diff --git a/rxjava-core/src/main/java/rx/Observable.java b/rxjava-core/src/main/java/rx/Observable.java
index c6f17c3149..b7fba3ca30 100644
--- a/rxjava-core/src/main/java/rx/Observable.java
+++ b/rxjava-core/src/main/java/rx/Observable.java
@@ -29,6 +29,7 @@
 import org.mockito.Mockito;
 import org.mockito.MockitoAnnotations;
 
+import rx.observables.GroupedObservable;
 import rx.operators.*;
 import rx.plugins.RxJavaErrorHandler;
 import rx.plugins.RxJavaPlugins;
@@ -65,7 +66,7 @@ protected Observable() {
         this(null, false);
     }
 
-    private Observable(Func1<Observer<T>, Subscription> onSubscribe, boolean isTrusted) {
+    /*package*/ Observable(Func1<Observer<T>, Subscription> onSubscribe, boolean isTrusted) {
         this.onSubscribe = onSubscribe;
         this.isTrusted = isTrusted;
     }
@@ -1031,6 +1032,34 @@ public static <T> Observable<T> concat(Observable<T>... source) {
         return _create(OperationConcat.concat(source));
     }
 
+    /**
+     * Groups the elements of an observable and selects the resulting elements by using a specified function.
+     *
+     * @param source an observable whose elements to group.
+     * @param keySelector a function to extract the key for each element.
+     * @param elementSelector a function to map each source element to an element in an observable group.
+     * @param <K> the key type.
+     * @param <T> the source type.
+     * @param <R> the resulting observable type.
+     * @return an observable of observable groups, each of which corresponds to a unique key value, containing all elements that share that same key value.
+     */
+    public static <K, T, R> Observable<GroupedObservable<K, R>> groupBy(Observable<T> source, final Func1<T, K> keySelector, final Func1<T, R> elementSelector) {
+        return _create(OperatorGroupBy.groupBy(source, keySelector, elementSelector));
+    }
+
+    /**
+     * Groups the elements of an observable according to a specified key selector function and
+     *
+     * @param source an observable whose elements to group.
+     * @param keySelector a function to extract the key for each element.
+     * @param <K> the key type.
+     * @param <T> the source type.
+     * @return an observable of observable groups, each of which corresponds to a unique key value, containing all elements that share that same key value.
+     */
+    public static <K, T> Observable<GroupedObservable<K, T>> groupBy(Observable<T> source, final Func1<T, K> keySelector) {
+        return _create(OperatorGroupBy.groupBy(source, keySelector));
+    }
+
     /**
      * Same functionality as <code>merge</code> except that errors received to onError will be held until all sequences have finished (onComplete/onError) before sending the error.
      * <p>
@@ -2931,6 +2960,34 @@ public Iterable<T> toIterable() {
         return toIterable(this);
     }
 
