diff --git a/terraform/context.go b/terraform/context.go
index 49c5da1ef..72166f8d6 100644
--- a/terraform/context.go
+++ b/terraform/context.go
@@ -1623,6 +1623,12 @@ func (c *walkContext) computeModuleVariable(
 	// Get that module from our state
 	mod := c.Context.state.ModuleByPath(path)
 	if mod == nil {
+		// If the module doesn't exist, then we can return an empty string.
+		// This happens usually only in Refresh() when we haven't populated
+		// a state. During validation, we semantically verify that all
+		// modules reference other modules, and graph ordering should
+		// ensure that the module is in the state, so if we reach this
+		// point otherwise it really is a panic.
 		return "", nil
 	}
 
diff --git a/terraform/test-fixtures/refresh-module-var-module/bar/main.tf b/terraform/test-fixtures/refresh-module-var-module/bar/main.tf
new file mode 100644
index 000000000..46ea37f14
--- /dev/null
+++ b/terraform/test-fixtures/refresh-module-var-module/bar/main.tf
@@ -0,0 +1,3 @@
+variable "value" {}
+
+resource "aws_instance" "bar" {}
diff --git a/terraform/test-fixtures/refresh-module-var-module/foo/main.tf b/terraform/test-fixtures/refresh-module-var-module/foo/main.tf
new file mode 100644
index 000000000..2ee798058
--- /dev/null
+++ b/terraform/test-fixtures/refresh-module-var-module/foo/main.tf
@@ -0,0 +1,7 @@
+output "output" {
+    value = "${aws_instance.foo.foo}"
+}
+
+resource "aws_instance" "foo" {
+    compute = "foo"
+}
diff --git a/terraform/test-fixtures/refresh-module-var-module/main.tf b/terraform/test-fixtures/refresh-module-var-module/main.tf
new file mode 100644
index 000000000..76775e3e6
--- /dev/null
+++ b/terraform/test-fixtures/refresh-module-var-module/main.tf
@@ -0,0 +1,8 @@
+module "foo" {
+    source = "./foo"
+}
+
+module "bar" {
+    source = "./bar"
+    value = "${module.foo.output}"
+}