diff --git a/README.md b/README.md
index ccbbf7d..e8294c4 100644
--- a/README.md
+++ b/README.md
@@ -416,10 +416,11 @@ default values.
 Variables are in the form:
 
     ${<name>}
+    ${<name>=<default>}
 
 Variables are set with the `Vars{"key": "value", ...}` option. Undefined
-variable references in the grammar will result in an error at construction
-time.
+variable references in the grammar without a default will result in an error at 
+construction time.
 
 Variables can also be set via the `set:"K=V"` tag. In this case, those variables will be available for that
 node and all children. This is useful for composition by allowing the same struct to be reused.
diff --git a/interpolate.go b/interpolate.go
index 296f9a4..9de1ff7 100644
--- a/interpolate.go
+++ b/interpolate.go
@@ -5,18 +5,21 @@ import (
 	"regexp"
 )
 
-var interpolationRegex = regexp.MustCompile(`(\${[[:alpha:]_][[:word:]]*})|(\$)|([^$]+)`)
+var interpolationRegex = regexp.MustCompile(`((?:\${([[:alpha:]_][[:word:]]*))(?:=([^}]+))?})|(\$)|([^$]+)`)
 
-// Interpolate variables from vars into s for substrings in the form ${var}.
+// Interpolate variables from vars into s for substrings in the form ${var} or ${var=default}.
 func interpolate(s string, vars map[string]string) (string, error) {
 	out := ""
 	matches := interpolationRegex.FindAllStringSubmatch(s, -1)
 	for _, match := range matches {
-		if match[1] != "" {
-			name := match[1][2 : len(match[1])-1]
+		if name := match[2]; name != "" {
 			value, ok := vars[name]
 			if !ok {
-				return "", fmt.Errorf("undefined variable ${%s}", name)
+				// No default value.
+				if match[3] == "" {
+					return "", fmt.Errorf("undefined variable ${%s}", name)
+				}
+				value = match[3]
 			}
 			out += value
 		} else {
diff --git a/interpolate_test.go b/interpolate_test.go
index f049e38..a2c9df1 100644
--- a/interpolate_test.go
+++ b/interpolate_test.go
@@ -8,10 +8,9 @@ import (
 
 func TestInterpolate(t *testing.T) {
 	vars := map[string]string{
-		"name": "Bobby Brown",
-		"age":  "35",
+		"age": "35",
 	}
-	actual, err := interpolate("${name} is ${age} years old", vars)
+	actual, err := interpolate("${name=Bobby Brown} is ${age} years old", vars)
 	require.NoError(t, err)
 	require.Equal(t, `Bobby Brown is 35 years old`, actual)
 }