diff --git a/functional/test_env_merge.py b/functional/test_env_merge.py
new file mode 100644
index 0000000..5e222b8
--- /dev/null
+++ b/functional/test_env_merge.py
@@ -0,0 +1,95 @@
+#
+#    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.
+
+from heat_integrationtests.functional import functional_base
+
+
+TEMPLATE = '''
+    heat_template_version: 2015-04-30
+    parameters:
+      p0:
+        type: string
+        default: CORRECT
+      p1:
+        type: string
+        default: INCORRECT
+      p2:
+        type: string
+        default: INCORRECT
+    resources:
+      r1:
+        type: test::R1
+      r2:
+        type: test::R2
+      r3a:
+        type: test::R3
+      r3b:
+        type: test::R3
+'''
+
+ENV_1 = '''
+    parameters:
+      p1: CORRECT
+      p2: INCORRECT-E1
+    resource_registry:
+      test::R1: OS::Heat::RandomString
+      test::R2: BROKEN
+      test::R3: OS::Heat::None
+'''
+
+ENV_2 = '''
+    parameters:
+      p2: CORRECT
+    resource_registry:
+      test::R2: OS::Heat::RandomString
+      resources:
+        r3b:
+          test::R3: OS::Heat::RandomString
+'''
+
+
+class EnvironmentMergingTests(functional_base.FunctionalTestsBase):
+
+    def test_server_environment_merging(self):
+
+        # Setup
+        files = {'env1.yaml': ENV_1, 'env2.yaml': ENV_2}
+        environment_files = ['env1.yaml', 'env2.yaml']
+
+        # Test
+        stack_id = self.stack_create(stack_name='env_merge',
+                                     template=TEMPLATE,
+                                     files=files,
+                                     environment_files=environment_files)
+
+        # Verify
+
+        # Since there is no environment show, the registry overriding
+        # is partially verified by there being no error. If it wasn't
+        # working, test::R2 would remain mapped to BROKEN in env1.
+
+        # Sanity check
+        resources = self.list_resources(stack_id)
+        self.assertEqual(4, len(resources))
+
+        # Verify the parameters are correctly set
+        stack = self.client.stacks.get(stack_id)
+        self.assertEqual('CORRECT', stack.parameters['p0'])
+        self.assertEqual('CORRECT', stack.parameters['p1'])
+        self.assertEqual('CORRECT', stack.parameters['p2'])
+
+        # Verify that r3b has been overridden into a RandomString
+        # by checking to see that it has a value
+        r3b = self.client.resources.get(stack_id, 'r3b')
+        r3b_attrs = r3b.attributes
+        self.assertTrue('value' in r3b_attrs)