diff --git a/jenkins_jobs/local_yaml.py b/jenkins_jobs/local_yaml.py
index e1b26bd1c..896cc24a9 100644
--- a/jenkins_jobs/local_yaml.py
+++ b/jenkins_jobs/local_yaml.py
@@ -613,7 +613,10 @@ class LateYamlLoader(CustomLoader):
         return LateYamlLoader(self._yaml_str, copy.deepcopy(self._loader, memo))
 
     def get_object_to_format(self):
-        return load(self._yaml_str, search_path=self._loader._search_path)
+        return yaml.load(
+            self._yaml_str,
+            functools.partial(LocalLoader, search_path=self._loader._search_path),
+        )
 
 
 class Jinja2YamlLoader(Jinja2Loader):
diff --git a/tests/localyaml/fixtures/custom_retain_anchors_j2_yaml.yaml b/tests/localyaml/fixtures/custom_retain_anchors_j2_yaml.yaml
new file mode 100644
index 000000000..f5471853c
--- /dev/null
+++ b/tests/localyaml/fixtures/custom_retain_anchors_j2_yaml.yaml
@@ -0,0 +1,12 @@
+- job-template:
+    name: 'test-job-template'
+    builders:
+    - shell:
+        docker run {docker-image}
+
+- project:
+    name: test-project
+    jobs:
+    - 'test-job-template':
+        docker-image: !j2-yaml: |
+            *docker-image
diff --git a/tests/localyaml/fixtures/custom_retain_anchors_j2_yaml_include001.yaml b/tests/localyaml/fixtures/custom_retain_anchors_j2_yaml_include001.yaml
new file mode 100644
index 000000000..18a72a5bb
--- /dev/null
+++ b/tests/localyaml/fixtures/custom_retain_anchors_j2_yaml_include001.yaml
@@ -0,0 +1,3 @@
+- globals:
+    name: globals
+    docker-image: &docker-image "ubuntu:latest"
diff --git a/tests/localyaml/test_localyaml.py b/tests/localyaml/test_localyaml.py
index c41c9ed8f..3814fb56c 100644
--- a/tests/localyaml/test_localyaml.py
+++ b/tests/localyaml/test_localyaml.py
@@ -22,6 +22,7 @@ from yaml.composer import ComposerError
 
 from jenkins_jobs.config import JJBConfig
 from jenkins_jobs.parser import YamlParser
+from jenkins_jobs.registry import ModuleRegistry
 from tests import base
 
 
@@ -118,3 +119,23 @@ class TestCaseLocalYamlRetainAnchors(base.BaseTestCase):
         jjb_config.validate()
         j = YamlParser(jjb_config)
         j.load_files([os.path.join(self.fixtures_path, f) for f in files])
+
+    def test_retain_anchors_enabled_j2_yaml(self):
+        """
+        Verify that anchors are retained across files and are properly retained when using !j2-yaml.
+        """
+
+        files = [
+            "custom_retain_anchors_j2_yaml_include001.yaml",
+            "custom_retain_anchors_j2_yaml.yaml",
+        ]
+
+        jjb_config = JJBConfig()
+        jjb_config.yamlparser["retain_anchors"] = True
+        jjb_config.validate()
+        j = YamlParser(jjb_config)
+        j.load_files([os.path.join(self.fixtures_path, f) for f in files])
+
+        registry = ModuleRegistry(jjb_config, None)
+        jobs, _ = j.expandYaml(registry)
+        self.assertEqual(jobs[0]["builders"][0]["shell"], "docker run ubuntu:latest")