diff --git a/novaclient/tests/unit/v2/test_shell.py b/novaclient/tests/unit/v2/test_shell.py
index 7bde8cd3d..e1166450b 100644
--- a/novaclient/tests/unit/v2/test_shell.py
+++ b/novaclient/tests/unit/v2/test_shell.py
@@ -1753,18 +1753,29 @@ class ShellTest(utils.TestCase):
                           cmd % (FAKE_UUID_1, testfile), api_version='2.57')
 
     def test_rebuild_change_user_data(self):
-        self.run_command('rebuild sample-server %s --user-data test' %
-                         FAKE_UUID_1, api_version='2.57')
-        user_data = servers.ServerManager.transform_userdata('test')
+        testfile = os.path.join(os.path.dirname(__file__), 'testfile.txt')
+        with open(testfile) as testfile_fd:
+            data = testfile_fd.read().encode('utf-8')
+        expected_file_data = servers.ServerManager.transform_userdata(data)
+        self.run_command('rebuild sample-server %s --user-data %s' %
+                         (FAKE_UUID_1, testfile), api_version='2.57')
         self.assert_called('GET', '/servers?name=sample-server', pos=0)
         self.assert_called('GET', '/servers/1234', pos=1)
         self.assert_called('GET', '/v2/images/%s' % FAKE_UUID_1, pos=2)
         self.assert_called('POST', '/servers/1234/action',
                            {'rebuild': {'imageRef': FAKE_UUID_1,
-                                        'user_data': user_data,
+                                        'user_data': expected_file_data,
                                         'description': None}}, pos=3)
         self.assert_called('GET', '/v2/images/%s' % FAKE_UUID_2, pos=4)
 
+    def test_rebuild_invalid_user_data(self):
+        invalid_file = os.path.join(os.path.dirname(__file__),
+                                    'no_such_file')
+        cmd = ('rebuild sample-server %s --user-data %s'
+               % (FAKE_UUID_1, invalid_file))
+        self.assertRaises(exceptions.CommandError, self.run_command, cmd,
+                          api_version='2.57')
+
     def test_rebuild_unset_user_data(self):
         self.run_command('rebuild sample-server %s --user-data-unset' %
                          FAKE_UUID_1, api_version='2.57')
diff --git a/novaclient/v2/shell.py b/novaclient/v2/shell.py
index 7ddc5323e..8a1b9a6d4 100644
--- a/novaclient/v2/shell.py
+++ b/novaclient/v2/shell.py
@@ -1915,8 +1915,15 @@ def do_rebuild(cs, args):
                     _("Cannot specify '--user-data-unset' with "
                       "'--user-data'."))
         elif args.user_data:
-            kwargs['userdata'] = args.user_data
-
+            try:
+                kwargs['userdata'] = open(args.user_data)
+            except IOError as e:
+                raise exceptions.CommandError(
+                    _("Can't open '%(user_data)s': %(exc)s") % {
+                        'user_data': args.user_data,
+                        'exc': e,
+                    }
+                )
     if cs.api_version >= api_versions.APIVersion('2.54'):
         if args.key_unset:
             kwargs['key_name'] = None
diff --git a/releasenotes/notes/fix-rebuild-userdata-9315e5784feb8ba9.yaml b/releasenotes/notes/fix-rebuild-userdata-9315e5784feb8ba9.yaml
new file mode 100644
index 000000000..4d5407584
--- /dev/null
+++ b/releasenotes/notes/fix-rebuild-userdata-9315e5784feb8ba9.yaml
@@ -0,0 +1,5 @@
+---
+fixes:
+  - |
+    The user data argument to rebuild was passing the filename as is as userdata.
+    Now this passes the contents of the filename as intended.