diff --git a/README.rst b/README.rst
index 1b04a2c..2e836bf 100644
--- a/README.rst
+++ b/README.rst
@@ -467,6 +467,7 @@
             # Cluster global settings
             rng: false
             enable_vnc: True
+            seed: cloud-init
             cloud_init:
               user_data:
                 disable_ec2_metadata: true
@@ -517,6 +518,31 @@
                     networks:
                     - <<: *private-ipv4
                       ip_address: 192.168.0.161
+                  user_data:
+                    salt_minion:
+                      conf:
+                        master: 10.1.1.1
+              ubuntu2:
+                seed: qemu-nbd
+                cloud_init:
+                  enabled: false
+
+There are two methods to seed an initial Salt minion configuration to
+Libvirt VMs: mount a disk and update a filesystem or create a ConfigDrive with
+a Cloud-init config. This is controlled by the "seed" parameter on cluster and
+node levels. When set to _True_ or "qemu-nbd", the old method of mounting a disk
+will be used. When set to "cloud-init", the new method will be used. When set
+to _False_, no seeding will happen. The default value is _True_, meaning
+the "qemu-nbd" method will be used. This is done for backward compatibility
+and may be changed in future.
+
+The recommended method is to use Cloud-init.
+It's controlled by the "cloud_init" dictionary on cluster and node levels.
+Node level parameters are merged on top of cluster level parameters.
+The Salt Minion config is populated automatically based on a VM name and config
+settings of the minion who is actually executing a state. To override them,
+add the "salt_minion" section into the "user_data" section as shown above.
+It is possible to disable Cloud-init by setting "cloud_init.enabled" to _False_.
 
 To enable Redis plugin for the Salt caching subsystem, use the
 below pillar structure:
@@ -932,4 +958,3 @@
 * #salt-formulas @ irc.freenode.net
    Use this IRC channel in case of any questions or feedback which is always
    welcome
-
diff --git a/_modules/cfgdrive.py b/_modules/cfgdrive.py
index bc76b77..9f07d8e 100644
--- a/_modules/cfgdrive.py
+++ b/_modules/cfgdrive.py
@@ -1,16 +1,17 @@
 # -*- coding: utf-8 -*-
 
+import errno
 import json
 import logging
 import os
 import shutil
 import six
+import subprocess
 import tempfile
+import uuid
 import yaml
 
-from oslo_utils import uuidutils
-from oslo_utils import fileutils
-from oslo_concurrency import processutils
+LOG = logging.getLogger(__name__)
 
 class ConfigDriveBuilder(object):
     """Build config drives, optionally as a context manager."""
@@ -20,19 +21,37 @@
         self.mdfiles=[]
 
     def __enter__(self):
-        fileutils.delete_if_exists(self.image_file)
+        self._delete_if_exists(self.image_file)
         return self
 
     def __exit__(self, exctype, excval, exctb):
         self.make_drive()
 
+    @staticmethod
+    def _ensure_tree(path):
+        try:
+            os.makedirs(path)
+        except OSError as e:
+            if e.errno == errno.EEXIST and os.path.isdir(path):
+                pass
+            else:
+                raise
+
+    @staticmethod
+    def _delete_if_exists(path):
+        try:
+            os.unlink(path)
+        except OSError as e:
+            if e.errno != errno.ENOENT:
+                raise
+
     def add_file(self, path, data):
         self.mdfiles.append((path, data))
 
     def _add_file(self, basedir, path, data):
         filepath = os.path.join(basedir, path)
         dirname = os.path.dirname(filepath)
-        fileutils.ensure_tree(dirname)
+        self._ensure_tree(dirname)
         with open(filepath, 'wb') as f:
             if isinstance(data, six.text_type):
                 data = data.encode('utf-8')
@@ -43,8 +62,7 @@
             self._add_file(basedir, data[0], data[1])
 
