diff --git a/grade/lib.php b/grade/lib.php
index ca85582f943..f968fd5974e 100644
--- a/grade/lib.php
+++ b/grade/lib.php
@@ -347,10 +347,9 @@ class grade_tree {
      * @param int $courseid
      * @param boolean $fillers include fillers and colspans, make the levels var "rectangular"
      * @param boolean $category_grade_last category grade item is the last child
-     * @param boolean $aggregation_view Either full view (0) or compact view (1)
+     * @param array $collapsed array of collapsed categories
      */
-    function grade_tree($courseid, $fillers=true, $category_grade_last=false,
-                        $aggregation_view=GRADE_REPORT_AGGREGATION_VIEW_FULL) {
+    function grade_tree($courseid, $fillers=true, $category_grade_last=false, $collapsed=null) {
         global $USER, $CFG;
 
         $this->courseid   = $courseid;
@@ -361,6 +360,12 @@ class grade_tree {
         // get course grade tree
         $this->top_element = grade_category::fetch_course_tree($courseid, true);
 
+        // collapse the categories if requested
+        if (!empty($collapsed)) {
+            grade_tree::category_collapse($this->top_element, $collapsed);
+        }
+
+        // move category item to last position in category
         if ($category_grade_last) {
             grade_tree::category_grade_last($this->top_element);
         }
@@ -375,6 +380,31 @@ class grade_tree {
         grade_tree::fill_levels($this->levels, $this->top_element, 0);
     }
 
+    /**
+     * Static recursive helper - removes items from collapsed categories
+     * @static
+     * @param array $element The seed of the recursion
+     * @param array $collapsed array of collapsed categories
+     * @return void
+     */
+    function category_collapse(&$element, $collapsed) {
+        if ($element['type'] != 'category') {
+            return;
+        }
+        if (empty($element['children']) or count($element['children']) < 2) {
+            return;
+        }
+
+        if (in_array($element['object']->id, $collapsed)) {
+            $category_item = reset($element['children']); //keep only category item
+            $element['children'] = array(key($element['children'])=>$category_item);
+
+        } else {
+            foreach ($element['children'] as $sortorder=>$child) {
+                grade_tree::category_collapse($element['children'][$sortorder], $collapsed);
+            }
+        }
+    }
 
     /**
      * Static recursive helper - makes the grade_item for category the last children
diff --git a/grade/report/grader/lib.php b/grade/report/grader/lib.php
index 1e106835ee2..8f9ce4fe29f 100644
--- a/grade/report/grader/lib.php
+++ b/grade/report/grader/lib.php
@@ -51,6 +51,12 @@ class grade_report_grader extends grade_report {
      */
     var $userselect;
 
+    /**
+     * List of collapsed captegories from user perference
+     * @var array $collapsed
+     */
+    var $collapsed;
+
     /**
      * Constructor. Sets local copies of user preferences and initialises grade_tree.
      * @param int $courseid
@@ -63,6 +69,20 @@ class grade_report_grader extends grade_report {
         global $CFG;
         parent::grade_report($courseid, $gpr, $context, $page);
 
+        // load collapsed settings for this report
+        if ($collapsed = get_user_preferences('grade_report_grader_collapsed_categories')) {
+            $this->collapsed = unserialize($collapsed);
+            foreach ($this->collapsed as $key=>$id) {
+                if ($this->get_pref('aggregationview', $id) == GRADE_REPORT_AGGREGATION_VIEW_FULL) {
+                    unset($this->collapsed[$key]); // full view categories can not be collapsed
+                }
+            }
+        } else {
+            $this->collapsed = array();
+        }
+        // Grab the grade_tree for this course
+        $this->gtree = new grade_tree($this->courseid, true, $this->get_pref('aggregationposition'), $this->collapsed);
+
         $this->sortitemid = $sortitemid;
 
