-		return isLocalPath($(element).attr('src'));
+		var path = $(element).attr('src');
+		return isLocalPath(path) && !isTemplateExpression(path);
 	});
 	images.each(function (index, element) {
 		var src = $(element).attr('src');
diff --git a/lib/is-template-expression.js b/lib/is-template-expression.js
new file mode 100644
index 0000000..d43c61b
--- /dev/null
+++ b/lib/is-template-expression.js
@@ -0,0 +1,14 @@
+/**
+ * Tests whether a path is a mustache template expression.
+ *
+ * Note: would be best if this was file extension specific
+ * (i.e. *.hbs => test for `{{ }}` )
+ *
+ * @param {String} path
+ * @return {Boolean}
+ */
+var isTemplateExpression = function (path) {
+	return /^{{.*}}$/.test(path);
+};
+
+module.exports = isTemplateExpression;
diff --git a/test/index.js b/test/index.js
index 1de3f9d..2e00dbd 100644
--- a/test/index.js
+++ b/test/index.js
@@ -152,6 +152,14 @@ describe('inlineHtml', function () {
 		var html = `<img src="http://test.com/file.txt?query=string#hash"/>`;
 		return expect(inline(html)).to.eventually.equal(html);
 	});
+	it('ignore css url template expression paths', function () {
+		var html = `<style> div { background-image: url({{path}}); }</style>`;
+		return expect(inline(html)).to.eventually.equal(html);
+	});
+	it('ignore img src template expression paths', function () {
+		var html = `<img src="{{path}}"/>`;
+		return expect(inline(html)).to.eventually.equal(html);
+	});
 	it('ignore query strings and hashes on local paths', function () {
 		var filename = path.resolve(__dirname, 'fixtures/file.txt');
 		var url = `${filename}?query=string#hash`;