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In this paper, we present a novel packetized bit-level decoding algorithm for variable-length encoded Markov sources, which calculates reliability information for the decoded bits in the form of a posteriori probabilities (APPs). An interesting feature of the proposed approach is that symbol-based source statistics in the form of the transition probabilities of the Markov source are exploited as a priori information on a bit-level trellis. This method is especially well-suited for long input blocks, since in contrast to other symbol-based APP decoding approaches, the number of trellis states does not depend on the packet length. When additionally the variable-length encoded source data is protected by channel codes, an iterative source-channel decoding scheme can be obtained in the same way as for serially concatenated codes. Furthermore, based on an analysis of the iterative decoder via extrinsic information transfer charts, it can be shown that by using reversible variable-length codes with a free distance of two, in combination with rate-1 channel codes and residual source redundancy, a reliable transmission is possible even for highly corrupted channels. This justifies a new source-channel encoding technique where explicit redundancy for error protection is only added in the source encoder.