diff --git a/lib/ansible/playbook/play.py b/lib/ansible/playbook/play.py
index e15a5aa0ce..6acc30ced6 100644
--- a/lib/ansible/playbook/play.py
+++ b/lib/ansible/playbook/play.py
@@ -56,6 +56,9 @@ class Play(object):
         self.vars_prompt      = ds.get('vars_prompt', {})
         self.playbook         = playbook
         self.vars             = self._get_vars()
+        self.vars_files       = ds.get('vars_files', [])
+        self.basedir          = basedir
+        self._update_vars_files_for_host(None)
         self._ds = ds         = utils.template(basedir, ds, self.vars)
 
         hosts = ds.get('hosts')
@@ -65,9 +68,7 @@ class Play(object):
             hosts = ';'.join(hosts)
 
         self.serial           = int(ds.get('serial', 0))
-        self.basedir          = basedir
         self.hosts            = hosts
-        self.vars_files       = ds.get('vars_files', [])
         self.name             = ds.get('name', self.hosts)
         self._tasks           = ds.get('tasks', [])
         self._handlers        = ds.get('handlers', [])
@@ -83,7 +84,6 @@ class Play(object):
         self.any_errors_fatal = ds.get('any_errors_fatal', False)
         self.roles            = ds.get('roles', None)
 
-        self._update_vars_files_for_host(None)
 
         load_vars = {}
         if self.playbook.inventory.basedir() is not None:
diff --git a/lib/ansible/runner/__init__.py b/lib/ansible/runner/__init__.py
index 25b8982da9..f9a65c99ca 100644
--- a/lib/ansible/runner/__init__.py
+++ b/lib/ansible/runner/__init__.py
@@ -138,7 +138,6 @@ class Runner(object):
         self.inventory        = utils.default(inventory, lambda: ansible.inventory.Inventory(host_list))
 
         self.module_vars      = utils.default(module_vars, lambda: {})
-        self.sudo_user        = sudo_user
         self.connector        = connection.Connection(self)
         self.conditional      = conditional
         self.module_name      = module_name
@@ -152,6 +151,7 @@ class Runner(object):
         self.private_key_file = private_key_file
         self.background       = background
         self.sudo             = sudo
+        self.sudo_user        = sudo_user
         self.sudo_pass        = sudo_pass
         self.is_playbook      = is_playbook
         self.environment      = environment
@@ -175,7 +175,7 @@ class Runner(object):
 
         # ensure we are using unique tmp paths
         random.seed()
-        
+ 
     # *****************************************************
 
     def _complex_args_hack(self, complex_args, module_args):
diff --git a/lib/ansible/utils/template.py b/lib/ansible/utils/template.py
index 91a915648d..61edb2940e 100644
--- a/lib/ansible/utils/template.py
+++ b/lib/ansible/utils/template.py
@@ -19,6 +19,7 @@ import os
 import re
 import codecs
 import jinja2
+import jinja2.meta as jinja2_meta
 import yaml
 import json
 from ansible import errors
@@ -233,7 +234,8 @@ def template(basedir, varname, vars, lookup_fatal=True, depth=0, expand_lists=Tr
 
     if isinstance(varname, basestring):
         if '{{' in varname or '{%' in varname:
-            return template_from_string(basedir, varname, vars)
+            res = template_from_string(basedir, varname, vars)
+            return res
         m = _varFind(basedir, varname, vars, lookup_fatal, depth, expand_lists)
         if not m:
             return varname
@@ -409,11 +411,19 @@ def template_from_string(basedir, data, vars):
     try:
         if type(data) == str:
             data = unicode(data, 'utf-8')
-        environment = jinja2.Environment(trim_blocks=True) # undefined=J2Undefined)
+        environment = jinja2.Environment(trim_blocks=True) 
         environment.filters.update(_get_filter_plugins())
+        environment.template_class = J2Template
+
+        # perhaps a nicer way to do this
+        ast = environment.parse(data)
+        undeclared = jinja2_meta.find_undeclared_variables(ast)
+        for x in undeclared:
+            if x not in vars:
+                return data
+
         # TODO: may need some way of using lookup plugins here seeing we aren't calling
         # the legacy engine, lookup() as a function, perhaps?
-        environment.template_class = J2Template
 
         try:
             t = environment.from_string(data)
@@ -421,10 +431,11 @@ def template_from_string(basedir, data, vars):
             if 'recursion' in str(re):
                 raise errors.AnsibleError("recursive loop detected in template string: %s" % data)
             else:
-                raise ree
+                return data
             
         res = jinja2.utils.concat(t.root_render_func(t.new_context(_jinja2_vars(basedir, vars, t.globals), shared=True)))
         return res
     except jinja2.exceptions.UndefinedError:
+        # this shouldn't happen due to undeclared check above
         return data