         // base url for sorting by first/last name
@@ -434,8 +454,9 @@ class grade_report_grader extends grade_report {
                     $headerhtml .= '<th class="'.$type.$catlevel.'" '.$colspan.'>&nbsp;</th>';
                 }
 // Element is a category
-                else if ($type == 'category' && !in_array($eid, $columns_to_unset)) {
+                else if ($type == 'category') {
                     $headerhtml .= '<th class="category'.$catlevel.'" '.$colspan.'>'.$element['object']->get_name();
+                    $headerhtml .= $this->get_collapsing_icon($element);
 
                     // Print icons
                     if ($USER->gradeediting[$this->courseid]) {
@@ -445,7 +466,7 @@ class grade_report_grader extends grade_report {
                     $headerhtml .= '</th>';
                 }
 // Element is a grade_item
-                elseif (!in_array($eid, $columns_to_unset)) {
+                else {
                     if ($element['object']->id == $this->sortitemid) {
                         if ($this->sortorder == 'ASC') {
                             $arrow = print_arrow('up', $strsortasc, true);
@@ -879,7 +900,6 @@ class grade_report_grader extends grade_report {
         $edit_icon             = $this->gtree->get_edit_icon($element, $this->gpr);
         $edit_calculation_icon = '';
         $show_hide_icon        = '';
-        $contract_expand_icon  = '';
         $lock_unlock_icon      = '';
 
         if ($this->get_pref('showcalculations')) {
@@ -894,6 +914,18 @@ class grade_report_grader extends grade_report {
             $lock_unlock_icon = $this->gtree->get_locking_icon($element, $this->gpr);
         }
 
+        return '<div class="grade_icons">'.$edit_icon.$edit_calculation_icon.$show_hide_icon.$lock_unlock_icon.'</div>';
+    }
+
+    /**
+     * Given a category element returns collapsing +/- icon if available
+     * @param object $object
+     * @return string HTML
+     */
+    function get_collapsing_icon($element) {
+        global $CFG;
+
+        $contract_expand_icon = '';
         // If object is a category, display expand/contract icon
         if ($element['type'] == 'category' && $this->get_pref('aggregationview', $element['object']->id) == GRADE_REPORT_AGGREGATION_VIEW_COMPACT) {
             // Load language strings
@@ -901,18 +933,14 @@ class grade_report_grader extends grade_report {
             $strswitch_plus  = $this->get_lang_string('expand', 'grades');
             $expand_contract = 'switch_minus'; // Default: expanded
 
-            $state = get_user_preferences('grade_report_categorystate' . $element['object']->id, GRADE_CATEGORY_EXPANDED);
-
-            if ($state == GRADE_CATEGORY_CONTRACTED) {
+            if (in_array($element['object']->id, $this->collapsed)) {
                 $expand_contract = 'switch_plus';
             }
-            $contract_expand_icon = '<a href="index.php?target=' . $element['eid']
-                              . "&amp;action=$expand_contract" . $this->gtree->commonvars . "\">\n"
-                              . '<img src="'.$CFG->pixpath.'/t/'.$expand_contract.'.gif" class="iconsmall" alt="'
-                              . ${'str' . $expand_contract}.'" title="'.${'str' . $expand_contract}.'" /></a>'. "\n";
+            $url = $this->gpr->get_return_url(null, array('target'=>$element['eid'], 'action'=>$expand_contract, 'sesskey'=>sesskey()));
+            $contract_expand_icon = '<a href="'.$url.'"><img src="'.$CFG->pixpath.'/t/'.$expand_contract.'.gif" class="iconsmall" alt="'
+                                    .${'str'.$expand_contract}.'" title="'.${'str'.$expand_contract}.'" /></a>';
         }
-
-        return '<div class="grade_icons">'.$edit_icon.$edit_calculation_icon.$show_hide_icon.$lock_unlock_icon.$contract_expand_icon.'</div>';
+        return $contract_expand_icon;
     }
 
