diff --git a/circuits/merkleProof.circom b/circuits/merkleProof.circom
new file mode 100644
index 0000000..5c31b83
--- /dev/null
+++ b/circuits/merkleProof.circom
@@ -0,0 +1,30 @@
+include "../node_modules/circomlib/circuits/poseidon.circom";
+include "../node_modules/circomlib/circuits/switcher.circom";
+
+// Verifies that merkle proof is correct for given merkle root and a leaf
+// pathIndices bits is an array of 0/1 selectors telling whether given pathElement is on the left or right side of merkle path
+template MerkleProof(levels) {
+    signal input leaf;
+    signal input pathElements[levels];
+    signal input pathIndices;
+    signal output root;
+
+    component switcher[levels];
+    component hasher[levels];
+
+    component indexBits = Num2Bits(levels);
+    indexBits.in <== pathIndices;
+
+    for (var i = 0; i < levels; i++) {
+        switcher[i] = Switcher();
+        switcher[i].L <== i == 0 ? leaf : hasher[i - 1].out;
+        switcher[i].R <== pathElements[i];
+        switcher[i].sel <== indexBits.out[i];
+
+        hasher[i] = Poseidon(2);
+        hasher[i].inputs[0] <== switcher[i].outL;
+        hasher[i].inputs[1] <== switcher[i].outR;
+    }
+
+    root <== hasher[levels - 1].out;
+}
diff --git a/circuits/merkleTree.circom b/circuits/merkleTree.circom
index feeacb0..fafb746 100644
--- a/circuits/merkleTree.circom
+++ b/circuits/merkleTree.circom
@@ -1,30 +1,32 @@
 include "../node_modules/circomlib/circuits/poseidon.circom";
-include "../node_modules/circomlib/circuits/switcher.circom";
 
-// Verifies that merkle proof is correct for given merkle root and a leaf
-// pathIndices input is an array of 0/1 selectors telling whether given pathElement is on the left or right side of merkle path
-template MerkleTree(levels) {
-    signal input leaf;
-    signal input pathElements[levels];
-    signal input pathIndices;
-    signal output root;
+// Helper template that computes hashes of the next tree layer
+template TreeLayer(height) {
+  var nItems = 1 << height;
+  signal input ins[nItems * 2];
+  signal output outs[nItems];
 
-    component switcher[levels];
-    component hasher[levels];
-
-    component indexBits = Num2Bits(levels);
-    indexBits.in <== pathIndices;
-
-    for (var i = 0; i < levels; i++) {
-        switcher[i] = Switcher();
-        switcher[i].L <== i == 0 ? leaf : hasher[i - 1].out;
-        switcher[i].R <== pathElements[i];
-        switcher[i].sel <== indexBits.out[i];
-
-        hasher[i] = Poseidon(2);
-        hasher[i].inputs[0] <== switcher[i].outL;
-        hasher[i].inputs[1] <== switcher[i].outR;
-    }
-
-    root <== hasher[levels - 1].out;
+  component hash[nItems];
+  for(var i = 0; i < nItems; i++) {
+    hash[i] = Poseidon(2);
+    hash[i].inputs[0] <== ins[i * 2];
+    hash[i].inputs[1] <== ins[i * 2 + 1];
+    hash[i].out ==> outs[i];
+  }
 }
+
+// Builds a merkle tree from leaf array
+template MerkleTree(levels) {
+  signal input leaves[1 << levels];
+  signal output root;
+
+  component layers[levels];
+  for(var level = levels - 1; level >= 0; level--) {
+    layers[level] = TreeLayer(level);
+    for(var i = 0; i < (1 << (level + 1)); i++) {
+      layers[level].ins[i] <== level == levels - 1 ? leaves[i] : layers[level + 1].outs[i];
+    }
+  }
+
+  root <== levels > 0 ? layers[0].outs[0] : leaves[0];
+}
\ No newline at end of file
diff --git a/circuits/transaction.circom b/circuits/transaction.circom
index e083c1e..27520f8 100644
--- a/circuits/transaction.circom
+++ b/circuits/transaction.circom
@@ -1,4 +1,4 @@
-include "./merkleTree.circom"
+include "./merkleProof.circom"
 include "./treeUpdater.circom"
 include "./utils.circom"
 
@@ -64,7 +64,7 @@ template Transaction(levels, nIns, nOuts, zeroLeaf) {
         nullifierHasher[tx].privateKey <== inPrivateKey[tx];
         nullifierHasher[tx].nullifier === inputNullifier[tx];
 
-        tree[tx] = MerkleTree(levels);
+        tree[tx] = MerkleProof(levels);
         tree[tx].leaf <== inUtxoHasher[tx].commitment;
         tree[tx].pathIndices <== inPathIndices[tx];
         for (var i = 0; i < levels; i++) {
@@ -124,7 +124,7 @@ template Transaction(levels, nIns, nOuts, zeroLeaf) {
     treeUpdater.oldRoot <== root;
     treeUpdater.newRoot <== newRoot;
     for (var i = 0; i < nOuts; i++) {
-      treeUpdater.leaf[i] <== outputCommitment[i];
+      treeUpdater.leaves[i] <== outputCommitment[i];
     }
     treeUpdater.pathIndices <== outPathIndices;
     for (var i = 0; i < levels - 1; i++) {
diff --git a/circuits/treeUpdater.circom b/circuits/treeUpdater.circom
index 6495a1e..63de031 100644
--- a/circuits/treeUpdater.circom
+++ b/circuits/treeUpdater.circom
@@ -1,27 +1,25 @@
+include "./merkleProof.circom";
 include "./merkleTree.circom";
 
 // inserts a subtree into a merkle tree
 // checks that tree previously contained zeroes is the same positions
 // zeroSubtreeRoot is a root of a subtree that contains only zeroes
 template TreeUpdater(levels, subtreeLevels, zeroSubtreeRoot) {
-    // currently it works only with 1-level subtrees
-    assert(subtreeLevels == 1);
     var remainingLevels = levels - subtreeLevels;
 
     signal input oldRoot;
     signal input newRoot;
-    signal input leaf[1 << subtreeLevels];
+    signal input leaves[1 << subtreeLevels];
     signal input pathIndices;
     signal private input pathElements[remainingLevels];
 
     // calculate subtree root
-    // todo: make it work with arbitrary subtree levels
-    // currently it works only with 1-level subtrees
-    component leafPair = Poseidon(2);
-    leafPair.inputs[0] <== leaf[0];
-    leafPair.inputs[1] <== leaf[1];
+    component subtree = MerkleTree(subtreeLevels);
+    for(var i = 0; i < (1 << subtreeLevels); i++) {
+        subtree.leaves[i] <== leaves[i];
+    }
 
-    component treeBefore = MerkleTree(remainingLevels);
+    component treeBefore = MerkleProof(remainingLevels);
     for(var i = 0; i < remainingLevels; i++) {
         treeBefore.pathElements[i] <== pathElements[i];
     }
@@ -29,11 +27,11 @@ template TreeUpdater(levels, subtreeLevels, zeroSubtreeRoot) {
     treeBefore.leaf <== zeroSubtreeRoot;
     treeBefore.root === oldRoot;
 
-    component treeAfter = MerkleTree(remainingLevels);
+    component treeAfter = MerkleProof(remainingLevels);
     for(var i = 0; i < remainingLevels; i++) {
         treeAfter.pathElements[i] <== pathElements[i];
     }
     treeAfter.pathIndices <== pathIndices;
-    treeAfter.leaf <== leafPair.out;
+    treeAfter.leaf <== subtree.root;
     treeAfter.root === newRoot;
 }