diff -u w/conditional_fields.module w/conditional_fields.module
--- w/conditional_fields.module
+++ w/conditional_fields.module
@@ -214,27 +214,53 @@
  * Have to wait for the group elements to be created - unfortunately this is after after_build
  */
 function conditional_fields_field_group_build_pre_render_alter(&$element) {
-  $form = &$element;
+  // Have to re-process conditional fields over again for newly created 
+  // fieldgroup elements (and existing elements moved to fieldgroup children)
 
-  // Have to re-process conditional fields over again for fieldgroup elements
-  $form_state = &$form['#form_state'];
-  $form_state['complete form'] = $form;
-  $process = array();
-  $groups = $form['#fieldgroups'];
-  foreach ($groups as $group_name => $group) {
+  // $form_state is added to $form['#form_state'] via conditional_fields_form_after_build()
+  $form_state = $element['#form_state'];
+  $form_state['complete form'] = $element;
+  $form = &$form_state['complete form'];
+  // Loop through fieldgroups and fieldgroup children
+  $new_dependents = array();
+  foreach ($form['#fieldgroups'] as $group_name => $group) {
+    // Call element_after_build for fieldgroup children
     foreach($group->children as $field_name) {
       $parents = array_merge($group->array_parents, array($field_name));
       $field_element = &drupal_array_get_nested_value($form, $parents);
       conditional_fields_element_after_build($field_element, $form_state, TRUE);
     }
+    // Call element_after_build for fieldgroup element
     $group_element = &drupal_array_get_nested_value($form, $group->array_parents);
-    $group_element['#group_name'] = $group_name;
+    $group_element['#field_name'] = $group_name;
+    // Make sure group element has an ID to select in drupal_process_states
+    $group_element['#id'] = isset($group_element['#id']) ? $group_element['#id'] : $group_name;
+    // Need to wrap markup type with a div with the ID, unless ID already present in prefix or markup
+    if (isset($group_element['#type']) && $group_element['#type'] == 'markup') {
+      if ((!isset($group_element['#prefix']) || !strstr($group_element['#prefix'], '#' . $group_element['#id']))
+        && (!isset($group_element['#markup']) || !strstr($group_element['#markup'], '#' . $group_element['#id']))
+      ) {
+        $group_element['#prefix'] = '<div id="' . $group_element['#id'] . '">' . (isset($group_element['#prefix']) ? $group_element['#prefix'] : '');
+        $group_element['#suffix'] = (isset($group_element['#suffix']) ? $group_element['#suffix'] : '') . '</div>';
+      }
+    }
     conditional_fields_element_after_build($group_element, $form_state, TRUE);
+    if (isset($form['#conditional_fields'][$group_name], $form['#conditional_fields'][$group_name]['dependees'])) {
+      $new_dependents[$group_name] = &$group_element;
+    }
+  }
+
+  // Call form_after_build
+  $form = conditional_fields_form_after_build($form, $form_state, TRUE);
+
+  // Call validation for group dependents
+  foreach ($new_dependents as $dependent_name => &$dependent) {
+    conditional_fields_dependent_validate($dependent, $form_state, $form);
   }
-  $form = $form_state['complete form'];
+  // Call form validation
+  conditional_fields_form_validate($form, $form_state);
 
-  // Manually call form after_build
-  $form = conditional_fields_form_after_build($form, $form_state);
+  $element = $form;
 }
 
 /**
@@ -250,10 +276,6 @@
   if (isset($element['#field_name'])) {
     $field = $element;
   }
-  elseif (isset($element['#group_name'])) {
-    $field = $element;
-    $field['#field_name'] = $field['#group_name'];
-  }
   elseif (isset($element['#language'], $element[$element['#language']], $element[$element['#language']]['#field_name'])) {
     // Some fields are wrapped in containers before processing.
     $field = $element[$element['#language']];
@@ -261,6 +283,7 @@
   else {
     return $element;
   }
+
   $form = &$form_state['complete form'];
 
   // Avoid processing fields in fields_ui administration pages.
@@ -287,6 +310,7 @@
   else {
     return $element;
   }
+
   $dependencies = conditional_fields_load_dependencies($entity_type, $bundle);
 
   if (!$dependencies) {
@@ -402,7 +426,7 @@
  */
 function conditional_fields_attach_dependency(&$form, $dependee, $dependent, $options, $id = 0) {
   $options += conditional_fields_dependency_default_options();
-  
+
   // The absence of the $id parameter identifies a custom dependency.
   if (!$id) {
     // String values are accepted to simplify usage of this function with custom
@@ -430,14 +454,10 @@
   // Attach dependee.
   // Use the #parents property of the dependee instead of #field_parents since
   // we will need access to the full structure of the widget.
-  if (isset($dependee['#array_parents'])) {
-    $dependee_parents = $dependee['#array_parents'];
-  }
-  elseif (isset($dependee['#parents'])) {
-    $dependee_parents = $dependee['#parents'];
-  }
-  if (isset($dependee_parents)) {
-    $form['#conditional_fields'][$dependee['#field_name']]['parents'] = $dependee_parents;
+  // We also need #field_parents to get the field from $form
+  if (isset($dependee['#parents'])) {
+    $form['#conditional_fields'][$dependee['#field_name']]['parents'] = $dependee['#parents'];
+    $form['#conditional_fields'][$dependee['#field_name']]['array_parents'] = $dependee['#array_parents'];
     $form['#conditional_fields'][$dependee['#field_name']]['dependents'][$id] = array(
       'dependent' => $dependent['#field_name'],
       'options'   => $options,
@@ -445,10 +465,7 @@
   }
 