     /**
@@ -922,15 +950,33 @@ class grade_report_grader extends grade_report {
      * @return
      */
     function process_action($target, $action) {
+        // TODO: this code should be in some grade_tree static method
         $targettype = substr($target, 0, 1);
         $targetid = substr($target, 1);
+        // TODO: end
+
+        if ($collapsed = get_user_preferences('grade_report_grader_collapsed_categories')) {
+            $collapsed = unserialize($collapsed);
+        } else {
+            $collapsed = array();
+        }
+
         switch ($action) {
             case 'switch_minus':
-                set_user_preference('grade_report_categorystate' . $targetid, GRADE_CATEGORY_CONTRACTED);
+                if (!in_array($targetid, $collapsed)) {
+                    $collapsed[] = $targetid;
+                    set_user_preference('grade_report_grader_collapsed_categories', serialize($collapsed));
+                }
                 break;
+
             case 'switch_plus':
-                set_user_preference('grade_report_categorystate' . $targetid, GRADE_CATEGORY_EXPANDED);
+                $key = array_search($targetid, $collapsed);
+                if ($key !== false) {
+                    unset($collapsed[$key]);
+                    set_user_preference('grade_report_grader_collapsed_categories', serialize($collapsed));
+                }
                 break;
+
             default:
                 break;
         }
diff --git a/grade/report/lib.php b/grade/report/lib.php
index 171e7aef35d..5b95cdea7af 100755
--- a/grade/report/lib.php
+++ b/grade/report/lib.php
@@ -106,17 +106,15 @@ class grade_report {
     function grade_report($courseid, $gpr, $context, $page=null) {
         global $CFG;
 
-        $this->courseid = $courseid;
-        $this->gpr      = $gpr;
-        $this->context  = $context;
-        $this->page     = $page;
+        $this->courseid  = $courseid;
+        $this->gpr       = $gpr;
+        $this->context   = $context;
+        $this->page      = $page;
 
         // roles to be displayed in the gradebook
         $this->gradebookroles = $CFG->gradebookroles;
 
-        // Grab the grade_tree for this course
-        $this->gtree = new grade_tree($this->courseid, true, $this->get_pref('aggregationposition'));
-
+        // init gtree in child class
     }
 
     /**
diff --git a/grade/report/user/lib.php b/grade/report/user/lib.php
index 20051681ec6..88d7a2600ed 100644
--- a/grade/report/user/lib.php
+++ b/grade/report/user/lib.php
@@ -37,6 +37,9 @@ class grade_report_user extends grade_report {
         global $CFG;
         parent::grade_report($courseid, $gpr, $context);
 
+        // Grab the grade_tree for this course
+        $this->gtree = new grade_tree($this->courseid, true, $this->get_pref('aggregationposition'));
+
         // get the user (for full name)
         $this->user = get_record('user', 'id', $userid);
 
diff --git a/lib/grade/grade_category.php b/lib/grade/grade_category.php
index 6eac93f4faa..6f4a5128515 100644
--- a/lib/grade/grade_category.php
+++ b/lib/grade/grade_category.php
@@ -628,41 +628,14 @@ class grade_category extends grade_object {
      */
     function fetch_course_tree($courseid, $include_category_items=false) {
         $course_category = grade_category::fetch_course_category($courseid);
-        $categorystate = grade_category::get_categorystate($course_category);
-        if ($categorystate == GRADE_CATEGORY_EXPANDED) {
-            $include_category_items = false;
-        }
-
-        $category_array = array('object'=>$course_category,
-                                'type'=>'category',
-                                'depth'=>1,
-                                'categorystate' => $categorystate,
+        $category_array = array('object'=>$course_category, 'type'=>'category', 'depth'=>1,
                                 'children'=>$course_category->get_children($include_category_items));
-
         $sortorder = 1;
         $course_category->set_sortorder($sortorder);
         $course_category->sortorder = $sortorder;
         return grade_category::_fetch_course_tree_recursion($category_array, $sortorder);
     }
 