     def _make_iso9660(self, path, tmpdir):
-
-        processutils.execute('mkisofs',
+        cmd = ['mkisofs',
             '-o', path,
             '-ldots',
             '-allow-lowercase',
@@ -54,13 +72,34 @@
             '-r',
             '-J',
             '-quiet',
-            tmpdir,
-            attempts=1,
-            run_as_root=False)
+            tmpdir]
+        try:
+            LOG.info('Running cmd (subprocess): %s', cmd)
+            _pipe = subprocess.PIPE
+            obj = subprocess.Popen(cmd,
+                       stdin=_pipe,
+                       stdout=_pipe,
+                       stderr=_pipe,
+                       close_fds=True)
+            (stdout, stderr) = obj.communicate()
+            obj.stdin.close()
+            _returncode = obj.returncode
+            LOG.debug('Cmd "%s" returned: %s', cmd, _returncode)
+            if _returncode != 0:
+                output = 'Stdout: %s\nStderr: %s' % (stdout, stderr)
+                LOG.error('The command "%s" failed. %s',
+                          cmd, output)
+                raise subprocess.CalledProcessError(cmd=cmd,
+                                                    returncode=_returncode,
+                                                    output=output)
+        except OSError as err:
+            LOG.error('Got an OSError in the command: "%s". Errno: %s', cmd,
+                      err.errno)
+            raise
 
     def make_drive(self):
         """Make the config drive.
-        :raises ProcessExecuteError if a helper process has failed.
+        :raises CalledProcessError if a helper process has failed.
         """
         try:
             tmpdir = tempfile.mkdtemp()
@@ -70,15 +109,8 @@
             shutil.rmtree(tmpdir)
 
 
-def generate(
-               dst,
-               hostname,
-               domainname,
-               instance_id=None,
-               user_data=None,
-               network_data=None,
-               saltconfig=None
-            ):
+def generate(dst, hostname, domainname, instance_id=None, user_data=None,
+             network_data=None):
 
     ''' Generate config drive
 
@@ -86,29 +118,24 @@
     :param hostname: hostname of Instance.
     :param domainname: instance domain.
     :param instance_id: UUID of the instance.
-    :param user_data: custom user data dictionary. type: json
-    :param network_data: custom network info dictionary. type: json
-    :param saltconfig: salt minion configuration. type: json
+    :param user_data: custom user data dictionary.
+    :param network_data: custom network info dictionary.
 
     '''
-
-    instance_md              = {}
-    instance_md['uuid']      = instance_id or uuidutils.generate_uuid()
-    instance_md['hostname']  = '%s.%s' % (hostname, domainname)
-    instance_md['name']      = hostname
+    instance_md = {}
+    instance_md['uuid'] = instance_id or str(uuid.uuid4())
+    instance_md['hostname'] = '%s.%s' % (hostname, domainname)
+    instance_md['name'] = hostname
 
     if user_data:
-      user_data = '#cloud-config\n\n' + yaml.dump(yaml.load(user_data), default_flow_style=False)
-      if saltconfig:
-        user_data += yaml.dump(yaml.load(str(saltconfig)), default_flow_style=False)
+        user_data = '#cloud-config\n\n' + yaml.dump(user_data, default_flow_style=False)
 
     data = json.dumps(instance_md)
-
     with ConfigDriveBuilder(dst) as cfgdrive:
-      cfgdrive.add_file('openstack/latest/meta_data.json', data)
-      if user_data:
-        cfgdrive.add_file('openstack/latest/user_data', user_data)
-      if network_data:
-         cfgdrive.add_file('openstack/latest/network_data.json', network_data)
-      cfgdrive.add_file('openstack/latest/vendor_data.json', '{}')
-      cfgdrive.add_file('openstack/latest/vendor_data2.json', '{}')
+        cfgdrive.add_file('openstack/latest/meta_data.json', data)
+        if user_data:
+            cfgdrive.add_file('openstack/latest/user_data', user_data)
+        if network_data:
+            cfgdrive.add_file('openstack/latest/network_data.json', json.dumps(network_data))
+
+    LOG.debug('Config drive was built %s' % dst)
diff --git a/_modules/virtng.py b/_modules/virtng.py
index 2c6bc9d..2da9d36 100644
--- a/_modules/virtng.py
+++ b/_modules/virtng.py
@@ -9,6 +9,7 @@
 
