diff --git a/heat/engine/service.py b/heat/engine/service.py
index a2d5a76509..a2fc9d6bdc 100644
--- a/heat/engine/service.py
+++ b/heat/engine/service.py
@@ -696,7 +696,7 @@ class EngineService(service.ServiceBase):
         else:
             tmpl = templatem.Template(template, files=files)
             env_util.merge_environments(environment_files, files, params,
-                                        tmpl.param_schemata())
+                                        tmpl.all_param_schemata(files))
             tmpl.env = environment.Environment(params)
         self._validate_new_stack(cnxt, stack_name, tmpl)
 
@@ -891,7 +891,7 @@ class EngineService(service.ServiceBase):
             new_files.update(files or {})
             tmpl = templatem.Template(new_template, files=new_files)
             env_util.merge_environments(environment_files, files, params,
-                                        tmpl.param_schemata())
+                                        tmpl.all_param_schemata(files))
             existing_env = current_stack.env.env_as_dict()
             existing_params = existing_env[env_fmt.PARAMETERS]
             clear_params = set(args.get(rpc_api.PARAM_CLEAR_PARAMETERS, []))
@@ -912,7 +912,7 @@ class EngineService(service.ServiceBase):
             else:
                 tmpl = templatem.Template(template, files=files)
                 env_util.merge_environments(environment_files, files, params,
-                                            tmpl.param_schemata())
+                                            tmpl.all_param_schemata(files))
                 tmpl.env = environment.Environment(params)
 
         max_resources = cfg.CONF.max_resources_per_stack
@@ -1221,7 +1221,7 @@ class EngineService(service.ServiceBase):
 
         tmpl = templatem.Template(template, files=files)
         env_util.merge_environments(environment_files, files, params,
-                                    tmpl.param_schemata())
+                                    tmpl.all_param_schemata(files))
         tmpl.env = environment.Environment(params)
         try:
             self._validate_template(cnxt, tmpl)
diff --git a/heat/engine/template.py b/heat/engine/template.py
index 5aa6c51f62..92f395ef91 100644
--- a/heat/engine/template.py
+++ b/heat/engine/template.py
@@ -22,6 +22,7 @@ from stevedore import extension
 
 from heat.common import exception
 from heat.common.i18n import _
+from heat.common import template_format
 from heat.engine import conditions
 from heat.engine import environment
 from heat.engine import function
@@ -195,6 +196,21 @@ class Template(collections.Mapping):
         """Return a dict of parameters.Schema objects for the parameters."""
         pass
 
+    def all_param_schemata(self, files):
+        schema = {}
+        files = files if files is not None else {}
+        for f in files.values():
+            try:
+                data = template_format.parse(f)
+            except ValueError:
+                continue
+            else:
+                sub_tmpl = Template(data)
+                schema.update(sub_tmpl.param_schemata())
+        # Parent template has precedence, so update the schema last.
+        schema.update(self.param_schemata())
+        return schema
+
     @abc.abstractmethod
     def get_section_name(self, section):
         """Return a correct section name."""
diff --git a/heat/tests/test_validate.py b/heat/tests/test_validate.py
index 4664717c19..234dcd35fe 100644
--- a/heat/tests/test_validate.py
+++ b/heat/tests/test_validate.py
@@ -1011,6 +1011,27 @@ class ValidateTest(common.HeatTestCase):
                          res['Parameters']['net_name']['Value'])
         self.assertNotIn('Default', res['Parameters']['net_name'])
 
+    def test_validate_parameters_nested(self):
+        t = template_format.parse(test_template_allowed_integers)
+
+        other_template = test_template_no_default.replace(
+            'net_name', 'net_name2')
+
+        files = {'env1': 'parameter_defaults:\n  net_name: net1',
+                 'env2': 'parameter_defaults:'
+                         '\n  net_name: net2'
+                         '\n  net_name2: net3',
+                 'tmpl1.yaml': test_template_no_default,
+                 'tmpl2.yaml': other_template}
+        params = {'parameters': {}, 'parameter_defaults': {}}
+
+        self.engine.validate_template(
+            self.ctx, t,
+            params=params,
+            files=files, environment_files=['env1', 'env2'])
+        self.assertEqual('net2', params['parameter_defaults']['net_name'])
+        self.assertEqual('net3', params['parameter_defaults']['net_name2'])
+
     def test_validate_hot_empty_parameters_valid(self):
         t = template_format.parse(
             """