diff --git a/functional/test_encryption_vol_type.py b/functional/test_encryption_vol_type.py
new file mode 100644
index 0000000..e1a3e76
--- /dev/null
+++ b/functional/test_encryption_vol_type.py
@@ -0,0 +1,91 @@
+#    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.common import clients
+from heat_integrationtests.common import config
+from heat_integrationtests.functional import functional_base
+
+test_encryption_vol_type = {
+    'heat_template_version': '2015-04-30',
+    'description': 'Test template to create encryption volume type.',
+    'resources': {
+        'my_volume_type': {
+            'type': 'OS::Cinder::VolumeType',
+            'properties': {
+                'name': 'LUKS'
+            }
+        },
+        'my_encrypted_vol_type': {
+            'type': 'OS::Cinder::EncryptedVolumeType',
+            'properties': {
+                'provider': 'nova.volume.encryptors.luks.LuksEncryptor',
+                'control_location': 'front-end',
+                'cipher': 'aes-xts-plain64',
+                'key_size': 512,
+                'volume_type': {'get_resource': 'my_volume_type'}
+            }
+        }
+    }
+}
+
+
+class EncryptionVolTypeTest(functional_base.FunctionalTestsBase):
+    def setUp(self):
+        super(EncryptionVolTypeTest, self).setUp()
+        self.conf = config.init_conf()
+        # cinder security policy usage of volume type is limited
+        # to being used by administrators only.
+        # Temporarily set username as admin for this test case.
+        self.conf.username = 'admin'
+        self.manager = clients.ClientManager(self.conf)
+        self.client = self.manager.orchestration_client
+        self.volume_client = self.manager.volume_client
+
+    def check_stack(self, sid):
+        vt = 'my_volume_type'
+        e_vt = 'my_encrypted_vol_type'
+
+        # check if only two resources are present.
+        expected_resources = {vt: 'OS::Cinder::VolumeType',
+                              e_vt: 'OS::Cinder::EncryptedVolumeType'}
+        self.assertEqual(expected_resources,
+                         self.list_resources(sid))
+
+        e_vt_obj = self.client.resources.get(sid, e_vt)
+        my_encrypted_vol_type_tmpl_prop = test_encryption_vol_type[
+            'resources']['my_encrypted_vol_type']['properties']
+
+        # check if the phy rsrc specs was created in accordance with template.
+        phy_rsrc_specs = self.volume_client.volume_encryption_types.get(
+            e_vt_obj.physical_resource_id)
+        self.assertEqual(my_encrypted_vol_type_tmpl_prop['key_size'],
+                         phy_rsrc_specs.key_size)
+        self.assertEqual(my_encrypted_vol_type_tmpl_prop['provider'],
+                         phy_rsrc_specs.provider)
+        self.assertEqual(my_encrypted_vol_type_tmpl_prop['cipher'],
+                         phy_rsrc_specs.cipher)
+        self.assertEqual(my_encrypted_vol_type_tmpl_prop['control_location'],
+                         phy_rsrc_specs.control_location)
+
+    def test_create_update(self):
+        stack_identifier = self.stack_create(
+            template=test_encryption_vol_type)
+        self.check_stack(stack_identifier)
+
+        # Change some properties and trigger update.
+        my_encrypted_vol_type_tmpl_prop = test_encryption_vol_type[
+            'resources']['my_encrypted_vol_type']['properties']
+        my_encrypted_vol_type_tmpl_prop['key_size'] = 256
+        my_encrypted_vol_type_tmpl_prop['cipher'] = 'aes-cbc-essiv'
+        self.update_stack(stack_identifier, test_encryption_vol_type)
+        self.check_stack(stack_identifier)