diff --git a/lib/ansible/playbook/play.py b/lib/ansible/playbook/play.py
index 639f4c065b4..b41c676a7b8 100644
--- a/lib/ansible/playbook/play.py
+++ b/lib/ansible/playbook/play.py
@@ -855,5 +855,4 @@ class Play(object):
 
         # finally, update the VARS_CACHE for the host, if it is set
         if host is not None:
-            self.playbook.VARS_CACHE[host].update(self.vars)
             self.playbook.VARS_CACHE[host].update(self.playbook.extra_vars)
diff --git a/lib/ansible/runner/__init__.py b/lib/ansible/runner/__init__.py
index feda312456e..7b943003f2e 100644
--- a/lib/ansible/runner/__init__.py
+++ b/lib/ansible/runner/__init__.py
@@ -570,7 +570,10 @@ class Runner(object):
         hostvars = HostVars(combined_cache, self.inventory, vault_password=self.vault_pass)
 
         # use combined_cache and host_variables to template the module_vars
+        # we update the inject variables with the data we're about to template
+        # since some of the variables we'll be replacing may be contained there too
         module_vars_inject = utils.combine_vars(combined_cache.get(host, {}), host_variables)
+        module_vars_inject.update(self.module_vars)
         module_vars = template.template(self.basedir, self.module_vars, module_vars_inject)
 
         inject = {}