diff --git a/murphi-format/src/format.c b/murphi-format/src/format.c
index e3524b17..10b9b79e 100644
--- a/murphi-format/src/format.c
+++ b/murphi-format/src/format.c
@@ -54,6 +54,9 @@ typedef struct state {
 
   /// have we output anything to `dst` yet?
   bool started;
+
+  /// have we seen `==>` and are thus anticipating `begin`?
+  bool arrow_expecting_begin;
 } state_t;
 
 /// are two strings equal?
@@ -135,8 +138,13 @@ static int pend_newline(state_t *st, token_t token) {
   if (token.type == TOKEN_EOF)
     goto done;
   size_t indentation = st->indentation;
-  if (token.type != TOKEN_ID || !streq(token.text, "begin"))
+  if (token.type != TOKEN_ID || !streq(token.text, "begin")) {
     indentation += st->soft_indentation;
+  } else if (st->arrow_expecting_begin) {
+    st->indentation--;
+    --indentation;
+    st->arrow_expecting_begin = false;
+  }
   for (size_t i = 0; i < indentation; ++i) {
     if (fputs(tab, st->dst) < 0) {
       rc = EIO;
@@ -165,6 +173,7 @@ static int arrow_lookahead(state_t *st, token_t token) {
 
   // otherwise infer a newline and indent
   ++st->indentation;
+  st->arrow_expecting_begin = true;
   rc = pend_newline(st, token);
 
 done:
diff --git a/tests/tests.py b/tests/tests.py
index d616ecbd..91ed99dd 100644
--- a/tests/tests.py
+++ b/tests/tests.py
@@ -1074,7 +1074,7 @@ def test_murphi_format_not_unicode():
     assert ":= ¬y" in stdout, "`¬` spaced incorrectly"
 
 
-def test_muprhi_format_smart_quotes():
+def test_murphi_format_smart_quotes():
     """murphi-format should handle smart quotes (“”) correctly"""
 
     model = "rule begin assert “foo bar” x; end"
@@ -1216,6 +1216,29 @@ def test_murphi_format_end_newline():
     assert stdout.endswith("\n"), "incorrect file ending"
 
 
+def test_murphi_format_arrow_break_dedent():
+    """
+    is murphi-format’s indenting confused by `==>\n\n`?
+
+    https://github.com/Smattr/rumur/issues/339
+    """
+
+    # a rule that has a paragraph break after `==>`
+    src = 'rule"foo"==>\n\nvar x:boolean;begin x:=false;end;'
+
+    # run this through `murphi-format`
+    ret, stdout, stderr = run(["murphi-format"], src)
+    if ret != 0:
+        sys.stdout.write(stdout)
+        sys.stderr.write(stderr)
+    assert ret == 0, "failed to reflow Murphi snippet"
+    assert stderr == "", "murphi-format printed errors/warnings"
+
+    # if indentation was not mismanaged, ending indentation should be 0
+    # did we get the expected reflowing?
+    assert stdout.endswith("\nend;\n"), "incorrect handling of `==><NL><NL>`"
+
+
 @pytest.mark.parametrize("component", ("list", "set"))
 @pytest.mark.skipif(shutil.which("m4") is None, reason="m4 not available")
 def test_stdlib(component, tmp_path):