diff --git a/tcp_tests/templates/local_dns/underlay--user-data1604.yaml b/tcp_tests/templates/local_dns/underlay--user-data1604.yaml
index 39ce86e..f60c4c2 100644
--- a/tcp_tests/templates/local_dns/underlay--user-data1604.yaml
+++ b/tcp_tests/templates/local_dns/underlay--user-data1604.yaml
@@ -49,6 +49,7 @@
    ############## Cloud repo01 node ##################
    - echo "nameserver 172.18.208.44" >> /etc/resolv.conf;
    - echo "nameserver 8.8.8.8" >> /etc/resolv.conf;
+   - export LOCAL_DNS_IP=$(ifconfig ens3 | grep "inet addr" | cut -d ':' -f 2 | cut -d ' ' -f 1)
    - which wget >/dev/null || (apt-get update; apt-get install -y wget);
 
    - echo "deb [arch=amd64] http://apt.mirantis.com/xenial {{ REPOSITORY_SUITE }} salt extra" > /etc/apt/sources.list.d/mcp_salt.list;
@@ -73,6 +74,7 @@
    - cp /tmp/underpillar/states/*.sls /srv/salt/;
    - cp /srv/pillar/top_localdns.sls /srv/pillar/top.sls;
    - cp /srv/salt/top_localdns.sls /srv/salt/top.sls;
+   - find /srv/pillar/ -type f -exec sed -i "s/==LOCAL_DNS_IP==/${LOCAL_DNS_IP}/g" {} +
    - salt-call --local  --state-output=mixed state.sls dnsmasq;
    - salt-call --local  --state-output=mixed state.sls nginx;
    ########################################################
diff --git a/tcp_tests/tests/environment/test_local_dns.py b/tcp_tests/tests/environment/test_local_dns.py
new file mode 100644
index 0000000..fcc0978
--- /dev/null
+++ b/tcp_tests/tests/environment/test_local_dns.py
@@ -0,0 +1,27 @@
+#    Copyright 2017 Mirantis, Inc.
+#
+#    Licensed under the Apache License, Version 2.0 (the "License"); you may
+#    not use this file except in compliance with the License. You may obtain
+#    a copy of the License at
+#
+#         http://www.apache.org/licenses/LICENSE-2.0
+#
+#    Unless required by applicable law or agreed to in writing, software
+#    distributed under the License is distributed on an "AS IS" BASIS, WITHOUT
+#    WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied. See the
+#    License for the specific language governing permissions and limitations
+#    under the License.
+
+import pytest
+
+from tcp_tests import logger
+
+LOG = logger.logger
+
+
+class TestLocalDns(object):
+    """Test class for deploy local dns_vm"""
+
+    @pytest.mark.fail_snapshot
+    def test_install_local_dns(self, config, underlay):
+        LOG.info("*************** DONE **************")