+    public Observable<T> startWith(T... values) {
+        return concat(Observable.<T>from(values), this);
+    }
+
+    /**
+     * Groups the elements of an observable and selects the resulting elements by using a specified function.
+     *
+     * @param keySelector a function to extract the key for each element.
+     * @param elementSelector a function to map each source element to an element in an observable group.
+     * @param <K> the key type.
+     * @param <R> the resulting observable type.
+     * @return an observable of observable groups, each of which corresponds to a unique key value, containing all elements that share that same key value.
+     */
+    public <K, R> Observable<GroupedObservable<K, R>> groupBy(final Func1<T, K> keySelector, final Func1<T, R> elementSelector) {
+        return groupBy(this, keySelector, elementSelector);
+    }
+
+    /**
+     * Groups the elements of an observable according to a specified key selector function and
+     *
+     * @param keySelector a function to extract the key for each element.
+     * @param <K> the key type.
+     * @return an observable of observable groups, each of which corresponds to a unique key value, containing all elements that share that same key value.
+     */
+    public <K> Observable<GroupedObservable<K, T>> groupBy(final Func1<T, K> keySelector) {
+        return groupBy(this, keySelector);
+    }
+
     /**
      * Returns an iterator that iterates all values of the observable.
      *
diff --git a/rxjava-core/src/main/java/rx/observables/GroupedObservable.java b/rxjava-core/src/main/java/rx/observables/GroupedObservable.java
new file mode 100644
index 0000000000..28ee67de49
--- /dev/null
+++ b/rxjava-core/src/main/java/rx/observables/GroupedObservable.java
@@ -0,0 +1,43 @@
+/**
+ * Copyright 2013 Netflix, Inc.
+ * 
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ * 
+ * http://www.apache.org/licenses/LICENSE-2.0
+ * 
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+package rx.observables;
+
+import rx.Observable;
+import rx.Observer;
+import rx.Subscription;
+import rx.util.functions.Func1;
+
+/**
+ * An {@link Observable} that has been grouped by a key whose value can be obtained using {@link #getKey()} <p>
+ * 
+ * @see {@link Observable#groupBy(Observable, Func1)}
+ * 
+ * @param <K>
+ * @param <T>
+ */
+public class GroupedObservable<K, T> extends Observable<T> {
+    private final K key;
+
+    public GroupedObservable(K key, Func1<Observer<T>, Subscription> onSubscribe) {
+        super(onSubscribe);
+        this.key = key;
+    }
+
+    public K getKey() {
+        return key;
+    }
+
+}
diff --git a/rxjava-core/src/main/java/rx/operators/OperatorGroupBy.java b/rxjava-core/src/main/java/rx/operators/OperatorGroupBy.java
new file mode 100644
index 0000000000..2ebe77e652
--- /dev/null
+++ b/rxjava-core/src/main/java/rx/operators/OperatorGroupBy.java
@@ -0,0 +1,175 @@
+/**
+ * Copyright 2013 Netflix, Inc.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+package rx.operators;
+
+import org.junit.Test;
+import rx.Observable;
+import rx.Observer;
+import rx.Subscription;
+import rx.observables.GroupedObservable;
+import rx.util.functions.Func1;
+import rx.util.functions.Functions;
+
+import java.util.*;
+import java.util.concurrent.ConcurrentHashMap;
+
+import static org.junit.Assert.*;
+
+public final class OperatorGroupBy {
+
+    public static <K, T, R> Func1<Observer<GroupedObservable<K, R>>, Subscription> groupBy(Observable<T> source, final Func1<T, K> keySelector, final Func1<T, R> elementSelector) {
+
+        final Observable<KeyValue<K, R>> keyval = source.map(new Func1<T, KeyValue<K, R>>() {
+            @Override
+            public KeyValue<K, R> call(T t) {
+                K key = keySelector.call(t);
+                R value = elementSelector.call(t);
+
+                return new KeyValue<K, R>(key, value);
+            }
+        });
+
+        return new GroupBy<K, R>(keyval);
+    }
+
+    public static <K, T> Func1<Observer<GroupedObservable<K, T>>, Subscription> groupBy(Observable<T> source, final Func1<T, K> keySelector) {
+        return groupBy(source, keySelector, Functions.<T>identity());
+    }
+
+    private static class GroupBy<K, V> implements Func1<Observer<GroupedObservable<K, V>>, Subscription> {
+        private final Observable<KeyValue<K, V>> source;
+        private final ConcurrentHashMap<K, Boolean> keys = new ConcurrentHashMap<K, Boolean>();
+
+        private GroupBy(Observable<KeyValue<K, V>> source) {
+            this.source = source;
+        }
+
+
+        @Override
+        public Subscription call(final Observer<GroupedObservable<K, V>> observer) {