 # Import python libs
 from __future__ import absolute_import
+import collections
 import copy
 import os
 import re
@@ -20,12 +21,13 @@
 
 # Import third party libs
 import yaml
-import json
 import jinja2
 import jinja2.exceptions
 import salt.ext.six as six
 from salt.ext.six.moves import StringIO as _StringIO  # pylint: disable=import-error
+from salt.utils.odict import OrderedDict
 from xml.dom import minidom
+from xml.etree import ElementTree
 try:
     import libvirt  # pylint: disable=import-error
     HAS_ALL_IMPORTS = True
@@ -253,8 +255,12 @@
             context['console'] = True
 
     context['disks'] = {}
+    context['cdrom'] = []
     for i, disk in enumerate(diskp):
         for disk_name, args in disk.items():
+            if args.get('device', 'disk') == 'cdrom':
+                context['cdrom'].append(args)
+                continue
             context['disks'][disk_name] = {}
             fn_ = '{0}.{1}'.format(disk_name, args['format'])
             context['disks'][disk_name]['file_name'] = fn_
@@ -282,8 +288,23 @@
         log.error('Could not load template {0}'.format(fn_))
         return ''
 
-    return template.render(**context)
+    xml = template.render(**context)
 
+    # Add cdrom devices separately because a current template doesn't support them.
+    if context['cdrom']:
+        xml_doc = ElementTree.fromstring(xml)
+        xml_devs = xml_doc.find('.//devices')
+        cdrom_xml_tmpl = """<disk type='file' device='cdrom'>
+          <driver name='{driver_name}' type='{driver_type}'/>
+          <source file='{filename}'/>
+          <target dev='{dev}' bus='{bus}'/>
+          <readonly/>
+        </disk>"""
+        for disk in context['cdrom']:
+            cdrom_elem = ElementTree.fromstring(cdrom_xml_tmpl.format(**disk))
+            xml_devs.append(cdrom_elem)
+        xml = ElementTree.tostring(xml_doc)
+    return xml
 
 def _gen_vol_xml(vmname,
                  diskname,
@@ -552,6 +573,10 @@
 
     rng = rng or {'backend':'/dev/urandom'}
     hypervisor = __salt__['config.get']('libvirt:hypervisor', hypervisor)
+    if kwargs.get('seed') not in (False, True, None, 'qemu-nbd', 'cloud-init'):
+        log.warning(
+            "The seeding method '{0}' is not supported".format(kwargs.get('seed'))
+        )
 
     nicp = _nic_profile(nic, hypervisor, **kwargs)
 
@@ -566,9 +591,6 @@
             diskp[0][disk_name]['image'] = image
 
     # Create multiple disks, empty or from specified images.
-    cloud_init = None
-    cfg_drive  = None
-
     for disk in diskp:
         log.debug("Creating disk for VM [ {0} ]: {1}".format(name, disk))
 
@@ -628,40 +650,14 @@
                     except (IOError, OSError) as e:
                         raise CommandExecutionError('problem while copying image. {0} - {1}'.format(args['image'], e))
 
-                    if kwargs.get('seed'):
-                        seed_cmd   = kwargs.get('seed_cmd', 'seedng.apply')
-                        cloud_init = kwargs.get('cloud_init', None)
-                        master     = __salt__['config.option']('master')
-                        cfg_drive  = os.path.join(img_dir,'config-2.iso')
+                    if kwargs.get('seed') in (True, 'qemu-nbd'):
+                        install = kwargs.get('install', True)
+                        seed_cmd = kwargs.get('seed_cmd', 'seedng.apply')
 
