diff --git a/IPython/nbconvert/exporters/exporter.py b/IPython/nbconvert/exporters/exporter.py
index af9da29..f15cb9c 100755
--- a/IPython/nbconvert/exporters/exporter.py
+++ b/IPython/nbconvert/exporters/exporter.py
@@ -68,6 +68,7 @@ default_filters = {
         'strip_math_space': filters.strip_math_space,
         'wrap_text': filters.wrap_text,
         'escape_latex': filters.escape_latex,
+        'parse_citation': filters.parse_citation
 }
 
 #-----------------------------------------------------------------------------
diff --git a/IPython/nbconvert/filters/__init__.py b/IPython/nbconvert/filters/__init__.py
index 9751c94..87dd748 100755
--- a/IPython/nbconvert/filters/__init__.py
+++ b/IPython/nbconvert/filters/__init__.py
@@ -3,4 +3,5 @@ from .datatypefilter import *
 from .highlight import *
 from .latex import *
 from .markdown import *
-from .strings import *
\ No newline at end of file
+from .strings import *
+from .citation import *
\ No newline at end of file
diff --git a/IPython/nbconvert/filters/citation.py b/IPython/nbconvert/filters/citation.py
new file mode 100644
index 0000000..e03cc25
--- /dev/null
+++ b/IPython/nbconvert/filters/citation.py
@@ -0,0 +1,70 @@
+"""Citation handling for LaTeX output."""
+
+#-----------------------------------------------------------------------------
+# Copyright (c) 2013, the IPython Development Team.
+#
+# Distributed under the terms of the Modified BSD License.
+#
+# The full license is in the file COPYING.txt, distributed with this software.
+#-----------------------------------------------------------------------------
+
+#-----------------------------------------------------------------------------
+# Code
+#-----------------------------------------------------------------------------
+
+
+__all__ = ['parse_citation']
+
+
+def parse_citation(s):
+    """Parse citations in Markdown cells.
+    
+    This looks for HTML tags having a data attribute names `data-cite`
+    and replaces it by the call to LaTeX cite command. The tranformation
+    looks like this:
+    
+    `<cite data-cite="granger">(Granger, 2013)</cite>`
+    
+    Becomes
+    
+    `\\cite{granger}`
+    
+    Any HTML tag can be used, which allows the citations to be formatted
+    in HTML in any manner.
+    """
+    try:
+        from lxml import html
+    except ImportError:
+        return s
+
+    tree = html.fragment_fromstring(s, create_parent='div')
+    _process_node_cite(tree)
+    s = html.tostring(tree)
+    s = s.lstrip('<div>')
+    s = s.rstrip('</div>')
+    return s
+
+
+def _process_node_cite(node):
+    """Do the citation replacement as we walk the lxml tree."""
+    
+    def _get(o, name):
+        value = getattr(o, name)
+        return '' if value is None else value
+    
+    if 'data-cite' in node.attrib:
+        cite = '\cite{%(ref)s}' % {'ref': node.attrib['data-cite']}
+        prev = node.getprevious()
+        if prev is not None:
+            prev.tail = _get(prev, 'tail') + cite + _get(node, 'tail')
+        else:
+            parent = node.getparent()
+            if parent is not None:
+                parent.text = _get(parent, 'text') + cite + _get(node, 'tail')
+        try:
+            node.getparent().remove(node)
+        except AttributeError:
+            pass
+    else:
+        for child in node:
+            _process_node_cite(child)
diff --git a/IPython/nbconvert/filters/tests/test_citation.py b/IPython/nbconvert/filters/tests/test_citation.py
new file mode 100644
index 0000000..7bb033b
--- /dev/null
+++ b/IPython/nbconvert/filters/tests/test_citation.py
@@ -0,0 +1,54 @@
+#-----------------------------------------------------------------------------
+# Copyright (c) 2013, the IPython Development Team.
+#
+# Distributed under the terms of the Modified BSD License.
+#
+# The full license is in the file COPYING.txt, distributed with this software.
+#-----------------------------------------------------------------------------
+
+#-----------------------------------------------------------------------------
+# Imports
+#-----------------------------------------------------------------------------
+
+from ..citation import parse_citation
+
+#-----------------------------------------------------------------------------
+# Tests
+#-----------------------------------------------------------------------------
+
+test_md = """
+# My Heading
+
+Lorem ipsum dolor sit amet, consectetur adipiscing elit. Phasellus ac magna non augue
+porttitor scelerisque ac id diam <cite data-cite="granger">Granger</cite>. Mauris elit
+velit, lobortis sed interdum at, vestibulum vitae libero <strong data-cite="fperez">Perez</strong>.
+Lorem ipsum dolor sit amet, consectetur adipiscing elit
+<em data-cite="takluyver">Thomas</em>. Quisque iaculis ligula ut ipsum mattis viverra.
+
+* One <cite data-cite="jdfreder">Jonathan</cite>.
+* Two <cite data-cite="carreau">Matthias</cite>.
+* Three <cite data-cite="ivanov">Paul</cite>.
+"""
+
+test_md_parsed = """
+# My Heading
+
+Lorem ipsum dolor sit amet, consectetur adipiscing elit. Phasellus ac magna non augue
+porttitor scelerisque ac id diam \cite{granger}. Mauris elit
+velit, lobortis sed interdum at, vestibulum vitae libero \cite{fperez}.
+Lorem ipsum dolor sit amet, consectetur adipiscing elit
+\cite{takluyver}. Quisque iaculis ligula ut ipsum mattis viverra.
+
+* One \cite{jdfreder}.
+* Two \cite{carreau}.
+* Three \cite{ivanov}.
+"""
+
+def test_parse_citation():
+    """Are citations parsed properly?"""
+    try:
+        import lxml
+    except ImportError:
+        assert test_md == parse_citation(test_md) 
+    else:
+        assert test_md_parsed == parse_citation(test_md)
diff --git a/IPython/nbconvert/templates/latex/latex_basic.tplx b/IPython/nbconvert/templates/latex/latex_basic.tplx
index ff3303b..d8d6e68 100644
--- a/IPython/nbconvert/templates/latex/latex_basic.tplx
+++ b/IPython/nbconvert/templates/latex/latex_basic.tplx
@@ -103,11 +103,11 @@ it introduces a new line
 ((* endblock stream *))
 