+
+            return source.subscribe(new Observer<KeyValue<K, V>>() {
+
+                @Override
+                public void onCompleted() {
+                    observer.onCompleted();
+                }
+
+                @Override
+                public void onError(Exception e) {
+                    observer.onError(e);
+                }
+
+                @Override
+                public void onNext(final KeyValue<K, V> args) {
+                    K key = args.key;
+                    boolean newGroup = keys.putIfAbsent(key, true) == null;
+                    if (newGroup) {
+                        observer.onNext(buildObservableFor(source, key));
+                    }
+                }
+
+            });
+        }
+    }
+
+    private static <K, R> GroupedObservable<K, R> buildObservableFor(Observable<KeyValue<K, R>> source, final K key) {
+        final Observable<R> observable = source.filter(new Func1<KeyValue<K, R>, Boolean>() {
+            @Override
+            public Boolean call(KeyValue<K, R> pair) {
+                return key.equals(pair.key);
+            }
+        }).map(new Func1<KeyValue<K, R>, R>() {
+            @Override
+            public R call(KeyValue<K, R> pair) {
+                return pair.value;
+            }
+        });
+        return new GroupedObservable<K, R>(key, new Func1<Observer<R>, Subscription>() {
+
+            @Override
+            public Subscription call(Observer<R> observer) {
+                return observable.subscribe(observer);
+            }
+
+        });
+    }
+
+    private static class KeyValue<K, V> {
+        private final K key;
+        private final V value;
+
+        private KeyValue(K key, V value) {
+            this.key = key;
+            this.value = value;
+        }
+    }
+
+    public static class UnitTest {
+        final Func1<String, Integer> length = new Func1<String, Integer>() {
+            @Override
+            public Integer call(String s) {
+                return s.length();
+            }
+        };
+
+        @Test
+        public void testGroupBy() {
+            Observable<String> source = Observable.from("one", "two", "three", "four", "five", "six");
+            Observable<GroupedObservable<Integer, String>> grouped = Observable.create(groupBy(source, length));
+
+            Map<Integer, List<String>> map = toMap(grouped);
+
+            assertEquals(3, map.size());
+            assertEquals(Arrays.asList("one", "two", "six"), map.get(3));
+            assertEquals(Arrays.asList("four", "five"), map.get(4));
+            assertEquals(Arrays.asList("three"), map.get(5));
+
+        }
+
+        @Test
+        public void testEmpty() {
+            Observable<String> source = Observable.from();
+            Observable<GroupedObservable<Integer, String>> grouped = Observable.create(groupBy(source, length));
+
+            Map<Integer, List<String>> map = toMap(grouped);
+
+            assertTrue(map.isEmpty());
+        }
+
+        private static <K, V> Map<K, List<V>> toMap(Observable<GroupedObservable<K, V>> observable) {
+            Map<K, List<V>> result = new HashMap<K, List<V>>();
+            for (GroupedObservable<K, V> g : observable.toIterable()) {
+                K key = g.getKey();
+
+                for (V value : g.toIterable()) {
+                    List<V> values = result.get(key);
+                    if (values == null) {
+                        values = new ArrayList<V>();
+                        result.put(key, values);
+                    }
+
+                    values.add(value);
+                }
+
+            }
+
+            return result;
+        }
+
+    }
+
+}
diff --git a/rxjava-core/src/main/java/rx/util/functions/Functions.java b/rxjava-core/src/main/java/rx/util/functions/Functions.java
index 3267e0f540..93a4049c08 100644
--- a/rxjava-core/src/main/java/rx/util/functions/Functions.java
+++ b/rxjava-core/src/main/java/rx/util/functions/Functions.java
@@ -555,6 +555,11 @@ public static <T> Func1<T, Boolean> alwaysTrue() {
         return (Func1<T, Boolean>) AlwaysTrue.INSTANCE;
     }
 
+    @SuppressWarnings("unchecked")
+    public static <T> Func1<T, T> identity() {
+        return (Func1<T, T>) Identity.INSTANCE;
+    }
+
     private enum AlwaysTrue implements Func1<Object, Boolean> {
         INSTANCE;
 
@@ -564,4 +569,13 @@ public Boolean call(Object o) {
         }
     }
 
+    private enum Identity implements Func1<Object, Object> {
+        INSTANCE;
+
+        @Override
+        public Object call(Object o) {
+            return o;
+        }
+    }
+
 }