diff --git a/package.json b/package.json
index d1af960..54cdf43 100644
--- a/package.json
+++ b/package.json
@@ -80,6 +80,11 @@
                     "type": "boolean",
                     "default": false,
                     "description": "When creating a hanging indent, do not put the closing bracket on its own line."
+                },
+                "pythonIndent.closeHangingIndent": {
+                    "type": "boolean",
+                    "default": false,
+                    "description": "Close a hanging indent when pressing Enter right before the closing bracket."
                 }
             }
         }
diff --git a/src/indent.ts b/src/indent.ts
index 89e4d28..5831b88 100644
--- a/src/indent.ts
+++ b/src/indent.ts
@@ -29,14 +29,20 @@ export function newlineAndIndent(
     let toInsert = '\n';
 
     try {
+        // TODO: Is this if test necessary? The keybindings in package.json already check this.
         if (textEditor.document.languageId === 'python') {
             const lines = textEditor.document.getText(
                 new vscode.Range(0, 0, position.line, position.character)).split("\n");
+            const remainder = textEditor.document.getText(
+                new vscode.Range(position.line, position.character, position.line, currentLine.length)).trim();
+            // Tell editsToMake to add a dedent if the curser is right before the closing bracket for a hanging indent.
+            const dedentIfHanging = "]})".includes(remainder[0]) && settings.closeHangingIndent;
 
             const edits = editsToMake(
                 lines, currentLine, tabSize, position.line, position.character,
                 settings.trimLinesWithOnlyWhitespace,
-                settings.keepHangingBracketOnLine);
+                settings.keepHangingBracketOnLine,
+                dedentIfHanging);
             toInsert = edits.insert;
             edits.deletes.forEach(range => { edit.delete(range); });
             hanging = edits.hanging;
@@ -64,9 +70,10 @@ export function editsToMake(
     lineNum: number,
     charNum: number,
     trimLinesWithOnlyWhitespace: boolean,
-    keepHangingBracketOnLine: boolean
+    keepHangingBracketOnLine: boolean,
+    dedentIfHanging?: boolean
 ): { insert: string; deletes: vscode.Range[]; hanging: Hanging } {
-    let { nextIndentationLevel: indent, parseOutput: parseOut } = indentationInfo(lines, tabSize);
+    let { nextIndentationLevel: indent, parseOutput: parseOut } = indentationInfo(lines, tabSize, dedentIfHanging);
     let deletes: vscode.Range[] = [];
 
     // If cursor has whitespace to the right, followed by non-whitespace,
diff --git a/src/parser.ts b/src/parser.ts
index 02c2227..7dababb 100644
--- a/src/parser.ts
+++ b/src/parser.ts
@@ -20,7 +20,7 @@ export function indentationLevel(line: string): number {
     return line.search(/\S|$/);
 }
 
-function nextIndentationLevel(parseOutput: IParseOutput, lines: string[], tabSize: number): number {
+function nextIndentationLevel(parseOutput: IParseOutput, lines: string[], tabSize: number, dedentIfHanging?: boolean): number {
     const row = lines.length - 1;
     // openBracketStack: A stack of [row, col] pairs describing where open brackets are
     // lastClosedRow: Either empty, or an array [rowOpen, rowClose] describing the rows
@@ -85,7 +85,11 @@ function nextIndentationLevel(parseOutput: IParseOutput, lines: string[], tabSiz
         // Thus, nothing has happened that could have changed the
         // indentation level since the previous line, so
         // we should use whatever indent we are given.
-        return indentationLevel(lines[row]);
+        indentColumn = indentationLevel(lines[row]);
+        if (dedentIfHanging) {
+            // We're in a hanging indent, so we obey dedentIfHanging.
+            indentColumn -= tabSize;
+        }
     } else if (justClosedBracket && closedBracketOpenedAfterLineWithCurrentOpen) {
         // A bracket that was opened after the most recent open
         // bracket was closed on the line we just finished typing.
@@ -108,6 +112,10 @@ function nextIndentationLevel(parseOutput: IParseOutput, lines: string[], tabSiz
         // before the "9", because it would try to match it up with the
         // open bracket instead of using the hanging indent.
         indentColumn = indentationLevel(lines[last_closed_info.open]);
+        if (dedentIfHanging) {
+            // We're in a hanging indent, so we obey dedentIfHanging.
+            indentColumn -= tabSize;
+        }
     } else {
         // lastOpenBracketLocation[1] is the column where the bracket was,
         // so need to bump up the indentation by one
@@ -117,9 +125,9 @@ function nextIndentationLevel(parseOutput: IParseOutput, lines: string[], tabSiz
     return indentColumn;
 }
 
-export function indentationInfo(lines: string[], tabSize: number): { nextIndentationLevel: number; parseOutput: IParseOutput } {
+export function indentationInfo(lines: string[], tabSize: number, dedentIfHanging?: boolean): { nextIndentationLevel: number; parseOutput: IParseOutput } {
     const parseOutput = parse_lines(lines);
-    const nextIndent = nextIndentationLevel(parseOutput, lines, tabSize);
+    const nextIndent = nextIndentationLevel(parseOutput, lines, tabSize, dedentIfHanging);
     return { nextIndentationLevel: nextIndent, parseOutput };
 }
 
diff --git a/src/test/suite/indent.test.ts b/src/test/suite/indent.test.ts
index cf95247..7235e09 100644
--- a/src/test/suite/indent.test.ts
+++ b/src/test/suite/indent.test.ts
@@ -382,6 +382,7 @@ def f():
         ]
     ];
     simpleCases.forEach((inputOutput, index) => {
+        // TODO: add tests for new closeHangingIndent option. Probbaly other tests need edits, too.
         let paramGrid: [boolean, boolean][] = [
             [false, false], [false, true], [true, false], [true, true]];
         test("simple case # " + (index + 1).toString(), async () => {