 ((* block markdowncell scoped *))
-((( cell.source | markdown2latex )))
+((( cell.source | parse_citation | markdown2latex )))
 ((* endblock markdowncell *))
 
 ((* block headingcell scoped -*))
-((( ('#' * cell.level + cell.source) | replace('\n', ' ') | markdown2latex )))
+((( ('#' * cell.level + cell.source) | replace('\n', ' ') | parse_citation | markdown2latex )))
 ((* endblock headingcell *))
 
 ((* block rawcell scoped *))
@@ -127,6 +127,10 @@ unknown type  ((( cell.type )))
 ((( super() )))
 
 ((* block bodyEnd *))
+
+((* block bibliography *))
+((* endblock bibliography *))
+
 \end{document}
 ((* endblock bodyEnd *))
 ((* endblock body *))
diff --git a/IPython/nbconvert/templates/latex/sphinx.tplx b/IPython/nbconvert/templates/latex/sphinx.tplx
index ee59ad8..80ee3fb 100644
--- a/IPython/nbconvert/templates/latex/sphinx.tplx
+++ b/IPython/nbconvert/templates/latex/sphinx.tplx
@@ -192,6 +192,9 @@ Note: For best display, use latex syntax highlighting. =))
         \renewcommand{\indexname}{Index}
         \printindex
 
+        ((* block bibliography *))
+        ((* endblock bibliography *))
+
     % End of document
     \end{document}
 ((* endblock bodyEnd *))
@@ -229,7 +232,7 @@ Note: For best display, use latex syntax highlighting. =))
     in IPYNB file titles) do not make their way into latex.  Sometimes this
     causes latex to barf. =))
     ((*- endif -*))
-    {((( cell.source | markdown2latex )))}
+    {((( cell.source | parse_citation | markdown2latex )))}
 ((*- endblock headingcell *))
 
 %==============================================================================
@@ -239,7 +242,7 @@ Note: For best display, use latex syntax highlighting. =))
 %          called since we know we want latex output.
 %==============================================================================
 ((*- block markdowncell scoped-*))
-((( cell.source | markdown2latex )))
+((( cell.source | parse_citation | markdown2latex )))
 ((*- endblock markdowncell -*))
 
 %==============================================================================