diff --git a/lib/ansible/executor/task_executor.py b/lib/ansible/executor/task_executor.py
index 2fa7901fe73..f83f901e900 100644
--- a/lib/ansible/executor/task_executor.py
+++ b/lib/ansible/executor/task_executor.py
@@ -143,7 +143,7 @@ class TaskExecutor:
 
         items = None
         if self._task.loop and self._task.loop in lookup_loader:
-            loop_terms = listify_lookup_plugin_terms(terms=self._task.loop_args, variables=self._job_vars, loader=self._loader)
+            loop_terms = listify_lookup_plugin_terms(terms=self._task.loop_args, variables=self._job_vars, loader=self._loader, fail_on_undefined=True)
             items = lookup_loader.get(self._task.loop, loader=self._loader).run(terms=loop_terms, variables=self._job_vars)
 
         return items
diff --git a/lib/ansible/plugins/lookup/nested.py b/lib/ansible/plugins/lookup/nested.py
index 52f4bed1d52..b4b4e5d9714 100644
--- a/lib/ansible/plugins/lookup/nested.py
+++ b/lib/ansible/plugins/lookup/nested.py
@@ -17,22 +17,29 @@
 from __future__ import (absolute_import, division, print_function)
 __metaclass__ = type
 
-from ansible.errors import AnsibleError
+from jinja2.exceptions import UndefinedError
+
+from ansible.errors import AnsibleError, AnsibleUndefinedVariable
 from ansible.plugins.lookup import LookupBase
 from ansible.utils.listify import listify_lookup_plugin_terms
 
 class LookupModule(LookupBase):
 
-    def __lookup_variabless(self, terms, variables):
+    def __lookup_variables(self, terms, variables):
+        foo = variables.copy()
+        foo.pop('vars')
         results = []
         for x in terms:
-            intermediate = listify_lookup_plugin_terms(x, variables, loader=self._loader)
+            try:
+                intermediate = listify_lookup_plugin_terms(x, variables, loader=self._loader, fail_on_undefined=True)
+            except UndefinedError, e:
+                raise AnsibleUndefinedVariable("One of the nested variables was undefined. The error was: %s" % e)
             results.append(intermediate)
         return results
 
     def run(self, terms, variables=None, **kwargs):
 
-        terms = self.__lookup_variabless(terms, variables)
+        terms = self.__lookup_variables(terms, variables)
 
         my_list = terms[:]
         my_list.reverse()
diff --git a/lib/ansible/utils/listify.py b/lib/ansible/utils/listify.py
index 7bcf9ce802c..95d48121339 100644
--- a/lib/ansible/utils/listify.py
+++ b/lib/ansible/utils/listify.py
@@ -26,14 +26,14 @@ from ansible.template.safe_eval import safe_eval
 __all__ = ['listify_lookup_plugin_terms']
 
 #FIXME: probably just move this into lookup plugin base class
-def listify_lookup_plugin_terms(terms, variables, loader):
+def listify_lookup_plugin_terms(terms, variables, loader, fail_on_undefined=False):
 
     if isinstance(terms, basestring):
         stripped = terms.strip()
         templar = Templar(loader=loader, variables=variables)
 
         #FIXME: warn/deprecation on bare vars in with_ so we can eventually remove fail on undefined override
-        terms = templar.template(terms, convert_bare=True, fail_on_undefined=False)
+        terms = templar.template(terms, convert_bare=True, fail_on_undefined=fail_on_undefined)
 
         #TODO: check if this is needed as template should also return correct type already
         terms = safe_eval(terms)