-    /**
-     * Checks the user preferences and returns the state of the category, for display purposes. This only
-     * applies when aggregationview is set to COMPACT.
-     * @param object $category_element
-     * @return int null, GRADE_CATEGORY_EXPANDED or GRADE_CATEGORY_CONTRACTED
-     */
-    function get_categorystate($category_element) {
-        global $CFG;
-        require_once($CFG->dirroot . '/grade/report/lib.php');
-        $aggregationview = grade_report::get_pref('aggregationview', $category_element->id);
-
-        $categorystate = null;
-        if ($aggregationview == GRADE_REPORT_AGGREGATION_VIEW_COMPACT) {
-            $categorystate = get_user_preferences('grade_report_categorystate' . $category_element->id, GRADE_CATEGORY_EXPANDED);
-        }
-        return $categorystate;
-    }
-
     function _fetch_course_tree_recursion($category_array, &$sortorder) {
         // update the sortorder in db if needed
         if ($category_array['object']->sortorder != $sortorder) {
@@ -769,28 +742,17 @@ class grade_category extends grade_object {
     function _get_children_recursion($category) {
 
         $children_array = array();
-        $categorystate = grade_category::get_categorystate($category);
-
         foreach($category->children as $sortorder=>$child) {
             if (array_key_exists('itemtype', $child)) {
                 $grade_item = new grade_item($child, false);
-                if (in_array($grade_item->itemtype, array('course', 'category'))) { // Child is a course or categoryitem
-                    if ($categorystate == GRADE_CATEGORY_EXPANDED) {
-                        continue;
-                    } else {
-                        $type  = $grade_item->itemtype.'item';
-                        $depth = $category->depth;
-                    }
+                if (in_array($grade_item->itemtype, array('course', 'category'))) {
+                    $type  = $grade_item->itemtype.'item';
+                    $depth = $category->depth;
                 } else {
-                    if ($categorystate == GRADE_CATEGORY_CONTRACTED) {
-                        continue;
-                    }
                     $type  = 'item';
                     $depth = $category->depth; // we use this to set the same colour
                 }
-                $children_array[$sortorder] = array('object'=>$grade_item,
-                                                    'type'=>$type,
-                                                    'depth'=>$depth);
+                $children_array[$sortorder] = array('object'=>$grade_item, 'type'=>$type, 'depth'=>$depth);
 
             } else {
                 $children = grade_category::_get_children_recursion($child);
@@ -798,11 +760,7 @@ class grade_category extends grade_object {
                 if (empty($children)) {
                     $children = array();
                 }
-                $children_array[$sortorder] = array('object'=>$grade_category,
-                                                    'type'=>'category',
-                                                    'depth'=>$grade_category->depth,
-                                                    'categorystate' => $categorystate,
-                                                    'children'=>$children);
+                $children_array[$sortorder] = array('object'=>$grade_category, 'type'=>'category', 'depth'=>$grade_category->depth, 'children'=>$children);
             }
         }
 
diff --git a/lib/gradelib.php b/lib/gradelib.php
index 68599109f80..b5d9ae1dc08 100644
--- a/lib/gradelib.php
+++ b/lib/gradelib.php
@@ -66,10 +66,6 @@ define('GRADE_HISTORY_INSERT', 1);
 define('GRADE_HISTORY_UPDATE', 2);
 define('GRADE_HISTORY_DELETE', 3);
 
-// Grader reports
-define('GRADE_CATEGORY_CONTRACTED', 0); // The state of a category header in the grader report
-define('GRADE_CATEGORY_EXPANDED', 1); // The state of a category header in the grader report
-
 define('GRADE_REPORT_AGGREGATION_POSITION_LEFT', 0);
 define('GRADE_REPORT_AGGREGATION_POSITION_RIGHT', 1);
 define('GRADE_REPORT_AGGREGATION_VIEW_FULL', 0);