diff --git a/functional/test_conditions.py b/functional/test_conditions.py
new file mode 100644
index 0000000..6ac01e1
--- /dev/null
+++ b/functional/test_conditions.py
@@ -0,0 +1,289 @@
+#    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
+
+
+cfn_template = '''
+AWSTemplateFormatVersion: 2010-09-09
+Parameters:
+  env_type:
+    Default: test
+    Type: String
+    AllowedValues: [prod, test]
+  zone:
+    Type: String
+    Default: beijing
+Conditions:
+  Prod: {"Fn::Equals" : [{Ref: env_type}, "prod"]}
+  Test:
+    Fn::Not:
+    - Fn::Equals:
+      - Ref: env_type
+      - prod
+  Beijing_Prod:
+    Fn::And:
+    - Fn::Equals:
+      - Ref: env_type
+      - prod
+    - Fn::Equals:
+      - Ref: zone
+      - beijing
+Resources:
+  test_res:
+    Type: OS::Heat::TestResource
+    Properties:
+      value: {"Fn::If": ["Prod", "env_is_prod", "env_is_test"]}
+  prod_res:
+    Type: OS::Heat::TestResource
+    Properties:
+      value: prod_res
+    Condition: Prod
+  test_res1:
+    Type: OS::Heat::TestResource
+    Properties:
+      value: just in test env
+    Condition: Test
+  beijing_prod_res:
+    Type: OS::Heat::TestResource
+    Properties:
+      value: beijing_prod_res
+    Condition: Beijing_Prod
+Outputs:
+  res_value:
+    Value: {"Fn::GetAtt": [prod_res, output]}
+    Condition: Prod
+  test_res_value:
+    Value: {"Fn::GetAtt": [test_res, output]}
+  prod_resource:
+    Value: {"Fn::If": [Prod, {Ref: prod_res}, 'no_prod_res']}
+  test_res1_value:
+    Value: {"Fn::If": [Test, {"Fn::GetAtt": [test_res1, output]},
+                       'no_test_res1']}
+  beijing_prod_res:
+    Value: {"Fn::If": [Beijing_Prod, {Ref: beijing_prod_res}, 'no_prod_res']}
+'''
+
+hot_template = '''
+heat_template_version: 2016-10-14
+parameters:
+  env_type:
+    default: test
+    type: string
+    constraints:
+      - allowed_values: [prod, test]
+  zone:
+    type: string
+    default: beijing
+conditions:
+  prod: {equals : [{get_param: env_type}, "prod"]}
+  test:
+    not:
+      equals:
+      - get_param: env_type
+      - prod
+  beijing_prod:
+    and:
+    - equals:
+      - get_param: zone
+      - beijing
+    - equals:
+      - get_param: env_type
+      - prod
+resources:
+  test_res:
+    type: OS::Heat::TestResource
+    properties:
+      value: {if: ["prod", "env_is_prod", "env_is_test"]}
+  prod_res:
+    type: OS::Heat::TestResource
+    properties:
+      value: prod_res
+    condition: prod
+  test_res1:
+    type: OS::Heat::TestResource
+    properties:
+      value: just in test env
+    condition: test
+  beijing_prod_res:
+    type: OS::Heat::TestResource
+    properties:
+      value: beijing_prod_res
+    condition: beijing_prod
+outputs:
+  res_value:
+    value: {get_attr: [prod_res, output]}
+    condition: prod
+  test_res_value:
+    value: {get_attr: [test_res, output]}
+  prod_resource:
+    value: {if: [prod, {get_resource: prod_res}, 'no_prod_res']}
+  test_res1_value:
+    value: {if: [test, {get_attr: [test_res1, output]}, 'no_test_res1']}
+  beijing_prod_res:
+    value: {if: [beijing_prod, {get_resource: beijing_prod_res},
+                 'no_prod_res']}
+'''
+
+
+class CreateUpdateResConditionTest(functional_base.FunctionalTestsBase):
+
+    def setUp(self):
+        super(CreateUpdateResConditionTest, self).setUp()
+
+    def res_assert_for_prod(self, resources, bj_prod=True):
+        res_names = [res.resource_name for res in resources]
+        if bj_prod:
+            self.assertEqual(3, len(resources))
+            self.assertIn('beijing_prod_res', res_names)
+        else:
+            self.assertEqual(2, len(resources))
+        self.assertIn('prod_res', res_names)
+        self.assertIn('test_res', res_names)
+
+    def res_assert_for_test(self, resources):
+        self.assertEqual(2, len(resources))
+        res_names = [res.resource_name for res in resources]
+        self.assertIn('test_res', res_names)
+        self.assertIn('test_res1', res_names)
+        self.assertNotIn('prod_res', res_names)
+
+    def output_assert_for_prod(self, stack_id, bj_prod=True):
+        output = self.client.stacks.output_show(stack_id,
+                                                'res_value')['output']
+        self.assertEqual('prod_res', output['output_value'])
+
+        test_res_value = self.client.stacks.output_show(
+            stack_id, 'test_res_value')['output']
+        self.assertEqual('env_is_prod', test_res_value['output_value'])
+
+        prod_resource = self.client.stacks.output_show(
+            stack_id, 'prod_resource')['output']
+        self.assertNotEqual('no_prod_res', prod_resource['output_value'])
+
+        test_res_output = self.client.stacks.output_show(
