diff --git a/src/lib/template/templatizer.html b/src/lib/template/templatizer.html
index b76fcc46..a6cdf5bf 100644
--- a/src/lib/template/templatizer.html
+++ b/src/lib/template/templatizer.html
@@ -416,7 +416,9 @@ subject to an additional IP rights grant found at http://polymer.github.io/PATEN
       if (this._parentProps) {
         var templatized = this._templatized;
         for (var prop in this._parentProps) {
-          model[prop] = templatized[this._parentPropPrefix + prop];
+          if (model[prop] === undefined) {
+            model[prop] = templatized[this._parentPropPrefix + prop];
+          }
         }
       }
       return new this.ctor(model, this);
diff --git a/test/runner.html b/test/runner.html
index 8acdc9b9..22b6bb82 100644
--- a/test/runner.html
+++ b/test/runner.html
@@ -66,6 +66,7 @@ subject to an additional IP rights grant found at http://polymer.github.io/PATEN
       'unit/templatizer.html',
       'unit/dom-repeat.html',
       'unit/dom-if.html',
+      'unit/dom-template.html',
       'unit/dom-bind.html',
       'unit/script-after-import-in-head.html',
       'unit/globals.html'
diff --git a/test/unit/template/dom-template.html b/test/unit/dom-template.html
similarity index 50%
rename from test/unit/template/dom-template.html
rename to test/unit/dom-template.html
index f36ddad4..36556a2f 100644
--- a/test/unit/template/dom-template.html
+++ b/test/unit/dom-template.html
@@ -11,9 +11,9 @@ subject to an additional IP rights grant found at http://polymer.github.io/PATEN
 <html>
 <head>
   <meta charset="utf-8">
-  <script src="../../../../webcomponentsjs/webcomponents-lite.js"></script>
-  <script src="../../../../web-component-tester/browser.js"></script>
-  <link rel="import" href="../../../polymer.html">
+  <script src="../../../webcomponentsjs/webcomponents-lite.js"></script>
+  <script src="../../../web-component-tester/browser.js"></script>
+  <link rel="import" href="../../polymer.html">
 </head>
 <body>
 
@@ -21,6 +21,38 @@ subject to an additional IP rights grant found at http://polymer.github.io/PATEN
   <span>{{text}}</span>
 </template>
 
+<dom-module id="test-dom-template">
+  <template>
+    <template is="dom-template" id="tmpl">
+      <span>{{text}}</span>
+    </template>
+  </template>
+  <script>
+    HTMLImports.whenReady(function() {
+
+      Polymer({
+        is: 'test-dom-template',
+
+        properties: {
+          value: String
+        },
+
+        ready: function() {
+
+          var tmpl = this.$.tmpl.stamp({
+            text: 'ohai'
+          });
+
+          this.value = tmpl.root.textContent.trim();
+        }
+      });
+
+    });
+  </script>
+</dom-module>
+
+<test-dom-template id="testDom"></test-dom-template>
+
 <script>
 
 suite('<dom-template>', function() {
@@ -31,6 +63,11 @@ suite('<dom-template>', function() {
     assert.equal(row.root.textContent.trim(), 'ohai');
   });
 
+  test('stamps within an element', function() {
+    var template = document.querySelector('#testDom');
+    assert.equal(template.value, 'ohai');
+  });
+
 });
 
 </script>
