diff --git a/index.html b/index.html
index e8148cd36..eec705bf4 100644
--- a/index.html
+++ b/index.html
@@ -124,6 +124,7 @@
         <script src='js/id/actions/disconnect.js'></script>
         <script src='js/id/actions/join.js'></script>
         <script src='js/id/actions/merge.js'></script>
+        <script src='js/id/actions/merge_polygon.js'></script>
         <script src='js/id/actions/move_node.js'></script>
         <script src='js/id/actions/move.js'></script>
         <script src='js/id/actions/rotate_way.js'></script>
diff --git a/js/id/actions/merge_polygon.js b/js/id/actions/merge_polygon.js
new file mode 100644
index 000000000..8eb94766f
--- /dev/null
+++ b/js/id/actions/merge_polygon.js
@@ -0,0 +1,106 @@
+iD.actions.MergePolygon = function(ids) {
+
+    function groupEntities(graph) {
+        var entities = ids.map(graph.getEntity);
+        return _.extend({
+                closedWay: [],
+                multipolygon: [],
+                other: []
+            }, _.groupBy(entities, function(entity) {
+                if (entity.type === 'way' && entity.isClosed()) {
+                    return 'closedWay';
+                } else if (entity.type === 'relation' && entity.isMultipolygon()) {
+                    return 'multipolygon';
+                } else {
+                    return 'other';
+                }
+            }));
+    }
+
+    var action = function(graph) {
+        var entities = groupEntities(graph);
+
+        // an array of all the polygons to be merged
+        var polygons = _.unique(entities.multipolygon.reduce(function(polygons, m) {
+            return polygons.concat(m.members.filter(function(d) {
+                return d.type === 'way';
+            }).map(function(d) {
+                return graph.entity(d.id);
+            }));
+        }, entities.closedWay));
+
+        // contained is an array of arrays of boolean values,
+        // where contained[j][k] is true iff the jth way is
+        // contained by the kth way.
+        var contained = polygons.map(function(w, i) {
+            return polygons.map(function(d, n) {
+                if (i === n) return null;
+                return iD.geo.polygonContainsPolygon(getLocs(d), getLocs(w));
+            });
+        });
+
+        function getLocs(way) {
+            return graph.childNodes(way).map(function(d) { return d.loc; });
+        }
+
+
+        // Sort all polygons as either outer or inner ways
+        var members = [];
+            outer = true;
+
+        while (polygons.length) {
+            extractUncontained(polygons);
+            polygons = polygons.filter(isContained);
+            contained = contained.filter(isContained).map(filterContained);
+        }
+
+        function isContained(d, i) {
+            return _.any(contained[i]);
+        }
+
+        function filterContained(d, i) {
+            return d.filter(isContained);
+        }
+
+        function extractUncontained(polygons) {
+            polygons.forEach(function(d, i) {
+                if (!isContained(d, i)) {
+                    members.push({
+                        type: 'way',
+                        id: d.id,
+                        role: outer ? 'outer' : 'inner'
+                    });
+                }
+            });
+            outer = !outer;
+        }
+
+        // Move all tags to one relation
+        var relation = entities.multipolygon[0] ||
+            iD.Relation({ tags: { type: 'multipolygon' }});
+
+        entities.multipolygon.slice(1).forEach(function(m) {
+            relation = relation.mergeTags(m.tags);
+            graph = graph.remove(m);
+        });
+
+        members.forEach(function(m) {
+            var entity = graph.entity(m.id);
+            relation = relation.mergeTags(entity.tags);
+            graph = graph.replace(entity.update({ tags: {} }));
+        });
+
+        delete relation.tags.area;
+
+        return graph.replace(relation.update({ members: members }));
+    };
+
+    action.disabled = function(graph) {
+        var entities = groupEntities(graph);
+        if (entities.other.length > 0 ||
+            entities.closedWay.length + entities.multipolygon.length < 2)
+            return 'not_eligible';
+    };
+
+    return action;
+};
diff --git a/js/id/operations/merge.js b/js/id/operations/merge.js
index 8cea1dcad..e7b2d5e43 100644
--- a/js/id/operations/merge.js
+++ b/js/id/operations/merge.js
@@ -1,6 +1,7 @@
 iD.operations.Merge = function(selection, context) {
     var join = iD.actions.Join(selection),
-        merge = iD.actions.Merge(selection);
+        merge = iD.actions.Merge(selection),
+        mergePolygon = iD.actions.MergePolygon(selection);
 
     var operation = function() {
         var annotation = t('operations.merge.annotation', {n: selection.length}),
@@ -8,8 +9,10 @@ iD.operations.Merge = function(selection, context) {
 
         if (!join.disabled(context.graph())) {
             action = join;
-        } else {
+        } else if (!merge.disabled(context.graph())) {
             action = merge;
+        } else {
+            action = mergePolygon;
         }
 
         var difference = context.perform(action, annotation);
@@ -22,7 +25,8 @@ iD.operations.Merge = function(selection, context) {
 
     operation.disabled = function() {
         return join.disabled(context.graph()) &&
-            merge.disabled(context.graph());
+            merge.disabled(context.graph()) &&
+            mergePolygon.disabled(context.graph());
     };
 
     operation.tooltip = function() {