diff --git a/lib/rexml/entity.rb b/lib/rexml/entity.rb
index 573db691..5e601521 100644
--- a/lib/rexml/entity.rb
+++ b/lib/rexml/entity.rb
@@ -12,6 +12,7 @@ class Entity < Child
     EXTERNALID = "(?:(?:(SYSTEM)\\s+#{SYSTEMLITERAL})|(?:(PUBLIC)\\s+#{PUBIDLITERAL}\\s+#{SYSTEMLITERAL}))"
     NDATADECL = "\\s+NDATA\\s+#{NAME}"
     PEREFERENCE = "%#{NAME};"
+    PEREFERENCE_RE = /#{PEREFERENCE}/um
     ENTITYVALUE = %Q{((?:"(?:[^%&"]|#{PEREFERENCE}|#{REFERENCE})*")|(?:'([^%&']|#{PEREFERENCE}|#{REFERENCE})*'))}
     PEDEF = "(?:#{ENTITYVALUE}|#{EXTERNALID})"
     ENTITYDEF = "(?:#{ENTITYVALUE}|(?:#{EXTERNALID}(#{NDATADECL})?))"
@@ -19,7 +20,7 @@ class Entity < Child
     GEDECL = "<!ENTITY\\s+#{NAME}\\s+#{ENTITYDEF}\\s*>"
     ENTITYDECL = /\s*(?:#{GEDECL})|(?:#{PEDECL})/um
 
-    attr_reader :name, :external, :ref, :ndata, :pubid
+    attr_reader :name, :external, :ref, :ndata, :pubid, :value
 
     # Create a new entity.  Simple entities can be constructed by passing a
     # name, value to the constructor; this creates a generic, plain entity
@@ -59,6 +60,10 @@ def initialize stream, value=nil, parent=nil, reference=false
         @name = stream
         @value = value
       end
+
+      if PEREFERENCE_RE.match?(@value)
+        raise "Parameter Entity References forbidden in internal subset: #{@value}"
+      end
     end
 
     # Evaluates whether the given string matches an entity definition,
@@ -68,14 +73,11 @@ def Entity::matches? string
     end
 
     # Evaluates to the unnormalized value of this entity; that is, replacing
-    # all entities -- both %ent; and &ent; entities.  This differs from
-    # +value()+ in that +value+ only replaces %ent; entities.
+    # &ent; entities.
     def unnormalized
       document.record_entity_expansion unless document.nil?
-      v = value()
-      return nil if v.nil?
-      @unnormalized = Text::unnormalize(v, parent)
-      @unnormalized
+      return nil if @value.nil?
+      @unnormalized = Text::unnormalize(@value, parent)
     end
 
     #once :unnormalized
@@ -121,46 +123,6 @@ def to_s
       write rv
       rv
     end
-
-    PEREFERENCE_RE = /#{PEREFERENCE}/um
-    # Returns the value of this entity.  At the moment, only internal entities
-    # are processed.  If the value contains internal references (IE,
-    # %blah;), those are replaced with their values.  IE, if the doctype
-    # contains:
-    #  <!ENTITY % foo "bar">
-    #  <!ENTITY yada "nanoo %foo; nanoo>
-    # then:
-    #  doctype.entity('yada').value   #-> "nanoo bar nanoo"
-    def value
-      @resolved_value ||= resolve_value
-    end
-
-    def parent=(other)
-      @resolved_value = nil
-      super
-    end
-
-    private
-    def resolve_value
-      return nil if @value.nil?
-      return @value unless @value.match?(PEREFERENCE_RE)
-
-      matches = @value.scan(PEREFERENCE_RE)
-      rv = @value.clone
-      if @parent
-        sum = 0
-        matches.each do |entity_reference|
-          entity_value = @parent.entity( entity_reference[0] )
-          if sum + entity_value.bytesize > Security.entity_expansion_text_limit
-            raise "entity expansion has grown too large"
-          else
-            sum += entity_value.bytesize
-          end
-          rv.gsub!( /%#{entity_reference.join};/um, entity_value )
-        end
-      end
-      rv
-    end
   end
 
   # This is a set of entity constants -- the ones defined in the XML
diff --git a/lib/rexml/parsers/baseparser.rb b/lib/rexml/parsers/baseparser.rb
index 342f9482..c8fb95cf 100644
--- a/lib/rexml/parsers/baseparser.rb
+++ b/lib/rexml/parsers/baseparser.rb
@@ -125,6 +125,7 @@ class BaseParser
       }
 