+            stack_id, 'test_res1_value')['output']
+        self.assertEqual('no_test_res1', test_res_output['output_value'])
+
+        beijing_prod_res = self.client.stacks.output_show(
+            stack_id, 'beijing_prod_res')['output']
+        if bj_prod:
+            self.assertNotEqual('no_prod_res',
+                                beijing_prod_res['output_value'])
+        else:
+            self.assertEqual('no_prod_res', beijing_prod_res['output_value'])
+
+    def output_assert_for_test(self, stack_id):
+        output = self.client.stacks.output_show(stack_id,
+                                                'res_value')['output']
+        self.assertIsNone(output['output_value'])
+
+        test_res_value = self.client.stacks.output_show(
+            stack_id, 'test_res_value')['output']
+        self.assertEqual('env_is_test', test_res_value['output_value'])
+
+        prod_resource = self.client.stacks.output_show(
+            stack_id, 'prod_resource')['output']
+        self.assertEqual('no_prod_res', prod_resource['output_value'])
+
+        test_res_output = self.client.stacks.output_show(
+            stack_id, 'test_res1_value')['output']
+        self.assertEqual('just in test env',
+                         test_res_output['output_value'])
+
+        beijing_prod_res = self.client.stacks.output_show(
+            stack_id, 'beijing_prod_res')['output']
+        self.assertEqual('no_prod_res', beijing_prod_res['output_value'])
+
+    def test_stack_create_update_cfn_template_test_to_prod(self):
+        stack_identifier = self.stack_create(template=cfn_template)
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_test(resources)
+        self.output_assert_for_test(stack_identifier)
+
+        parms = {'env_type': 'prod'}
+        self.update_stack(stack_identifier,
+                          template=cfn_template,
+                          parameters=parms)
+
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_prod(resources)
+        self.output_assert_for_prod(stack_identifier)
+
+        parms = {'env_type': 'prod',
+                 'zone': 'shanghai'}
+        self.update_stack(stack_identifier,
+                          template=cfn_template,
+                          parameters=parms)
+
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_prod(resources, False)
+        self.output_assert_for_prod(stack_identifier, False)
+
+    def test_stack_create_update_cfn_template_prod_to_test(self):
+        parms = {'env_type': 'prod'}
+        stack_identifier = self.stack_create(template=cfn_template,
+                                             parameters=parms)
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_prod(resources)
+        self.output_assert_for_prod(stack_identifier)
+
+        parms = {'env_type': 'test'}
+        self.update_stack(stack_identifier,
+                          template=cfn_template,
+                          parameters=parms)
+
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_test(resources)
+        self.output_assert_for_test(stack_identifier)
+
+    def test_stack_create_update_hot_template_test_to_prod(self):
+        stack_identifier = self.stack_create(template=hot_template)
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_test(resources)
+        self.output_assert_for_test(stack_identifier)
+
+        parms = {'env_type': 'prod'}
+        self.update_stack(stack_identifier,
+                          template=hot_template,
+                          parameters=parms)
+
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_prod(resources)
+        self.output_assert_for_prod(stack_identifier)
+
+        parms = {'env_type': 'prod',
+                 'zone': 'shanghai'}
+        self.update_stack(stack_identifier,
+                          template=hot_template,
+                          parameters=parms)
+
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_prod(resources, False)
+        self.output_assert_for_prod(stack_identifier, False)
+
+    def test_stack_create_update_hot_template_prod_to_test(self):
+        parms = {'env_type': 'prod'}
+        stack_identifier = self.stack_create(template=hot_template,
+                                             parameters=parms)
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_prod(resources)
+        self.output_assert_for_prod(stack_identifier)
+
+        parms = {'env_type': 'test'}
+        self.update_stack(stack_identifier,
+                          template=hot_template,
+                          parameters=parms)
+
+        resources = self.client.resources.list(stack_identifier)
+        self.res_assert_for_test(resources)
+        self.output_assert_for_test(stack_identifier)