   // Attach dependent.
-  if (isset($dependent['#array_parents'])) {
-    $dependent_parents = $dependent['#array_parents'];
-  }
-  elseif (isset($dependent['#field_parents'])) {
+  if (isset($dependent['#field_parents'])) {
     $dependent_parents = $dependent['#field_parents'];
   }
   elseif (isset($dependent['#parents'])) {
@@ -456,6 +473,7 @@
   }
   if (isset($dependent_parents)) {
     $form['#conditional_fields'][$dependent['#field_name']]['field_parents'] = $dependent_parents;
+    $form['#conditional_fields'][$dependent['#field_name']]['array_parents'] = $dependent['#array_parents'];
     $form['#conditional_fields'][$dependent['#field_name']]['dependees'][$id] = array(
       'dependee' => $dependee['#field_name'],
       'options'  => $options,
@@ -483,18 +501,22 @@
   // Set $form_state in $form so hook_field_group_build_pre_render_alter has access to it
   // when it is invoked after after_build (when fieldgroup elements are attached to form)
   $form['#form_state'] =& $form_state;
-
+  
   $effects = array();
   $state_handlers = conditional_fields_states_handlers();
 
   // Cycle all dependents.
   foreach ($form['#conditional_fields'] as $dependent => $dependent_info) {
     $states = array();
+
     if (empty($dependent_info['dependees'])) {
       continue;
     }
-    $dependent_location = array_unique(array_merge($dependent_info['field_parents'], array($dependent)));
+
+    // Here we use #array_parents to get field from $form
+    $dependent_location = $dependent_info['array_parents'];
     $dependent_form_field = drupal_array_get_nested_value($form, $dependent_location);
+
     // Cycle the dependant's dependees.
     foreach ($dependent_info['dependees'] as $dependency) {
       $dependee = $dependency['dependee'];
@@ -502,9 +524,16 @@
       if (empty($form['#conditional_fields'][$dependee])) {
         continue;
       }
+      // Skip this dependency if it's a group element and state is not visible/hidden
+      // (dependencies for other states are attached to fieldgroup children elements)
+      if (in_array($dependent_form_field['#field_name'], array_keys($form['#fieldgroups'])) && !in_array($dependency['options']['state'], array('visible', 'hidden'))) {
+        continue;
+      }
 
       $dependee_info = $form['#conditional_fields'][$dependee];
-      $dependee_form_field = drupal_array_get_nested_value($form, $dependee_info['parents']);
+      // Here we use #array_parents to get field from $form
+      $dependee_location = $dependee_info['array_parents'];
+      $dependee_form_field = drupal_array_get_nested_value($form, $dependee_location);
       $options = $dependency['options'];
 
       // Load field edit behaviors.
@@ -639,6 +668,7 @@
         $behavior($form, $form_state, $dependent, $dependent_info);
       }
     }
+
     unset($behaviors);
 
     if (empty($states)) {
@@ -725,7 +755,12 @@
  * @see conditional_fields_form_validate()
  */
 function conditional_fields_dependent_validate($element, &$form_state, $form) {
-  $dependent = $element[$element['#language']];
+  if (isset($element['#language'], $element[$element['#language']])) {
+    $dependent = $element[$element['#language']];
+  }
+  else {
+    $dependent = $element;    
+  }
 
   // Check if this field's dependencies were triggered.
   if (conditional_fields_evaluate_dependencies($dependent, $form, $form_state)) {
@@ -747,7 +782,7 @@
   // conditional_fields_form_validate().
   $errors = form_get_errors();
 
-  if ($errors) {
+  if ($errors && isset($dependent['#parents'])) {  // group elements have no #parents key
     $error_key = implode('][', $dependent['#parents']);
     foreach ($errors as $name => $error) {
       // An error triggered by this field might have been set on a descendant
@@ -776,7 +811,9 @@
  */
 function conditional_fields_form_field_get_values($element, $form_state) {
   // Fall back to #parents to support custom dependencies.
-  $parents = isset($element['#field_parents']) ? $element['#field_parents'] : $element['#parents'];
+  // $parents = isset($element['#field_parents']) ? $element['#field_parents'] : $element['#parents'];
+  // Should this be the other way around? Isn't #parents the parent keys in $form_state['values']?
+  $parents = isset($element['#parents']) ? $element['#parents'] : $element['#field_parents'];
   return drupal_array_get_nested_value($form_state['values'], $parents);
 }
 
@@ -1057,7 +1094,7 @@
   foreach ($dependencies as $dependency_id => $dependency) {
     // Extract field values from submitted values.
     $dependee = $dependency['dependee'];
-    $dependee_parents = $form['#conditional_fields'][$dependee]['parents'];
+    $dependee_parents = $form['#conditional_fields'][$dependee]['array_parents'];
 
     // We have the parents of the field, but depending on the entity type and
     // the widget type, they may include additional elements that are actually
diff -u w/includes/conditional_fields.admin.inc w/includes/conditional_fields.admin.inc
--- w/includes/conditional_fields.admin.inc
+++ w/includes/conditional_fields.admin.inc
@@ -319,6 +319,7 @@
     'state' => $form_state['values']['state'],
     'condition' => $form_state['values']['condition']
   );
+
   if (!$id = conditional_fields_dependency_insert($form_state['values']['dependee'], $form_state['values']['dependent'], $options)) {
     drupal_set_message(t('There was an error while trying to create the dependency.'), 'error');
     return;