diff --git a/lib/ansible/runner/__init__.py b/lib/ansible/runner/__init__.py
index e5d62e3a49..7242357457 100644
--- a/lib/ansible/runner/__init__.py
+++ b/lib/ansible/runner/__init__.py
@@ -528,7 +528,8 @@ class Runner(object):
             self.conditional = [ self.conditional ]
 
         for cond in self.conditional:
-            if not utils.check_conditional(cond, self.basedir, inject):
+
+            if not utils.check_conditional(cond, self.basedir, inject, fail_on_undefined=self.error_on_undefined_vars):
                 result = utils.jsonify(dict(changed=False, skipped=True))
                 self.callbacks.on_skipped(host, inject.get('item',None))
                 return ReturnData(host=host, result=result)
@@ -636,8 +637,7 @@ class Runner(object):
                     if 'stdout' in data:
                         data['stdout_lines'] = data['stdout'].splitlines()
                     inject[register] = data
-                changed = template.template(self.basedir, changed_when, inject, fail_on_undefined=self.error_on_undefined_vars)
-                data['changed'] = utils.check_conditional(changed)
+                data['changed'] = utils.check_conditional(changed_when, self.basedir, inject, fail_on_undefined=self.error_on_undefined_vars)
 
             if is_chained:
                 # no callbacks
diff --git a/lib/ansible/runner/action_plugins/group_by.py b/lib/ansible/runner/action_plugins/group_by.py
index 093196e399..79bcea42c1 100644
--- a/lib/ansible/runner/action_plugins/group_by.py
+++ b/lib/ansible/runner/action_plugins/group_by.py
@@ -58,7 +58,7 @@ class ActionModule(object):
             data = {}
             data.update(inject)
             data.update(inject['hostvars'][host])
-            if not check_conditional(self.runner.basedir, self.runner.conditional, data):
+            if not check_conditional(self.runner.basedir, self.runner.conditional, data, fail_on_undefined=self.runner.error_on_undefined_vars):
                 continue
             group_name = template.template(self.runner.basedir, args['key'], data)
             group_name = group_name.replace(' ','-')
diff --git a/lib/ansible/utils/__init__.py b/lib/ansible/utils/__init__.py
index 572e101cb1..70f16ae337 100644
--- a/lib/ansible/utils/__init__.py
+++ b/lib/ansible/utils/__init__.py
@@ -155,16 +155,18 @@ def is_changed(result):
 
     return (result.get('changed', False) in [ True, 'True', 'true'])
 
-def check_conditional(conditional, basedir, inject):
+def check_conditional(conditional, basedir, inject, fail_on_undefined=False):
 
     if conditional.startswith("jinja2_compare"):
         conditional = conditional.replace("jinja2_compare ","")
         # allow variable names
         if conditional in inject:
             conditional = inject[conditional]
-        conditional = template.template(basedir, conditional, inject)
+        print "INJECTIFYING: %s" % inject
+        conditional = template.template(basedir, conditional, inject, fail_on_undefined=fail_on_undefined)
         # a Jinja2 evaluation that results in something Python can eval!
         presented = "{% if " + conditional + " %} True {% else %} False {% endif %}"
+        return presented
 
     if not isinstance(conditional, basestring):
         return conditional