diff --git a/spec/LayoutSpec.js b/spec/LayoutSpec.js
index 3520d81e..dc01bb65 100755
--- a/spec/LayoutSpec.js
+++ b/spec/LayoutSpec.js
@@ -512,6 +512,18 @@ describe('Layout', function() {
     );
   });
 
+
+  it('should layout node with inner & outer padding and stretch', function() {
+    testLayout(
+      {style: {padding: 50}, children: [
+        {style: {padding: 10, alignSelf: 'stretch'}}
+      ]},
+      {width: 120, height: 120, top: 0, left: 0, children: [
+        {width: 20, height: 20, top: 50, left: 50}
+      ]}
+    );
+  });
+
   it('should layout randomly', function() {
     function RNG(seed) {
       this.state = seed;
diff --git a/src/Layout.js b/src/Layout.js
index ea821b33..70268f5e 100755
--- a/src/Layout.js
+++ b/src/Layout.js
@@ -203,6 +203,8 @@ function computeLayout(node) {
         leadingCrossDim += remainingCrossDim;
       } else if (alignItem === 'stretch') {
         child.layout[dim[crossAxis]] += node.layout[dim[crossAxis]] -
+          getPadding(node, leading[crossAxis]) -
+          getPadding(node, trailing[crossAxis]) -
           getMargin(child, leading[crossAxis]) -
           getMargin(child, trailing[crossAxis]) -
           getPadding(child, leading[crossAxis]) -