diff --git a/heat/db/sqlalchemy/api.py b/heat/db/sqlalchemy/api.py
index 9eb8fffa5..abd04e74b 100644
--- a/heat/db/sqlalchemy/api.py
+++ b/heat/db/sqlalchemy/api.py
@@ -70,7 +70,8 @@ def resource_get(context, resource_id):
 def resource_get_by_name_and_stack(context, resource_name, stack_id):
     result = model_query(context, models.Resource).\
         filter_by(name=resource_name).\
-        filter_by(stack_id=stack_id).first()
+        filter_by(stack_id=stack_id).\
+        order_by('created_at').first()
 
     return result
 
diff --git a/heat/engine/update.py b/heat/engine/update.py
index 7aa862c8d..53e69e29e 100644
--- a/heat/engine/update.py
+++ b/heat/engine/update.py
@@ -53,9 +53,14 @@ def __call__(self):
         update = scheduler.DependencyTaskGroup(new_deps,
                                                self._update_resource)
 
-        yield cleanup()
         yield create_new()
-        yield update()
+        try:
+            yield update()
+        finally:
+            prev_deps = self.previous_stack._get_dependencies(
+                self.previous_stack.resources.itervalues())
+            self.previous_stack.dependencies = prev_deps
+        yield cleanup()
 
     @scheduler.wrappertask
     def _remove_old_resource(self, existing_res):
@@ -79,10 +84,26 @@ def _create_new_resource(self, new_res):
     @scheduler.wrappertask
     def _replace_resource(self, new_res):
         res_name = new_res.name
-        yield self.existing_stack[res_name].destroy()
+
+        existing_res = self.existing_stack[res_name]
+        existing_res.stack = self.previous_stack
+        self.previous_stack[res_name] = existing_res
+
         new_res.stack = self.existing_stack
         self.existing_stack[res_name] = new_res
-        yield new_res.create()
+        if new_res.state is None:
+            yield new_res.create()
+        else:
+            new_res.state_set(new_res.UPDATE_COMPLETE)
+
+        # Remove from rollback cache
+        previous = resource.Resource(res_name,
+                                     self.previous_stack[res_name].t,
+                                     self.previous_stack)
+        self.previous_stack[res_name] = previous
+
+        existing_res.stack = self.existing_stack
+        yield existing_res.destroy()
 
     @scheduler.wrappertask
     def _update_resource(self, new_res):
diff --git a/heat/tests/test_parser.py b/heat/tests/test_parser.py
index afd47a2d5..548e6ec5c 100644
--- a/heat/tests/test_parser.py
+++ b/heat/tests/test_parser.py
@@ -721,7 +721,6 @@ def test_update_modify_update_failed(self):
                                             'Properties': {'Foo': 'abc'}}}}
 
         self.m.StubOutWithMock(scheduler.TaskRunner, '_sleep')
-        scheduler.TaskRunner._sleep(mox.IsA(int)).MultipleTimes()
         mox.Replay(scheduler.TaskRunner._sleep)
 
         self.stack = parser.Stack(self.ctx, 'update_test_stack',
@@ -806,7 +805,6 @@ def test_update_modify_replace_failed_create(self):
                                             'Properties': {'Foo': 'abc'}}}}
 
         self.m.StubOutWithMock(scheduler.TaskRunner, '_sleep')
-        scheduler.TaskRunner._sleep(mox.IsA(int)).MultipleTimes()
         mox.Replay(scheduler.TaskRunner._sleep)
 
         self.stack = parser.Stack(self.ctx, 'update_test_stack',
@@ -900,10 +898,9 @@ def test_update_rollback(self):
         # key/property in update_allowed_keys/update_allowed_properties
 
         # patch in a dummy handle_create making the replace fail when creating
-        # the replacement rsrc, but succeed the second call (rollback)
+        # the replacement rsrc
         self.m.StubOutWithMock(generic_rsrc.GenericResource, 'handle_create')
         generic_rsrc.GenericResource.handle_create().AndRaise(Exception)
-        generic_rsrc.GenericResource.handle_create().AndReturn(None)
         self.m.ReplayAll()
 
         self.stack.update(updated_stack)
@@ -921,7 +918,6 @@ def test_update_rollback_fail(self):
                                             'Properties': {'Foo': 'abc'}}}}
 
         self.m.StubOutWithMock(scheduler.TaskRunner, '_sleep')
-        scheduler.TaskRunner._sleep(mox.IsA(int)).MultipleTimes()
         mox.Replay(scheduler.TaskRunner._sleep)
 
         self.stack = parser.Stack(self.ctx, 'update_test_stack',
@@ -944,8 +940,9 @@ def test_update_rollback_fail(self):
         # patch in a dummy handle_create making the replace fail when creating
         # the replacement rsrc, and again on the second call (rollback)
         self.m.StubOutWithMock(generic_rsrc.GenericResource, 'handle_create')
+        self.m.StubOutWithMock(generic_rsrc.GenericResource, 'handle_delete')
         generic_rsrc.GenericResource.handle_create().AndRaise(Exception)
-        generic_rsrc.GenericResource.handle_create().AndRaise(Exception)
+        generic_rsrc.GenericResource.handle_delete().AndRaise(Exception)
         self.m.ReplayAll()
 
         self.stack.update(updated_stack)
@@ -1124,16 +1121,12 @@ def test_update_by_reference_and_rollback_1(self):
         # resource.UpdateReplace because we've not specified the modified
         # key/property in update_allowed_keys/update_allowed_properties
 
-        generic_rsrc.GenericResource.FnGetRefId().AndReturn(
+        generic_rsrc.GenericResource.FnGetRefId().MultipleTimes().AndReturn(
             'AResource')
 
         # mock to make the replace fail when creating the replacement resource
         generic_rsrc.GenericResource.handle_create().AndRaise(Exception)
 
-        generic_rsrc.GenericResource.handle_create().AndReturn(None)
-        generic_rsrc.GenericResource.FnGetRefId().MultipleTimes().AndReturn(
-            'AResource')
-
         self.m.ReplayAll()
 
         updated_stack = parser.Stack(self.ctx, 'updated_stack',
@@ -1205,12 +1198,6 @@ def handle_create(self):
         # replacement resource
         generic_rsrc.GenericResource.handle_create().AndRaise(Exception)
 
-        # Calls to GenericResource.handle_update will raise
-        # resource.UpdateReplace because we've not specified the modified
-        # key/property in update_allowed_keys/update_allowed_properties
-
-        generic_rsrc.GenericResource.handle_create().AndReturn(None)
-
         self.m.ReplayAll()
 
         updated_stack = parser.Stack(self.ctx, 'updated_stack',