diff --git a/terraform/terraform.go b/terraform/terraform.go
index 3a1cdf7be..55085ca81 100644
--- a/terraform/terraform.go
+++ b/terraform/terraform.go
@@ -106,11 +106,7 @@ func New(c *Config) (*Terraform, error) {
 func (t *Terraform) Apply(p *Plan) (*State, error) {
 	result := new(State)
 	err := t.graph.Walk(t.applyWalkFn(p, result))
-	if err != nil {
-		return nil, err
-	}
-
-	return result, nil
+	return result, err
 }
 
 func (t *Terraform) Plan(s *State) (*Plan, error) {
@@ -157,6 +153,17 @@ func (t *Terraform) applyWalkFn(
 			return nil, nil
 		}
 
+		var errs []error
+		for ak, av := range rs.Attributes {
+			// If the value is the unknown variable value, then it is an error.
+			// In this case we record the error and remove it from the state
+			if av == config.UnknownVariableValue {
+				errs = append(errs, fmt.Errorf(
+					"Attribute with unknown value: %s", ak))
+				delete(rs.Attributes, ak)
+			}
+		}
+
 		// Update the resulting diff
 		l.Lock()
 		result.Resources[r.Id] = rs
@@ -168,7 +175,12 @@ func (t *Terraform) applyWalkFn(
 			vars[fmt.Sprintf("%s.%s", r.Id, ak)] = av
 		}
 
-		return vars, nil
+		err = nil
+		if len(errs) > 0 {
+			err = &MultiError{Errors: errs}
+		}
+
+		return vars, err
 	}
 
 	return t.genericWalkFn(p.State, p.Diff, p.Vars, cb)
diff --git a/terraform/terraform_test.go b/terraform/terraform_test.go
index 6eaba3b9f..216e7cb99 100644
--- a/terraform/terraform_test.go
+++ b/terraform/terraform_test.go
@@ -256,6 +256,27 @@ func TestTerraformApply_compute(t *testing.T) {
 	}
 }
 
+func TestTerraformApply_unknownAttribute(t *testing.T) {
+	tf := testTerraform(t, "apply-unknown")
+
+	s := &State{}
+	p, err := tf.Plan(s)
+	if err != nil {
+		t.Fatalf("err: %s", err)
+	}
+
+	state, err := tf.Apply(p)
+	if err == nil {
+		t.Fatal("should error")
+	}
+
+	actual := strings.TrimSpace(state.String())
+	expected := strings.TrimSpace(testTerraformApplyUnknownAttrStr)
+	if actual != expected {
+		t.Fatalf("bad: \n%s", actual)
+	}
+}
+
 func TestTerraformApply_vars(t *testing.T) {
 	tf := testTerraform(t, "apply-vars")
 	tf.variables = map[string]string{"foo": "baz"}
@@ -388,9 +409,7 @@ func testProviderFunc(n string, rs []string) ResourceProviderFactory {
 			}
 
 			if d != nil {
-				for ak, ad := range d.Attributes {
-					result.Attributes[ak] = ad.New
-				}
+				result = result.MergeDiff(d)
 			}
 
 			return result, nil
@@ -451,10 +470,6 @@ func testProviderFunc(n string, rs []string) ResourceProviderFactory {
 					New: v.(string),
 				}
 
-				if strings.Contains(attrDiff.New, config.UnknownVariableValue) {
-					attrDiff.NewComputed = true
-				}
-
 				diff.Attributes[k] = attrDiff
 			}
 
@@ -575,6 +590,13 @@ aws_instance.foo:
   id = computed_id
 `
 
+const testTerraformApplyUnknownAttrStr = `
+aws_instance.foo:
+  ID = foo
+  type = aws_instance
+  num = 2
+`
+
 const testTerraformApplyVarsStr = `
 aws_instance.bar:
   ID = foo
diff --git a/terraform/test-fixtures/apply-unknown/main.tf b/terraform/test-fixtures/apply-unknown/main.tf
new file mode 100644
index 000000000..7eec0bf20
--- /dev/null
+++ b/terraform/test-fixtures/apply-unknown/main.tf
@@ -0,0 +1,4 @@
+resource "aws_instance" "foo" {
+    num = "2"
+    compute = "id"
+}