diff --git a/lib/rscons/varset.rb b/lib/rscons/varset.rb
index 4144e69..f296412 100644
--- a/lib/rscons/varset.rb
+++ b/lib/rscons/varset.rb
@@ -68,9 +68,9 @@ module Rscons
           prefix, varname, suffix = $1, $2, $3
           varval = expand_varref(@vars[varname])
           if varval.is_a?(String)
-            "#{prefix}#{varval}#{suffix}"
+            expand_varref("#{prefix}#{varval}#{suffix}")
           elsif varval.is_a?(Array)
-            varval.map {|vv| "#{prefix}#{vv}#{suffix}"}
+            varval.map {|vv| expand_varref("#{prefix}#{vv}#{suffix}")}.flatten
           else
             raise "I do not know how to expand a variable reference to a #{varval.class.name}"
           end
diff --git a/spec/rscons/varset_spec.rb b/spec/rscons/varset_spec.rb
index d117a92..e52b7d9 100644
--- a/spec/rscons/varset_spec.rb
+++ b/spec/rscons/varset_spec.rb
@@ -103,6 +103,14 @@ module Rscons
         v.expand_varref("${compiler}").should == "gcc"
         v.expand_varref("${cmd}").should == ["gcc", "-c", "-Wall", "-O2", "-Idir1", "-Idir2"]
       end
+      it "resolves multiple variable references in one element by enumerating all combinations" do
+        v.expand_varref("cflag: ${CFLAGS}, cpppath: ${CPPPATH}, compiler: ${compiler}").should == [
+          "cflag: -Wall, cpppath: dir1, compiler: gcc",
+          "cflag: -O2, cpppath: dir1, compiler: gcc",
+          "cflag: -Wall, cpppath: dir2, compiler: gcc",
+          "cflag: -O2, cpppath: dir2, compiler: gcc",
+        ]
+      end
       it "raises an error when a variable reference refers to a non-existent variable" do
         expect { v.expand_varref("${not_here}") }.to raise_error /I do not know how to expand a variable reference to a NilClass/
       end