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    <p>You are really close, you just need to move your <code>&lt;xsl:variable name="ID" select="@Id"/&gt;</code> and your <code>&lt;xsl:apply-templates select="//row[@ParentId=$ID]"/&gt;</code> outside of your <code>&lt;ul&gt;...&lt;/ul&gt;</code> statement.</p> <pre><code>&lt;xsl:stylesheet xmlns:xsl="http://www.w3.org/1999/XSL/Transform" version="1.0"&gt; &lt;xsl:template match="/"&gt; &lt;ul id="someid" class="menu"&gt; &lt;xsl:apply-templates select="root/row[not(@ParentId)]"/&gt; &lt;/ul&gt; &lt;/xsl:template&gt; &lt;xsl:template match="row"&gt; &lt;xsl:variable name="ID" select="@Id"/&gt; &lt;li&gt; &lt;xsl:attribute name="rel"&gt; &lt;xsl:value-of select="@Id"/&gt; &lt;/xsl:attribute&gt; &lt;xsl:value-of select="@Name"/&gt; &lt;/li&gt; &lt;xsl:if test="//row[@ParentId=$ID]"&gt; &lt;ul&gt; &lt;xsl:apply-templates select="//row[@ParentId=$ID]"/&gt; &lt;/ul&gt; &lt;/xsl:if&gt; &lt;/xsl:template&gt; &lt;/xsl:stylesheet&gt; </code></pre> <p>this produces the result I think you are looking for</p> <pre><code>&lt;ul id="someid" class="menu"&gt; &lt;li rel="2"&gt;data&lt;/li&gt; &lt;ul&gt; &lt;li rel="6"&gt;folder&lt;/li&gt; &lt;/ul&gt; &lt;li rel="3"&gt;people&lt;/li&gt; &lt;ul&gt; &lt;li rel="4"&gt;person&lt;/li&gt; &lt;li rel="7"&gt;thing&lt;/li&gt; &lt;/ul&gt; &lt;li rel="8"&gt;web&lt;/li&gt; &lt;ul&gt; &lt;li rel="9"&gt;link&lt;/li&gt; &lt;/ul&gt; &lt;/ul&gt; </code></pre> <p>this also removes the extra <code>&lt;ul&gt;</code> before the top level <code>&lt;li rel="2"&gt;</code></p>
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