diff --git a/src/test/extension.test.ts b/src/test/extension.test.ts
index a4368e9..77ef70e 100644
--- a/src/test/extension.test.ts
+++ b/src/test/extension.test.ts
@@ -101,6 +101,26 @@ describe("V2XmlFormatter", () => {
         });
     });
 
+    describe("#minifyXml(xml, options)", () => {
+
+        const options = {
+            editorOptions: {
+                insertSpaces: true,
+                tabSize: 4
+            },
+            enforcePrettySelfClosingTagOnFormat: false,
+            newLine: "\r\n",
+            removeCommentsOnMinify: false,
+            splitAttributesOnFormat: false,
+            splitXmlnsOnFormat: true
+        };
+
+        it("should preserve whitespace on minify if xml:space is set to 'preserve-whitespace'", () => {
+            testMinifier(xmlFormatter, options, "issue-262");
+        });
+
+    });
+
 });
 
 function testFormatter(xmlFormatter: XmlFormatter, options: XmlFormattingOptions, fileLabel: string): void {
@@ -111,3 +131,12 @@ function testFormatter(xmlFormatter: XmlFormatter, options: XmlFormattingOptions
 
     assert.equal(actualFormattedXml, expectedFormattedXml, "Actual formatted XML does not match expected formatted XML.");
 }
+
+function testMinifier(xmlFormatter: XmlFormatter, options: XmlFormattingOptions, fileLabel: string): void {
+    const expectedMinifiedXml = TestDataLoader.load(`${fileLabel}.minified.xml`);
+    const unminifiedXml = TestDataLoader.load(`${fileLabel}.unminified.xml`);
+
+    const actualMinifiedXml = xmlFormatter.minifyXml(unminifiedXml, options);
+
+    assert.equal(actualMinifiedXml, expectedMinifiedXml, "Actual minified XML does not match expected minified XML.");
+}
diff --git a/src/test/test-data/issue-262.minified.xml b/src/test/test-data/issue-262.minified.xml
new file mode 100644
index 0000000..beed2a0
--- /dev/null
+++ b/src/test/test-data/issue-262.minified.xml
@@ -0,0 +1,13 @@
+<tests><test>1.
+2.
+3.
+4.</test><test xml:space="preserve">1.
+2.
+3.
+4.</test><test>1.
+ 2.
+ 3.
+ 4.</test><test xml:space="preserve">1.
+ 2.
+ 3.
+ 4.</test></tests>
\ No newline at end of file
diff --git a/src/test/test-data/issue-262.unminified.xml b/src/test/test-data/issue-262.unminified.xml
new file mode 100644
index 0000000..023f4e0
--- /dev/null
+++ b/src/test/test-data/issue-262.unminified.xml
@@ -0,0 +1,18 @@
+<tests>
+<test>1.
+2.
+3.
+4.</test>
+<test xml:space="preserve">1.
+2.
+3.
+4.</test>
+<test>1.
+ 2.
+ 3.
+ 4.</test>
+<test xml:space="preserve">1.
+ 2.
+ 3.
+ 4.</test>
+</tests>
\ No newline at end of file