diff --git a/heat/engine/resource.py b/heat/engine/resource.py
index 74d72dc99b..1f41a29b5a 100644
--- a/heat/engine/resource.py
+++ b/heat/engine/resource.py
@@ -254,7 +254,7 @@ class Resource(object):
         resource._load_data(db_res)
         return resource, stack
 
-    def make_replacement(self):
+    def make_replacement(self, new_tmpl_id):
         # 1. create the replacement with "replaces" = self.id
         #  Don't set physical_resource_id so that a create is triggered.
         rs = {'stack_id': self.stack.id,
@@ -263,14 +263,17 @@ class Resource(object):
               'needed_by': self.needed_by,
               'requires': self.requires,
               'replaces': self.id,
-              'current_template_id': self.current_template_id,
+              'action': self.INIT,
+              'status': self.COMPLETE,
+              'current_template_id': new_tmpl_id,
               'stack_name': self.stack.name}
         new_rs = resource_objects.Resource.create(self.context, rs)
 
         # 2. update the current resource to be replaced_by the one above.
         rs = resource_objects.Resource.get_obj(self.context, self.id)
         self.replaced_by = new_rs.id
-        rs.update_and_save({'replaced_by': self.replaced_by})
+        rs.update_and_save({'status': self.COMPLETE,
+                            'replaced_by': self.replaced_by})
         return new_rs.id
 
     def reparse(self):
diff --git a/heat/engine/worker.py b/heat/engine/worker.py
index eafe354a7f..2c9b1947aa 100644
--- a/heat/engine/worker.py
+++ b/heat/engine/worker.py
@@ -163,7 +163,9 @@ class WorkerService(service.Service):
             try:
                 check_resource_update(rsrc, tmpl.id, data, self.engine_id)
             except resource.UpdateReplace:
-                new_res_id = rsrc.make_replacement()
+                new_res_id = rsrc.make_replacement(tmpl.id)
+                LOG.info("Replacing resource with new id %s", new_res_id)
+                data = sync_point.serialize_input_data(data)
                 self._rpc_client.check_resource(cnxt,
                                                 new_res_id,
                                                 current_traversal,
diff --git a/heat/tests/test_resource.py b/heat/tests/test_resource.py
index 0329120dce..8603e19e10 100644
--- a/heat/tests/test_resource.py
+++ b/heat/tests/test_resource.py
@@ -382,13 +382,15 @@ class ResourceTest(common.HeatTestCase):
         tmpl = rsrc_defn.ResourceDefinition('test_resource', 'Foo')
         res = generic_rsrc.GenericResource('test_res_upd', tmpl, self.stack)
         res._store()
+        new_tmpl_id = 2
         self.assertIsNotNone(res.id)
-        new_id = res.make_replacement()
+        new_id = res.make_replacement(new_tmpl_id)
         new_res = resource_objects.Resource.get_obj(res.context, new_id)
 
         self.assertEqual(new_id, res.replaced_by)
         self.assertEqual(res.id, new_res.replaces)
         self.assertIsNone(new_res.nova_instance)
+        self.assertEqual(new_tmpl_id, new_res.current_template_id)
 
     def test_parsed_template(self):
         join_func = cfn_funcs.Join(None,