diff --git a/heat/engine/service.py b/heat/engine/service.py
index 3e903143c4..e1f5177275 100644
--- a/heat/engine/service.py
+++ b/heat/engine/service.py
@@ -942,6 +942,9 @@ class EngineService(service.ServiceBase):
         common_params.setdefault(rpc_api.PARAM_DISABLE_ROLLBACK,
                                  current_stack.disable_rollback)
 
+        if args.get(rpc_api.PARAM_EXISTING):
+            common_params.setdefault(rpc_api.STACK_TAGS,
+                                     current_stack.tags)
         current_kwargs.update(common_params)
         updated_stack = parser.Stack(cnxt, stack_name, tmpl,
                                      **current_kwargs)
diff --git a/heat/tests/engine/service/test_stack_update.py b/heat/tests/engine/service/test_stack_update.py
index 36f19add43..d89e2b8ea8 100644
--- a/heat/tests/engine/service/test_stack_update.py
+++ b/heat/tests/engine/service/test_stack_update.py
@@ -321,6 +321,41 @@ resources:
                              tmpl.env.params)
             self.assertEqual(stk.identifier(), result)
 
+    def test_stack_update_with_tags(self):
+        """Test case for updating stack with tags.
+
+        Create a stack with tags, then update with/without
+        rpc_api.PARAM_EXISTING.
+        """
+        stack_name = 'service_update_test_stack_existing_tags'
+        api_args = {rpc_api.PARAM_TIMEOUT: 60,
+                    rpc_api.PARAM_EXISTING: True}
+        t = template_format.parse(tools.wp_template)
+
+        stk = utils.parse_stack(t, stack_name=stack_name, tags=['tag1'])
+        stk.set_stack_user_project_id('1234')
+        self.assertEqual(['tag1'], stk.tags)
+
+        self.patchobject(stack.Stack, 'validate')
+
+        # update keep old tags
+        _, _, updated_stack = self.man._prepare_stack_updates(
+            self.ctx, stk, t, {}, None, None, api_args, None)
+        self.assertEqual(['tag1'], updated_stack.tags)
+
+        # with new tags
+        api_args[rpc_api.STACK_TAGS] = ['tag2']
+        _, _, updated_stack = self.man._prepare_stack_updates(
+            self.ctx, stk, t, {}, None, None, api_args, None)
+        self.assertEqual(['tag2'], updated_stack.tags)
+
+        # with no PARAM_EXISTING flag and no tags
+        del api_args[rpc_api.PARAM_EXISTING]
+        del api_args[rpc_api.STACK_TAGS]
+        _, _, updated_stack = self.man._prepare_stack_updates(
+            self.ctx, stk, t, {}, None, None, api_args, None)
+        self.assertIsNone(updated_stack.tags)
+
     def test_stack_update_existing_registry(self):
         # Use a template with existing flag and ensure the
         # environment registry is preserved.
diff --git a/heat/tests/utils.py b/heat/tests/utils.py
index 511a314663..a6ef88a853 100644
--- a/heat/tests/utils.py
+++ b/heat/tests/utils.py
@@ -91,7 +91,8 @@ def dummy_context(user='test_username', tenant_id='test_tenant_id',
 
 
 def parse_stack(t, params=None, files=None, stack_name=None,
-                stack_id=None, timeout_mins=None, cache_data=None):
+                stack_id=None, timeout_mins=None,
+                cache_data=None, tags=None):
     params = params or {}
     files = files or {}
     ctx = dummy_context()
@@ -104,7 +105,8 @@ def parse_stack(t, params=None, files=None, stack_name=None,
         cache_data = {n: node_data.NodeData.from_dict(d)
                       for n, d in cache_data.items()}
     stk = stack.Stack(ctx, stack_name, templ, stack_id=stack_id,
-                      timeout_mins=timeout_mins, cache_data=cache_data)
+                      timeout_mins=timeout_mins,
+                      cache_data=cache_data, tags=tags)
     stk.store()
     return stk