diff --git a/lib/syntax.default b/lib/syntax.default
index f713cfae8a..67d25bd07c 100644
--- a/lib/syntax.default
+++ b/lib/syntax.default
@@ -703,30 +703,30 @@ thebibliography{}
 
 % Environments that start math mode.
 % $...$, $$...$$, \(...\) and \[...\] are hardcoded in tex2lyx.
-% The arguments are currently ignored.
+% The arguments are currently ignored (apart from displaymath).
 \begin{mathenvironments}
-equation
-equation*
-eqnarray
-eqnarray*
-align
-align*
-gather
-gather*
-multline
-multline*
-math
-displaymath
-flalign
-flalign
+equation{displaymath}
+equation*{displaymath}
+eqnarray{displaymath}
+eqnarray*{displaymath}
+align{displaymath}
+align*{displaymath}
+gather{displaymath}
+gather*{displaymath}
+multline{displaymath}
+multline*{displaymath}
+math{}
+displaymath{displaymath}
+flalign{displaymath}
+flalign{displaymath}
 % These require extra args
-alignat
-alignat*
-xalignat
-xalignat*
-xxalignat
+alignat{}{displaymath}
+alignat*{displaymath}
+xalignat{}{displaymath}
+xalignat*{}{displaymath}
+xxalignat{}{displaymath}
 % These are not known by LyX but work nevertheless:
-empheq
+empheq[]{}{displaymath}
 \end{mathenvironments}
 
 %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%
diff --git a/src/tex2lyx/math.cpp b/src/tex2lyx/math.cpp
index f615926efa..d17d1d9017 100644
--- a/src/tex2lyx/math.cpp
+++ b/src/tex2lyx/math.cpp
@@ -27,6 +27,16 @@ bool is_math_env(string const & name)
 }
 
 
+bool is_display_math_env(string const & name)
+{
+	CommandMap::const_iterator it = known_math_environments.find(name);
+	if (it != known_math_environments.end())
+		if (!it->second.empty())
+			return it->second.back() == displaymath;
+	return false;
+}
+
+
 void parse_math(Parser & p, ostream & os, unsigned flags, const mode_type mode)
 {
 	while (p.good()) {
diff --git a/src/tex2lyx/tex2lyx.cpp b/src/tex2lyx/tex2lyx.cpp
index c6b4b68bbc..addfe3f8c7 100644
--- a/src/tex2lyx/tex2lyx.cpp
+++ b/src/tex2lyx/tex2lyx.cpp
@@ -357,6 +357,8 @@ void read_command(Parser & p, string command, CommandMap & commands)
 				arguments.push_back(required);
 			else if (arg == "item")
 				arguments.push_back(item);
+			else if (arg == "displaymath")
+				arguments.push_back(displaymath);
 			else
 				arguments.push_back(verbatim);
 		} else {
diff --git a/src/tex2lyx/tex2lyx.h b/src/tex2lyx/tex2lyx.h
index e1d779a115..ce201c2cec 100644
--- a/src/tex2lyx/tex2lyx.h
+++ b/src/tex2lyx/tex2lyx.h
@@ -84,6 +84,7 @@ std::string join(std::vector<std::string> const & input,
 	char const * delim);
 
 bool is_math_env(std::string const & name);
+bool is_display_math_env(std::string const & name);
 char const * const * is_known(std::string const &, char const * const *);
 
 /*!
@@ -117,7 +118,8 @@ enum ArgumentType {
 	required,
 	verbatim,
 	item,
-	optional
+	optional,
+	displaymath,
 };
 
 class FullCommand {
diff --git a/src/tex2lyx/text.cpp b/src/tex2lyx/text.cpp
index 1886c08956..1fb0e18aa4 100644
--- a/src/tex2lyx/text.cpp
+++ b/src/tex2lyx/text.cpp
@@ -689,6 +689,7 @@ void parse_arguments(string const & command,
 			else
 				ert += p.verbatim_item();
 			break;
+		case displaymath:
 		case verbatim:
 			// This argument may contain special characters
 			ert += '{' + p.verbatim_item() + '}';
@@ -1157,6 +1158,12 @@ void parse_environment(Parser & p, ostream & os, bool outer,
 		parse_math(p, os, FLAG_END, MATH_MODE);
 		os << "\\end{" << name << "}";
 		end_inset(os);
+		if (is_display_math_env(name)) {
+			// Prevent the conversion of a line break to a space
+			// (bug 7668). This does not change the output, but
+			// looks ugly in LyX.
+			eat_whitespace(p, os, parent_context, false);
+		}
 	}
 
 	else if (unstarred_name == "tabular" || name == "longtable") {
@@ -1900,7 +1907,8 @@ void parse_text(Parser & p, ostream & os, unsigned flags, bool outer,
 			context.check_layout(os);
 			begin_inset(os, "Formula ");
 			Token const & n = p.get_token();
-			if (n.cat() == catMath && outer) {
+			bool const display(n.cat() == catMath && outer);
+			if (display) {
 				// TeX's $$...$$ syntax for displayed math
 				os << "\\[";
 				parse_math(p, os, FLAG_SIMPLE, MATH_MODE);
@@ -1914,6 +1922,12 @@ void parse_text(Parser & p, ostream & os, unsigned flags, bool outer,
 				os << '$';
 			}
 			end_inset(os);
+			if (display) {
+				// Prevent the conversion of a line break to a
+				// space (bug 7668). This does not change the
+				// output, but looks ugly in LyX.
+				eat_whitespace(p, os, context, false);
+			}
 		}
 
 		else if (t.cat() == catSuper || t.cat() == catSub)
@@ -2160,6 +2174,10 @@ void parse_text(Parser & p, ostream & os, unsigned flags, bool outer,
 			parse_math(p, os, FLAG_EQUATION, MATH_MODE);
 			os << "\\]";
 			end_inset(os);
+			// Prevent the conversion of a line break to a space
+			// (bug 7668). This does not change the output, but
+			// looks ugly in LyX.
+			eat_whitespace(p, os, context, false);
 		}
 
 		else if (t.cs() == "begin")