diff --git a/lib/ansible/inventory_parser.py b/lib/ansible/inventory_parser.py
index fa4b3767b2..f7387050f9 100644
--- a/lib/ansible/inventory_parser.py
+++ b/lib/ansible/inventory_parser.py
@@ -54,12 +54,12 @@ class InventoryParser(object):
 
     def _parse_base_groups(self):
 
-        undefined = Group(name='undefined')
+        ungrouped = Group(name='ungrouped')
         all = Group(name='all')
-        all.add_child_group(undefined)
+        all.add_child_group(ungrouped)
 
-        self.groups = dict(all=all, undefined=undefined)
-        active_group_name = 'undefined'
+        self.groups = dict(all=all, ungrouped=ungrouped)
+        active_group_name = 'ungrouped'
 
         for line in self.lines:
             if line.startswith("["):
diff --git a/test/TestInventory.py b/test/TestInventory.py
index fa8568028b..6d8d3bb2a4 100644
--- a/test/TestInventory.py
+++ b/test/TestInventory.py
@@ -221,11 +221,11 @@ class TestInventory(unittest.TestCase):
         expected_hosts=['thor', 'odin', 'loki']
         self.compare(hosts, expected_hosts)
 
-    def test_simple_ungrouped(self):
+    def test_yaml_ungrouped(self):
         inventory = self.yaml_inventory()
         hosts = inventory.list_hosts("ungrouped")
 
-        expected_hosts=['jupiter','zeus']
+        expected_hosts=['jupiter']
         self.compare(hosts, expected_hosts)
 
     def test_yaml_combined(self):