diff --git a/compose/project.go b/compose/project.go
index e64a2058..d15a527f 100644
--- a/compose/project.go
+++ b/compose/project.go
@@ -32,7 +32,7 @@ func CreateService(cfg *config.CloudConfig, name string, serviceConfig *project.
 }
 
 func CreateServiceSet(name string, cfg *config.CloudConfig, configs map[string]*project.ServiceConfig) (*project.Project, error) {
-	p, err := newProject(name, cfg)
+	p, err := newProject(name, cfg, nil)
 	if err != nil {
 		return nil, err
 	}
@@ -55,12 +55,16 @@ func GetProject(cfg *config.CloudConfig, networkingAvailable bool) (*project.Pro
 	return newCoreServiceProject(cfg, networkingAvailable)
 }
 
-func newProject(name string, cfg *config.CloudConfig) (*project.Project, error) {
+func newProject(name string, cfg *config.CloudConfig, environmentLookup project.EnvironmentLookup) (*project.Project, error) {
 	clientFactory, err := rosDocker.NewClientFactory(docker.ClientOpts{})
 	if err != nil {
 		return nil, err
 	}
 
+	if environmentLookup == nil {
+		environmentLookup = rosDocker.NewConfigEnvironment(cfg)
+	}
+
 	serviceFactory := &rosDocker.ServiceFactory{
 		Deps: map[string][]string{},
 	}
@@ -69,7 +73,7 @@ func newProject(name string, cfg *config.CloudConfig) (*project.Project, error)
 		Context: project.Context{
 			ProjectName:       name,
 			NoRecreate:        true, // for libcompose to not recreate on project reload, looping up the boot :)
-			EnvironmentLookup: rosDocker.NewConfigEnvironment(cfg),
+			EnvironmentLookup: environmentLookup,
 			ServiceFactory:    serviceFactory,
 			Log:               cfg.Rancher.Log,
 			LoggerFactory:     logger.NewColorLoggerFactory(),
@@ -121,7 +125,9 @@ func newCoreServiceProject(cfg *config.CloudConfig, network bool) (*project.Proj
 	projectEvents := make(chan project.Event)
 	enabled := map[interface{}]interface{}{}
 
-	p, err := newProject("os", cfg)
+	environmentLookup := rosDocker.NewConfigEnvironment(cfg)
+
+	p, err := newProject("os", cfg, environmentLookup)
 	if err != nil {
 		return nil, err
 	}
@@ -136,6 +142,8 @@ func newCoreServiceProject(cfg *config.CloudConfig, network bool) (*project.Proj
 			return err
 		}
 
+		environmentLookup.SetConfig(cfg)
+
 		enabled = addServices(p, enabled, cfg.Rancher.Services)
 
 		for service, serviceEnabled := range cfg.Rancher.ServicesInclude {
@@ -193,7 +201,7 @@ func newCoreServiceProject(cfg *config.CloudConfig, network bool) (*project.Proj
 }
 
 func StageServices(cfg *config.CloudConfig, services ...string) error {
-	p, err := newProject("stage-services", cfg)
+	p, err := newProject("stage-services", cfg, nil)
 	if err != nil {
 		return err
 	}
diff --git a/docker/env.go b/docker/env.go
index 26ff13f3..4e044977 100644
--- a/docker/env.go
+++ b/docker/env.go
@@ -49,6 +49,10 @@ func lookupKeys(cfg *config.CloudConfig, keys ...string) []string {
 	return []string{}
 }
 
+func (c *ConfigEnvironment) SetConfig(cfg *config.CloudConfig) {
+	c.cfg = cfg
+}
+
 func (c *ConfigEnvironment) Lookup(key, serviceName string, serviceConfig *project.ServiceConfig) []string {
 	fullKey := fmt.Sprintf("%s/%s", serviceName, key)
 	return lookupKeys(c.cfg, fullKey, key)
diff --git a/tests/integration/assets/test_11/cloud-config.yml b/tests/integration/assets/test_11/cloud-config.yml
new file mode 100644
index 00000000..c8956870
--- /dev/null
+++ b/tests/integration/assets/test_11/cloud-config.yml
@@ -0,0 +1,18 @@
+#cloud-config
+rancher:
+  environment:
+    A: A
+    BB: BB
+    BC: BC
+  services:
+    env:
+      image: busybox
+      command: env
+      labels:
+        io.rancher.os.scope: system
+        io.rancher.os.before: console
+      environment:
+        - A
+        - B*
+ssh_authorized_keys:
+  - ssh-rsa AAAAB3NzaC1yc2EAAAADAQABAAABAQDUlsWAL5Rf0Wis/A7k7Tlqx0fZS60VzCZrPZYbP/wkL95jv0XzCx8bd1rZHeybblHPDNpND3BLv4qPY5DxRyexF4seGuzcJI/pOvGUGjQondeMPgDTFEo5w939gSdeTZcfXzQ0wAVhzwDbgH4zPfMzbdoo8Aiu9jkKljXw8IFju0gh+t6iKkGZCIjKT9o7zza1vGfkodhvi2V3VzPdNO28gaxZaRNtmBYUoVnGyR6nXN1Q3CJaVuh5o6GPCOqrhHNbYOFZKBpDiHbxPhVpxHQD2+8yUSGTG7WW75FfZePja5y8d0c/O5L37ZYx4AZAd3KgQYDBT2XCEJGQNawNbfpt
diff --git a/tests/integration/rostest/test_11_environment.py b/tests/integration/rostest/test_11_environment.py
new file mode 100644
index 00000000..61729254
--- /dev/null
+++ b/tests/integration/rostest/test_11_environment.py
@@ -0,0 +1,22 @@
+import pytest
+import rostest.util as u
+from rostest.util import SSH
+
+ssh_command = ['./scripts/ssh', '--qemu', '--key', './tests/integration/assets/test.key']
+cloud_config_path = './tests/integration/assets/test_11/cloud-config.yml'
+
+
+@pytest.fixture(scope="module")
+def qemu(request):
+    q = u.run_qemu(request, ['--cloud-config', cloud_config_path])
+    u.flush_out(q.stdout)
+    return q
+
+
+@pytest.mark.timeout(40)
+def test_rancher_environment_in_system_service(qemu):
+    SSH(qemu, ssh_command).check_call('''
+sudo system-docker logs env | grep A=A
+sudo system-docker logs env | grep BB=BB
+sudo system-docker logs env | grep BC=BC
+    ''')