-                        if cloud_init:
-                          _tmp         = name.split('.')
-
-                          try:
-                            user_data  = json.dumps(cloud_init["user_data"])
-                          except:
-                            user_data  = None
-
-                          try:
-                            network_data = json.dumps(cloud_init["network_data"])
-                          except:
-                            network_data = None
-
-                          __salt__["cfgdrive.generate"](
-                            dst          = cfg_drive,
-                            hostname     = _tmp.pop(0),
-                            domainname   = '.'.join(_tmp),
-                            user_data    = user_data,
-                            network_data = network_data,
-                            saltconfig   = { "salt_minion": { "conf": { "master": master, "id": name } } }
-                          )
-                        else:
-                          __salt__[seed_cmd](
-                            path      = img_dest,
-                            id_       = name,
-                            config    = kwargs.get('config'),
-                            install   = kwargs.get('install', True)
-                          )
+                        __salt__[seed_cmd](img_dest,
+                                           id_=name,
+                                           config=kwargs.get('config'),
+                                           install=install)
                 else:
                     # Create empty disk
                     try:
@@ -684,55 +680,99 @@
                 raise SaltInvocationError('Unsupported hypervisor when handling disk image: {0}'
                                           .format(hypervisor))
 
+    cloud_init = kwargs.get('cloud_init', {})
+
+    # Seed Salt Minion config via Cloud-init if required.
+    if kwargs.get('seed') == 'cloud-init':
+        # Recursive dict update.
+        def rec_update(d, u):
+            for k, v in u.iteritems():
+                if isinstance(v, collections.Mapping):
+                    d[k] = rec_update(d.get(k, {}), v)
+                else:
+                    d[k] = v
+            return d
+
+        cloud_init_seed = {
+            "user_data": {
+                "salt_minion": {
+                    "conf": {
+                        "master": __salt__['config.option']('master'),
+                        "id": name
+                    }
+                }
+            }
+        }
+        cloud_init = rec_update(cloud_init_seed, cloud_init)
+
+    # Create a cloud-init config drive if defined.
+    if cloud_init:
+        if hypervisor not in ['qemu', 'kvm']:
+            raise SaltInvocationError('Unsupported hypervisor when '
+                                      'handling Cloud-Init disk '
+                                      'image: {0}'.format(hypervisor))
+        cfg_drive = os.path.join(img_dir, 'config-2.iso')
+        vm_hostname, vm_domainname = name.split('.', 1)
+
+        def OrderedDict_to_dict(instance):
+            if isinstance(instance, basestring):
+                return instance
+            elif isinstance(instance, collections.Sequence):
+                return map(OrderedDict_to_dict, instance)
+            elif isinstance(instance, collections.Mapping):
+                if isinstance(instance, OrderedDict):
+                    instance = dict(instance)
+                for k, v in instance.iteritems():
+                    instance[k] = OrderedDict_to_dict(v)
+                return instance
+            else:
+                return instance
+
+        # Yaml.dump dumps OrderedDict in the way to be incompatible with
+        # Cloud-init, hence all OrderedDicts have to be converted to dict first.
+        user_data = OrderedDict_to_dict(cloud_init.get('user_data', None))
+
+        __salt__["cfgdrive.generate"](
+            dst=cfg_drive,
+            hostname=vm_hostname,
+            domainname=vm_domainname,
+            user_data=user_data,
+            network_data=cloud_init.get('network_data', None),
+        )
+        diskp.append({
+            'config_2': {
+                'device': 'cdrom',
+                'driver_name': 'qemu',
+                'driver_type': 'raw',
+                'dev': 'hdc',
+                'bus': 'ide',
+                'filename': cfg_drive
+            }
+        })
+
     xml = _gen_xml(name, cpu, mem, diskp, nicp, hypervisor, **kwargs)
 
-    if cloud_init and cfg_drive:
-      xml_doc = minidom.parseString(xml)
-      iso_xml = xml_doc.createElement("disk")
-      iso_xml.setAttribute("type", "file")
-      iso_xml.setAttribute("device", "cdrom")
-      iso_xml.appendChild(xml_doc.createElement("readonly"))
-      driver = xml_doc.createElement("driver")
-      driver.setAttribute("name", "qemu")
-      driver.setAttribute("type", "raw")
-      target = xml_doc.createElement("target")
-      target.setAttribute("dev", "hdc")
-      target.setAttribute("bus", "ide")
-      source = xml_doc.createElement("source")
-      source.setAttribute("file", cfg_drive)
-      iso_xml.appendChild(driver)
-      iso_xml.appendChild(target)
-      iso_xml.appendChild(source)
-      xml_doc.getElementsByTagName("domain")[0].getElementsByTagName("devices")[0].appendChild(iso_xml)
-      xml = xml_doc.toxml()
-
     # TODO: Remove this code and refactor module, when salt-common would have updated libvirt_domain.jinja template
+    xml_doc = minidom.parseString(xml)
     if cpuset:
-        xml_doc = minidom.parseString(xml)
         xml_doc.getElementsByTagName("vcpu")[0].setAttribute('cpuset', cpuset)
-        xml = xml_doc.toxml()
 
