diff --git a/lib/aquilon/worker/templates/base.py b/lib/aquilon/worker/templates/base.py
index b18752306..6c7468a17 100644
--- a/lib/aquilon/worker/templates/base.py
+++ b/lib/aquilon/worker/templates/base.py
@@ -388,9 +388,17 @@ def _generate_content(self):
         lines.append("object template %s;" % self.template_name(self.dbobj))
         lines.append("")
 
-        loadpath = self.loadpath(self.dbobj)
-        if loadpath:
-            pan_variable(lines, "LOADPATH", [loadpath])
+        if self.loadpath(self.dbobj):
+            # If configuration option template_library_configured is true, define
+            # an ARCHETYPE variable with the host archetype and use it to initialize
+            # LOADPATH variable
+            if self.config.getboolean("panc", "template_library_configured"):
+                archetype_var_name = "ARCHETYPE"
+                pan_variable(lines, archetype_var_name, self.loadpath(self.dbobj), final=True)
+                # Define LOADPATH based on ARCHETYPE variabble
+                pan_variable(lines, "LOADPATH", [archetype_var_name], quoted=False)
+            else:
+                pan_variable(lines, "LOADPATH", [self.loadpath(self.dbobj)])
             lines.append("")
         pan_assign(lines, "/metadata/template/branch/name",
                    self.dbobj.branch.name)