diff --git a/expandybird/expansion/expansion.py b/expandybird/expansion/expansion.py
index 610da71be..162ebbcd0 100755
--- a/expandybird/expansion/expansion.py
+++ b/expandybird/expansion/expansion.py
@@ -136,7 +136,7 @@ def _ProcessResource(resource, imports, env, validate_schema=False):
   layout = {'name': resource['name'],
             'type': resource['type']}
 
-  if IsTemplate(resource['type']):
+  if IsTemplate(resource['type']) and resource['type'] in imports:
     # A template resource, which contains sub-resources.
     expanded_template = ExpandTemplate(resource, imports, env, validate_schema)
 
@@ -145,7 +145,7 @@ def _ProcessResource(resource, imports, env, validate_schema=False):
 
       # Process all sub-resources of this template.
       for resource_to_process in expanded_template['resources']:
-        processed_resource = _ProcessResource(resource_to_process, imports, env, 
+        processed_resource = _ProcessResource(resource_to_process, imports, env,
                                               validate_schema)
 
         # Append all sub-resources to the config resources, and the resulting
diff --git a/expandybird/expansion/expansion_test.py b/expandybird/expansion/expansion_test.py
index db6ee2243..264d5e272 100644
--- a/expandybird/expansion/expansion_test.py
+++ b/expandybird/expansion/expansion_test.py
@@ -144,12 +144,7 @@ class ExpansionTest(unittest.TestCase):
 
   def testNoImportErrors(self):
     template = 'resources: \n- type: something.jinja\n  name: something'
-
-    try:
-      expansion.Expand(template, {})
-      self.fail('Expansion should fail')
-    except expansion.ExpansionError as e:
-      self.assertTrue('Unable to find source file' in e.message)
+    expansion.Expand(template, {})
 
   def testInvalidConfig(self):
     template = ReadTestFile('invalid_config.yaml')