diff --git a/heat/engine/api.py b/heat/engine/api.py
index 47bffd5ad..46b9b5beb 100644
--- a/heat/engine/api.py
+++ b/heat/engine/api.py
@@ -17,6 +17,7 @@ from oslo_log import log as logging
 from oslo_utils import timeutils
 import six
 
+from heat.common import exception
 from heat.common.i18n import _
 from heat.common.i18n import _LE
 from heat.common import param_utils
@@ -200,9 +201,13 @@ def format_stack_resource(resource, detail=True, with_props=False,
         rpc_api.RES_REQUIRED_BY: resource.required_by(),
     }
 
-    if (hasattr(resource, 'nested') and callable(resource.nested) and
-            resource.nested() is not None):
-        res[rpc_api.RES_NESTED_STACK_ID] = dict(resource.nested().identifier())
+    try:
+        if (hasattr(resource, 'nested') and callable(resource.nested) and
+                resource.nested() is not None):
+            res[rpc_api.RES_NESTED_STACK_ID] = dict(
+                resource.nested().identifier())
+    except exception.NotFound:
+        pass
 
     if resource.stack.parent_resource_name:
         res[rpc_api.RES_PARENT_RESOURCE] = resource.stack.parent_resource_name
diff --git a/heat/tests/test_engine_api_utils.py b/heat/tests/test_engine_api_utils.py
index 39e51c010..b03c68e65 100644
--- a/heat/tests/test_engine_api_utils.py
+++ b/heat/tests/test_engine_api_utils.py
@@ -19,6 +19,7 @@ import mock
 from oslo_utils import timeutils
 import six
 
+from heat.common import exception
 from heat.common import identifier
 from heat.common import template_format
 from heat.engine import api
@@ -205,6 +206,28 @@ class FormatTest(common.HeatTestCase):
         formatted = api.format_stack_resource(res, False)
         self.assertEqual(resource_keys, set(six.iterkeys(formatted)))
 
+    def test_format_stack_resource_with_nested_stack_not_found(self):
+        res = self.stack['generic1']
+        res.nested = mock.Mock()
+        res.nested.side_effect = exception.NotFound()
+
+        resource_keys = set((
+            rpc_api.RES_CREATION_TIME,
+            rpc_api.RES_UPDATED_TIME,
+            rpc_api.RES_NAME,
+            rpc_api.RES_PHYSICAL_ID,
+            rpc_api.RES_ACTION,
+            rpc_api.RES_STATUS,
+            rpc_api.RES_STATUS_DATA,
+            rpc_api.RES_TYPE,
+            rpc_api.RES_ID,
+            rpc_api.RES_STACK_ID,
+            rpc_api.RES_STACK_NAME,
+            rpc_api.RES_REQUIRED_BY))
+
+        formatted = api.format_stack_resource(res, False)
+        self.assertEqual(resource_keys, set(six.iterkeys(formatted)))
+
     def test_format_stack_resource_with_nested_stack_empty(self):
         res = self.stack['generic1']
         nested_id = {'foo': 'bar'}
diff --git a/heat_integrationtests/functional/test_resource_group.py b/heat_integrationtests/functional/test_resource_group.py
index a41f84106..ab3b355b3 100644
--- a/heat_integrationtests/functional/test_resource_group.py
+++ b/heat_integrationtests/functional/test_resource_group.py
@@ -472,3 +472,43 @@ outputs:
         stack = self.client.stacks.get(stack_identifier)
         self.assertEqual('goopie', self._stack_output(stack, 'test0'))
         self.assertEqual('different', self._stack_output(stack, 'test1'))
+
+
+class ResourceGroupErrorResourceTest(test.HeatIntegrationTest):
+    template = '''
+heat_template_version: "2013-05-23"
+resources:
+  group1:
+    type: OS::Heat::ResourceGroup
+    properties:
+      count: 2
+      resource_def:
+        type: fail.yaml
+'''
+    nested_templ = '''
+heat_template_version: "2013-05-23"
+resources:
+  oops:
+    type: OS::Heat::TestResource
+    properties:
+      fail: true
+      wait_secs: 2
+'''
+
+    def setUp(self):
+        super(ResourceGroupErrorResourceTest, self).setUp()
+        self.client = self.orchestration_client
+
+    def test_fail(self):
+        stack_identifier = self.stack_create(
+            template=self.template,
+            files={'fail.yaml': self.nested_templ},
+            expected_status='CREATE_FAILED',
+            enable_cleanup=False)
+        stack = self.client.stacks.get(stack_identifier)
+
+        self.assertEqual('CREATE_FAILED', stack.stack_status)
+        self.client.stacks.delete(stack_identifier)
+        self._wait_for_stack_status(
+            stack_identifier, 'DELETE_COMPLETE',
+            success_on_not_found=True)