diff --git a/heat/common/environment_util.py b/heat/common/environment_util.py
index b19a4606d4..833ee0c816 100644
--- a/heat/common/environment_util.py
+++ b/heat/common/environment_util.py
@@ -12,7 +12,9 @@
 #    under the License.
 import collections
 
-from heat.common import environment_format
+import six
+
+from heat.common import environment_format as env_fmt
 
 ALLOWED_PARAM_MERGE_STRATEGIES = (OVERWRITE, MERGE, DEEP_MERGE) = (
     'overwrite', 'merge', 'deep_merge')
@@ -32,14 +34,37 @@ def get_param_merge_strategy(merge_strategies, param_key):
     return env_default
 
 
-def deep_update(old, new):
-    '''Merge nested dictionaries.'''
+def merge_list(old, new):
+    """merges lists and comma delimited lists."""
+    if not old:
+        return new
+
+    if isinstance(new, list):
+        old.extend(new)
+        return old
+    else:
+        return ','.join([old, new])
+
+
+def merge_map(old, new, deep_merge=False):
+    """Merge nested dictionaries."""
+    if not old:
+        return new
+
     for k, v in new.items():
-        if isinstance(v, collections.Mapping):
-            r = deep_update(old.get(k, {}), v)
-            old[k] = r
-        else:
-            old[k] = new[k]
+        if v:
+            if not deep_merge:
+                old[k] = v
+            elif isinstance(v, collections.Mapping):
+                old_v = old.get(k)
+                old[k] = merge_map(old_v, v, deep_merge) if old_v else v
+            elif (isinstance(v, collections.Sequence) and
+                    not isinstance(v, six.string_types)):
+                old_v = old.get(k)
+                old[k] = merge_list(old_v, v) if old_v else v
+            else:
+                old[k] = v
+
     return old
 
 
@@ -60,8 +85,14 @@ def merge_environments(environment_files, files, params):
     :param params: parameters describing the stack
     :type  dict:
     """
-    if environment_files:
-        for filename in environment_files:
-            raw_env = files[filename]
-            parsed_env = environment_format.parse(raw_env)
-            deep_update(params, parsed_env)
+    if not environment_files:
+        return
+
+    for filename in environment_files:
+        raw_env = files[filename]
+        parsed_env = env_fmt.parse(raw_env)
+        for section_key, section_value in parsed_env.items():
+            if section_value:
+                params[section_key] = merge_map(params[section_key],
+                                                section_value,
+                                                deep_merge=True)
diff --git a/heat/tests/test_common_env_util.py b/heat/tests/test_common_env_util.py
index b8975462d5..a29928f978 100644
--- a/heat/tests/test_common_env_util.py
+++ b/heat/tests/test_common_env_util.py
@@ -83,6 +83,45 @@ class TestMergeEnvironments(common.HeatTestCase):
         }}
         self.assertEqual(expected, params)
 
+    def test_merge_environments_deep_merge(self):
+        # Setup
+        params = {'parameters': {
+            'p0': 'CORRECT',
+            'p1': ['CORRECT1'],
+            'p2': {'A': ['CORRECT1', 'CORRECT2']},
+            'p3': 'CORRECT1,CORRECT2'}
+        }
+        env_1 = '''
+        {'parameters' : {
+            'p1': ['CORRECT2', 'CORRECT3'],
+            'p2': {'B': ['CORRECT3', 'CORRECT4'],
+                   'C': [CORRECT5]},
+            'p3': 'CORRECT3,CORRECT4'
+        }}'''
+        env_2 = '''
+        {'parameters': {
+        'p2': {'C': ['CORRECT6']},
+        'p3': 'CORRECT5,CORRECT6'
+        }}'''
+
+        files = {'env_1': env_1, 'env_2': env_2}
+        environment_files = ['env_1', 'env_2']
+
+        # Test
+        env_util.merge_environments(environment_files, files, params)
+
+        # Verify
+        # Does not work for comma_delimited_list.
+        expected = {'parameters': {
+            'p0': 'CORRECT',
+            'p1': ['CORRECT1', 'CORRECT2', 'CORRECT3'],
+            'p2': {'A': ['CORRECT1', 'CORRECT2'],
+                   'B': ['CORRECT3', 'CORRECT4'],
+                   'C': ['CORRECT5', 'CORRECT6']},
+            'p3': 'CORRECT5,CORRECT6'
+        }}
+        self.assertEqual(expected, params)
+
     def test_merge_environments_no_env_files(self):
         params = {'parameters': {'p0': 'CORRECT'}}
         env_1 = '''