       module Private
+        PEREFERENCE_RE = /#{PEREFERENCE}/um
         TAG_PATTERN = /((?>#{QNAME_STR}))\s*/um
         CLOSE_PATTERN = /(#{QNAME_STR})\s*>/um
         ATTLISTDECL_END = /\s+#{NAME}(?:#{ATTDEF})*\s*>/um
@@ -334,6 +335,8 @@ def pull_event
                 match[4] = match[4][1..-2] # HREF
                 match.delete_at(5) if match.size > 5 # Chop out NDATA decl
                 # match is [ :entity, name, PUBLIC, pubid, href(, ndata)? ]
+              elsif Private::PEREFERENCE_RE.match?(match[2])
+                raise REXML::ParseException.new("Parameter Entity References forbidden in internal subset: #{match[2]}", @source)
               else
                 match[2] = match[2][1..-2]
                 match.pop if match.size == 4
diff --git a/test/test_document.rb b/test/test_document.rb
index 72ec3579..25a8828f 100644
--- a/test/test_document.rb
+++ b/test/test_document.rb
@@ -147,56 +147,6 @@ def test_entity_expansion_text_limit
           assert_equal(90, doc.root.children.first.value.bytesize)
         end
       end
-
-      class ParameterEntityTest < self
-        def test_have_value
-          xml = <<EOF
-<!DOCTYPE root [
-  <!ENTITY % a "BOOM.BOOM.BOOM.BOOM.BOOM.BOOM.BOOM.BOOM.BOOM.">
-  <!ENTITY % b "%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;">
-  <!ENTITY % c "%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;">
-  <!ENTITY % d "%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;">
-  <!ENTITY % e "%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;">
-  <!ENTITY % f "%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;">
-  <!ENTITY % g "%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;">
-  <!ENTITY test "test %g;">
-]>
-<cd></cd>
-EOF
-
-          assert_raise(REXML::ParseException) do
-            REXML::Document.new(xml)
-          end
-          REXML::Security.entity_expansion_limit = 100
-          assert_equal(100, REXML::Security.entity_expansion_limit)
-          assert_raise(REXML::ParseException) do
-            REXML::Document.new(xml)
-          end
-        end
-
-        def test_empty_value
-          xml = <<EOF
-<!DOCTYPE root [
-  <!ENTITY % a "">
-  <!ENTITY % b "%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;%a;">
-  <!ENTITY % c "%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;%b;">
-  <!ENTITY % d "%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;%c;">
-  <!ENTITY % e "%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;%d;">
-  <!ENTITY % f "%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;%e;">
-  <!ENTITY % g "%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;%f;">
-  <!ENTITY test "test %g;">
-]>
-<cd></cd>
-EOF
-
-          REXML::Document.new(xml)
-          REXML::Security.entity_expansion_limit = 90
-          assert_equal(90, REXML::Security.entity_expansion_limit)
-          assert_raise(REXML::ParseException) do
-            REXML::Document.new(xml)
-          end
-        end
-      end
     end
 
     def test_tag_in_cdata_with_not_ascii_only_but_ascii8bit_encoding_source
diff --git a/test/test_entity.rb b/test/test_entity.rb
index 61d1c041..c9b30e4f 100644
--- a/test/test_entity.rb
+++ b/test/test_entity.rb
@@ -59,8 +59,7 @@ def test_parse_entity
 
     def test_constructor
       one = [ %q{<!ENTITY % YN '"Yes"'>},
-        %q{<!ENTITY % YN2 "Yes">},
-        %q{<!ENTITY WhatHeSaid "He said %YN;">},
+        %q{<!ENTITY WhatHeSaid 'He said "Yes"'>},
         '<!ENTITY open-hatch
                 SYSTEM "http://www.textuality.com/boilerplate/OpenHatch.xml">',
         '<!ENTITY open-hatch2
@@ -71,8 +70,7 @@ def test_constructor
                 NDATA gif>' ]
       source = %q{<!DOCTYPE foo [
         <!ENTITY % YN '"Yes"'>
-        <!ENTITY % YN2 "Yes">
-        <!ENTITY WhatHeSaid "He said %YN;">
+        <!ENTITY WhatHeSaid 'He said "Yes"'>
         <!ENTITY open-hatch
                 SYSTEM "http://www.textuality.com/boilerplate/OpenHatch.xml">
         <!ENTITY open-hatch2
@@ -138,6 +136,28 @@ def test_doctype_entity_with_nested_references
       assert_equal("X", doctype.entities["b"].unnormalized)
     end
 
+    def test_parameter_entity_reference_forbidden_by_internal_subset_in_new
+      assert_raise(RuntimeError.new('Parameter Entity References forbidden in internal subset: %a;')) do
+        REXML::Entity.new( [:entitydecl, "c", "%a;"])
+      end
+    end
+
+    def test_parameter_entity_reference_forbidden_by_internal_subset_in_parser
+      source = '<!DOCTYPE root [ <!ENTITY % a "B" > <!ENTITY c "%a;" > ]><root/>'
+      parser = REXML::Parsers::BaseParser.new(source)
+      exception = assert_raise(REXML::ParseException) do
+        while parser.has_next?
+          parser.pull
+        end
+      end
+      assert_equal(<<-DETAIL, exception.to_s)
+Parameter Entity References forbidden in internal subset: "%a;"
+Line: 1
+Position: 54
+Last 80 unconsumed characters:
+      DETAIL
+    end
+
     def test_entity_string_limit
       template = '<!DOCTYPE bomb [ <!ENTITY a "^" > ]> <bomb>$</bomb>'
       len      = 5120 # 5k per entity
@@ -156,22 +176,6 @@ def test_entity_string_limit
       end
     end
 
-    def test_entity_string_limit_for_parameter_entity
-      template = '<!DOCTYPE bomb [ <!ENTITY % a "^" > <!ENTITY bomb "$" > ]><root/>'
-      len      = 5120 # 5k per entity
-      template.sub!(/\^/, "B" * len)
-
-      # 10k is OK
-      entities = '%a;' * 2 # 5k entity * 2 = 10k
-      REXML::Document.new(template.sub(/\$/, entities))
-
-      # above 10k explodes
-      entities = '%a;' * 3 # 5k entity * 2 = 15k
-      assert_raise(REXML::ParseException) do
-        REXML::Document.new(template.sub(/\$/, entities))
-      end
-    end
-
     def test_raw
       source = '<!DOCTYPE foo [
 <!ENTITY ent "replace">
@@ -195,7 +199,7 @@ def test_lazy_evaluation
     def test_entity_replacement
       source = %q{<!DOCTYPE foo [
       <!ENTITY % YN '"Yes"'>
-      <!ENTITY WhatHeSaid "He said %YN;">]>
+      <!ENTITY WhatHeSaid 'He said "Yes"'>]>
       <a>&WhatHeSaid;</a>}
 
       d = REXML::Document.new( source )