diff --git a/test/TestInventory.py b/test/TestInventory.py
index 1f2cd02c217..55706bba6b5 100644
--- a/test/TestInventory.py
+++ b/test/TestInventory.py
@@ -13,6 +13,7 @@ class TestInventory(unittest.TestCase):
         self.large_range_inventory_file = os.path.join(self.test_dir, 'large_range')
         self.complex_inventory_file     = os.path.join(self.test_dir, 'complex_hosts')
         self.inventory_script           = os.path.join(self.test_dir, 'inventory_api.py')
+        self.inventory_dir              = os.path.join(self.test_dir, 'inventory_dir')
 
         os.chmod(self.inventory_script, 0755)
 
@@ -39,6 +40,9 @@ class TestInventory(unittest.TestCase):
     def complex_inventory(self):
         return Inventory(self.complex_inventory_file)
 
+    def dir_inventory(self):
+        return Inventory(self.inventory_dir)
+
     all_simple_hosts=['jupiter', 'saturn', 'zeus', 'hera',
             'cerberus001','cerberus002','cerberus003',
             'cottus99', 'cottus100',
@@ -288,3 +292,14 @@ class TestInventory(unittest.TestCase):
         assert vars == {'inventory_hostname': 'zeus',
                         'inventory_hostname_short': 'zeus',
                         'group_names': ['greek', 'major-god']}
+
+    def test_dir_inventory(self):
+        inventory = self.dir_inventory()
+        vars = inventory.get_variables('zeus')
+
+        print "VARS=%s" % vars
+
+        assert vars == {'inventory_hostname': 'zeus',
+                        'inventory_hostname_short': 'zeus',
+                        'group_names': ['greek', 'major-god', 'ungrouped'],
+                        'var_a': '1'}
diff --git a/test/inventory_dir/0hosts b/test/inventory_dir/0hosts
new file mode 100644
index 00000000000..27fc46e8530
--- /dev/null
+++ b/test/inventory_dir/0hosts
@@ -0,0 +1,3 @@
+zeus var_a=2
+morpheus
+thor
diff --git a/test/inventory_dir/1mythology b/test/inventory_dir/1mythology
new file mode 100644
index 00000000000..43fa181bd5c
--- /dev/null
+++ b/test/inventory_dir/1mythology
@@ -0,0 +1,6 @@
+[greek]
+zeus
+morpheus
+
+[norse]
+thor
diff --git a/test/inventory_dir/2levels b/test/inventory_dir/2levels
new file mode 100644
index 00000000000..22f06bcd436
--- /dev/null
+++ b/test/inventory_dir/2levels
@@ -0,0 +1,6 @@
+[major-god]
+zeus var_a=1
+thor
+
+[minor-god]
+morpheus