     # TODO: Remove this code and refactor module, when salt-common would have updated libvirt_domain.jinja template
     if cpu_mode:
-        xml_doc = minidom.parseString(xml)
         cpu_xml = xml_doc.createElement("cpu")
         cpu_xml.setAttribute('mode', cpu_mode)
         xml_doc.getElementsByTagName("domain")[0].appendChild(cpu_xml)
-        xml = xml_doc.toxml()
 
     # TODO: Remove this code and refactor module, when salt-common would have updated libvirt_domain.jinja template
     if machine:
-        xml_doc = minidom.parseString(xml)
         os_xml = xml_doc.getElementsByTagName("domain")[0].getElementsByTagName("os")[0]
         os_xml.getElementsByTagName("type")[0].setAttribute('machine', machine)
-        xml = xml_doc.toxml()
 
     # TODO: Remove this code and refactor module, when salt-common would have updated libvirt_domain.jinja template
     if loader and 'path' not in loader:
         log.info('`path` is a required property of `loader`, and cannot be found. Skipping loader configuration')
         loader = None
     elif loader:
-        xml_doc = minidom.parseString(xml)
         loader_xml = xml_doc.createElement("loader")
         for key, val in loader.items():
             if key == 'path':
@@ -741,25 +781,21 @@
         loader_path_xml = xml_doc.createTextNode(loader['path'])
         loader_xml.appendChild(loader_path_xml)
         xml_doc.getElementsByTagName("domain")[0].getElementsByTagName("os")[0].appendChild(loader_xml)
-        xml = xml_doc.toxml()
 
     # TODO: Remove this code and refactor module, when salt-common would have updated libvirt_domain.jinja template
     for _nic in nicp:
         if _nic['virtualport']:
-            xml_doc = minidom.parseString(xml)
             interfaces = xml_doc.getElementsByTagName("domain")[0].getElementsByTagName("devices")[0].getElementsByTagName("interface")
             for interface in interfaces:
                 if interface.getElementsByTagName('mac')[0].getAttribute('address').lower() == _nic['mac'].lower():
                     vport_xml = xml_doc.createElement("virtualport")
                     vport_xml.setAttribute("type", _nic['virtualport']['type'])
                     interface.appendChild(vport_xml)
-            xml = xml_doc.toxml()
 
     # TODO: Remove this code and refactor module, when salt-common would have updated libvirt_domain.jinja template
     if rng:
         rng_model = rng.get('model', 'random')
         rng_backend = rng.get('backend', '/dev/urandom')
-        xml_doc = minidom.parseString(xml)
         rng_xml = xml_doc.createElement("rng")
         rng_xml.setAttribute("model", "virtio")
         backend = xml_doc.createElement("backend")
@@ -774,8 +810,8 @@
             rate.setAttribute("bytes", rng_rate_bytes)
             rng_xml.appendChild(rate)
         xml_doc.getElementsByTagName("domain")[0].getElementsByTagName("devices")[0].appendChild(rng_xml)
-        xml = xml_doc.toxml()
 
+    xml = xml_doc.toxml()
     define_xml_str(xml)
 
     if start:
diff --git a/salt/control/virt.sls b/salt/control/virt.sls
index d84199f..08e6158 100644
--- a/salt/control/virt.sls
+++ b/salt/control/virt.sls
@@ -49,6 +49,7 @@
 {%- if node.provider == grains.id %}
 
