diff --git a/os_apply_config/apply_config.py b/os_apply_config/apply_config.py
index fb55a9f..a1d97e1 100755
--- a/os_apply_config/apply_config.py
+++ b/os_apply_config/apply_config.py
@@ -29,12 +29,35 @@ from os_apply_config import renderers
 from os_apply_config import value_types
 from os_apply_config import version
 
-TEMPLATES_DIR = os.environ.get('OS_CONFIG_APPLIER_TEMPLATES', None)
-if TEMPLATES_DIR is None:
-    TEMPLATES_DIR = '/opt/stack/os-apply-config/templates'
-    if not os.path.isdir(TEMPLATES_DIR):
-        # Backwards compat with the old name.
-        TEMPLATES_DIR = '/opt/stack/os-config-applier/templates'
+DEFAULT_TEMPLATES_DIR = '/usr/libexec/os-apply-config/templates'
+
+
+def templates_dir():
+    """Determine the default templates directory path
+
+    If the OS_CONFIG_APPLIER_TEMPLATES environment variable has been set,
+    use its value.
+    Otherwise, select a default path based on which directories exist on the
+    system, preferring the newer paths but still allowing the old ones for
+    backwards compatibility.
+    """
+    templates_dir = os.environ.get('OS_CONFIG_APPLIER_TEMPLATES', None)
+    if templates_dir is None:
+        templates_dir = '/opt/stack/os-apply-config/templates'
+        if not os.path.isdir(templates_dir):
+            # Backwards compat with the old name.
+            templates_dir = '/opt/stack/os-config-applier/templates'
+        if (os.path.isdir(templates_dir) and
+                not os.path.isdir(DEFAULT_TEMPLATES_DIR)):
+            logging.warning('Template directory %s is deprecated.  The '
+                            'recommended location for template files is %s',
+                            templates_dir, DEFAULT_TEMPLATES_DIR)
+        else:
+            templates_dir = DEFAULT_TEMPLATES_DIR
+    return templates_dir
+
+
+TEMPLATES_DIR = templates_dir()
 OS_CONFIG_FILES_PATH = os.environ.get(
     'OS_CONFIG_FILES_PATH', '/var/lib/os-collect-config/os_config_files.json')
 OS_CONFIG_FILES_PATH_OLD = '/var/run/os-collect-config/os_config_files.json'
diff --git a/os_apply_config/tests/test_apply_config.py b/os_apply_config/tests/test_apply_config.py
index 1645f05..4009259 100644
--- a/os_apply_config/tests/test_apply_config.py
+++ b/os_apply_config/tests/test_apply_config.py
@@ -19,6 +19,7 @@ import os
 import tempfile
 
 import fixtures
+import mock
 import testtools
 
 from os_apply_config import apply_config
@@ -283,3 +284,25 @@ class OSConfigApplierTestCase(testtools.TestCase):
         err = self.assertRaises(ValueError, load_list, path)
         self.assertEqual(
             "No list defined in json file: %s" % path, str(err))
+
+    def test_default_templates_dir_current(self):
+        default = '/usr/libexec/os-apply-config/templates'
+        with mock.patch('os.path.isdir', lambda x: x == default):
+            self.assertEqual(default, apply_config.templates_dir())
+
+    def test_default_templates_dir_deprecated(self):
+        default = '/opt/stack/os-apply-config/templates'
+        with mock.patch('os.path.isdir', lambda x: x == default):
+            self.assertEqual(default, apply_config.templates_dir())
+
+    def test_default_templates_dir_old_deprecated(self):
+        default = '/opt/stack/os-config-applier/templates'
+        with mock.patch('os.path.isdir', lambda x: x == default):
+            self.assertEqual(default, apply_config.templates_dir())
+
+    def test_default_templates_dir_both(self):
+        default = '/usr/libexec/os-apply-config/templates'
+        deprecated = '/opt/stack/os-apply-config/templates'
+        with mock.patch('os.path.isdir', lambda x: (x == default or
+                                                    x == deprecated)):
+            self.assertEqual(default, apply_config.templates_dir())
diff --git a/test-requirements.txt b/test-requirements.txt
index ade0b3c..742be56 100644
--- a/test-requirements.txt
+++ b/test-requirements.txt
@@ -3,6 +3,7 @@ hacking>=0.8.0,<0.9
 coverage>=3.6
 discover
 fixtures>=0.3.14
+mock>=1.0
 python-subunit>=0.0.18
 sphinx>=1.1.2,<1.2
 testrepository>=0.0.18