diff --git a/lib/ansible/playbook/__init__.py b/lib/ansible/playbook/__init__.py
index 6bb09213454..68e94d226bf 100644
--- a/lib/ansible/playbook/__init__.py
+++ b/lib/ansible/playbook/__init__.py
@@ -312,7 +312,8 @@ class PlayBook(object):
             conditional=task.only_if, callbacks=self.runner_callbacks,
             sudo=task.sudo, sudo_user=task.sudo_user,
             transport=task.transport, sudo_pass=task.sudo_pass, is_playbook=True,
-            check=self.check, diff=self.diff, environment=task.environment, complex_args=task.args
+            check=self.check, diff=self.diff, environment=task.environment, complex_args=task.args,
+            error_on_undefined_vars=C.DEFAULT_UNDEFINED_VAR_BEHAVIOR
         )
 
         if task.async_seconds == 0:
diff --git a/test/TestPlayBook.py b/test/TestPlayBook.py
index a34de0ae3c4..ac65ce5efc7 100644
--- a/test/TestPlayBook.py
+++ b/test/TestPlayBook.py
@@ -266,6 +266,52 @@ class TestPlaybook(unittest.TestCase):
        )
        playbook.run()
 
+   def _test_playbook_undefined_vars(self, playbook, fail_on_undefined):
+       # save DEFAULT_UNDEFINED_VAR_BEHAVIOR so we can restore it in the end of the test
+       saved_undefined_var_behavior = C.DEFAULT_UNDEFINED_VAR_BEHAVIOR
+       C.DEFAULT_UNDEFINED_VAR_BEHAVIOR = fail_on_undefined
+
+       test_callbacks = TestCallbacks()
+       playbook = ansible.playbook.PlayBook(
+           playbook=os.path.join(self.test_dir, 'test_playbook_undefined_vars', playbook),
+           host_list='test/test_playbook_undefined_vars/hosts',
+           stats=ans_callbacks.AggregateStats(),
+           callbacks=test_callbacks,
+           runner_callbacks=test_callbacks
+       )
+       actual = playbook.run()
+
+       C.DEFAULT_UNDEFINED_VAR_BEHAVIOR = saved_undefined_var_behavior
+
+       # if different, this will output to screen
+       print "**ACTUAL**"
+       print utils.jsonify(actual, format=True)
+       expected =  {
+           "localhost": {
+               "changed": 0,
+               "failures": 0,
+               "ok": int(not fail_on_undefined) + 1,
+               "skipped": 0,
+               "unreachable": int(fail_on_undefined)
+           }
+       }
+       print "**EXPECTED**"
+       print utils.jsonify(expected, format=True)
+
+       assert utils.jsonify(expected, format=True) == utils.jsonify(actual, format=True)
+
+   def test_playbook_undefined_vars1_ignore(self):
+       self._test_playbook_undefined_vars('playbook1.yml', False)
+
+   def test_playbook_undefined_vars1_fail(self):
+       self._test_playbook_undefined_vars('playbook1.yml', True)
+
+   def test_playbook_undefined_vars2_ignore(self):
+       self._test_playbook_undefined_vars('playbook2.yml', False)
+
+   def test_playbook_undefined_vars2_fail(self):
+       self._test_playbook_undefined_vars('playbook2.yml', True)
+
    def test_yaml_hosts_list(self):
        # Make sure playbooks support hosts: [host1, host2]
        # TODO: Actually run the play on more than one host
diff --git a/test/test_playbook_undefined_vars/hosts b/test/test_playbook_undefined_vars/hosts
new file mode 100644
index 00000000000..3ca87c2c1e3
--- /dev/null
+++ b/test/test_playbook_undefined_vars/hosts
@@ -0,0 +1,5 @@
+localhost
+
+[all:vars]
+inventory_var_good="{{ playbook_var_good }}"
+inventory_var_bad="{{ playbook_var_bad }}"
diff --git a/test/test_playbook_undefined_vars/playbook1.yml b/test/test_playbook_undefined_vars/playbook1.yml
new file mode 100644
index 00000000000..7f46d704cc3
--- /dev/null
+++ b/test/test_playbook_undefined_vars/playbook1.yml
@@ -0,0 +1,7 @@
+- hosts: all
+  vars:
+    playbook_var_good: "ok"
+    playbook_var_bad: "{{ undefined_var }}"
+  tasks:
+  - debug: msg="{{ playbook_var_good }}"
+  - debug: msg="{{ playbook_var_bad }}"
diff --git a/test/test_playbook_undefined_vars/playbook2.yml b/test/test_playbook_undefined_vars/playbook2.yml
new file mode 100644
index 00000000000..08c8c28e19d
--- /dev/null
+++ b/test/test_playbook_undefined_vars/playbook2.yml
@@ -0,0 +1,7 @@
+- hosts: all
+  vars:
+    playbook_var_good: "ok"
+    playbook_var_bad: "{{ undefined_var }}"
+  tasks:
+  - debug: msg="{{ inventory_var_good }}"
+  - debug: msg="{{ inventory_var_bad }}"