 {%- set size = control.size.get(node.size) %}
+{%- set seed = node.get('seed', cluster.get('seed', True)) %}
 {%- set cluster_cloud_init = cluster.get('cloud_init', {}) %}
 {%- set node_cloud_init = node.get('cloud_init', {}) %}
 {%- set cloud_init = salt['grains.filter_by']({'default': cluster_cloud_init}, merge=node_cloud_init) %}
@@ -63,28 +64,33 @@
   - start: True
   - disk: {{ size.disk_profile }}
   - nic: {{ size.net_profile }}
-  {%- if  node.rng is defined %}
+  {%- if node.rng is defined %}
   - rng: {{  node.rng }}
   {%- elif rng is defined %}
   - rng: {{ rng }}
   {%- endif %}
-  {%- if  node.loader is defined %}
+  {%- if node.loader is defined %}
   - loader: {{  node.loader }}
   {%- endif %}
-  {%- if  node.machine is defined %}
+  {%- if node.machine is defined %}
   - machine: {{ node.machine }}
   {%- endif %}
-  {%- if  node.cpuset is defined %}
+  {%- if node.cpuset is defined %}
   - cpuset: {{ node.cpuset }}
   {%- endif %}
-  {%- if  node.cpu_mode is defined %}
+  {%- if node.cpu_mode is defined %}
   - cpu_mode: {{ node.cpu_mode }}
   {%- endif %}
   - kwargs:
-      {%- if cloud_init is defined %}
+      {%- if cluster.config is defined %}
+      config: {{ cluster.config }}
+      {%- endif %}
+      {%- if cloud_init and cloud_init.get('enabled', True) %}
       cloud_init: {{ cloud_init }}
       {%- endif %}
-      seed: True
+      {%- if seed %}
+      seed: {{ seed }}
+      {%- endif %}
       serial_type: pty
       console: True
       {%- if node.enable_vnc is defined %}
@@ -104,13 +110,6 @@
   - require:
     - salt_libvirt_service
 
-#salt_control_seed_{{ cluster_name }}_{{ node_name }}:
-#  module.run:
-#  - name: seed.apply
-#  - path: /srv/salt-images/{{ node_name }}.{{ cluster.domain }}/system.qcow2
-#  - id_: {{ node_name }}.{{ cluster.domain }}
-#  - unless: virsh list | grep {{ node_name }}.{{ cluster.domain }}
-
 {%- if node.get("autostart", True) %}
 
 salt_virt_autostart_{{ cluster_name }}_{{ node_name }}:
diff --git a/salt/map.jinja b/salt/map.jinja
index b20f378..71f50c1 100644
--- a/salt/map.jinja
+++ b/salt/map.jinja
@@ -192,6 +192,7 @@
   virt_pkgs:
   - libvirt-dev
   - pkg-config
+  - genisoimage
 {% if grains.get('oscodename') == 'trusty' %}
   - libguestfs-tools
 {% endif %}
@@ -201,6 +202,7 @@
   virt_pkgs:
   - libvirt-dev
   - pkg-config
+  - genisoimage
   virt_service: 'libvirtd'
 {%- endload %}
 
diff --git a/tests/pillar/control_virt_custom.sls b/tests/pillar/control_virt_custom.sls
index 265d484..3ee85f1 100644
--- a/tests/pillar/control_virt_custom.sls
+++ b/tests/pillar/control_virt_custom.sls
@@ -67,6 +67,7 @@
         config:
           engine: salt
           host: master.domain.com
+        seed: cloud-init
         cloud_init:
           user_data:
             disable_ec2_metadata: true
@@ -104,6 +105,9 @@
             image: bubuntu.qcomw
             size: small
             img_dest: /var/lib/libvirt/hddimages
+            seed: qemu-nbd
+            cloud_init:
+              enabled: false
             loader:
               readonly: yes
               type: pflash
@@ -113,6 +117,10 @@
             image: meowbuntu.qcom2
             size: medium_three_disks
             cloud_init:
+              user_data:
+                salt_minion:
+                  config:
+                    master: master.domain.com
               network_data:
                 networks:
                 - <<: *private-ipv4