diff --git a/server/src/main/java/com/cloud/template/TemplateManagerImpl.java b/server/src/main/java/com/cloud/template/TemplateManagerImpl.java
index d88bbd09bc24..06392e8f7289 100755
--- a/server/src/main/java/com/cloud/template/TemplateManagerImpl.java
+++ b/server/src/main/java/com/cloud/template/TemplateManagerImpl.java
@@ -1640,8 +1640,14 @@ public boolean updateTemplateOrIsoPermissions(BaseUpdateTemplateOrIsoPermissions
             }
         }
 
+        // For project owned templates/isos, the project admins are treated as owners
+        boolean isOwner = caller.getId() == ownerId;
+        if (!isOwner && !isAdmin && owner.getType() == Account.Type.PROJECT) {
+            isOwner = _projectMgr.canModifyProjectAccount(caller, ownerId);
+        }
+
         //Only admin or owner of the template should be able to change its permissions
-        if (caller.getId() != ownerId && !isAdmin) {
+        if (!isOwner && !isAdmin) {
             throw new InvalidParameterValueException("Unable to grant permission to Account " + caller.getAccountName() + " as it is neither admin nor owner or the Template");
         }
 
@@ -1657,7 +1663,7 @@ public boolean updateTemplateOrIsoPermissions(BaseUpdateTemplateOrIsoPermissions
 
         if (isExtractable != null) {
             // Only Root admins and owners are allowed to change it for templates
-            if (!template.getFormat().equals(ImageFormat.ISO) && caller.getId() != ownerId && !isAdmin) {
+            if (!template.getFormat().equals(ImageFormat.ISO) && !isOwner && !isAdmin) {
                 throw new InvalidParameterValueException("Only ROOT admins and Template owners are allowed to modify isExtractable attribute.");
             } else {
                 // For Isos normal user can change it, as their are no derivatives.
diff --git a/server/src/test/java/com/cloud/template/TemplateManagerImplTest.java b/server/src/test/java/com/cloud/template/TemplateManagerImplTest.java
index 8ffa031f28f4..f26090ef941e 100755
--- a/server/src/test/java/com/cloud/template/TemplateManagerImplTest.java
+++ b/server/src/test/java/com/cloud/template/TemplateManagerImplTest.java
@@ -19,11 +19,13 @@
 package com.cloud.template;
 
 
+import com.cloud.domain.dao.DomainDao;
 import com.cloud.exception.InvalidParameterValueException;
 import com.cloud.exception.ResourceAllocationException;
 import com.cloud.host.Status;
 import com.cloud.hypervisor.Hypervisor;
 import com.cloud.hypervisor.HypervisorGuruManager;
+import com.cloud.projects.ProjectManager;
 import com.cloud.resourcelimit.CheckedReservation;
 import com.cloud.storage.DataStoreRole;
 import com.cloud.storage.GuestOSVO;
@@ -66,6 +68,7 @@
 import org.apache.cloudstack.api.command.user.template.RegisterTemplateCmd;
 import org.apache.cloudstack.api.command.user.template.RegisterVnfTemplateCmd;
 import org.apache.cloudstack.api.command.user.template.UpdateTemplateCmd;
+import org.apache.cloudstack.api.command.user.template.UpdateTemplatePermissionsCmd;
 import org.apache.cloudstack.api.command.user.template.UpdateVnfTemplateCmd;
 import org.apache.cloudstack.api.command.user.userdata.LinkUserDataToTemplateCmd;
 import org.apache.cloudstack.context.CallContext;
@@ -189,6 +192,12 @@ public class TemplateManagerImplTest extends TestCase {
     @Mock
     private UserDataVO userDataMock;
 
+    @Mock
+    ProjectManager projectManagerMock;
+
+    @Mock
+    DomainDao domainDaoMock;
+
     public class CustomThreadPoolExecutor extends ThreadPoolExecutor {
         AtomicInteger ai = new AtomicInteger(0);
         public CustomThreadPoolExecutor(int corePoolSize, int maximumPoolSize, long keepAliveTime, TimeUnit unit,
@@ -773,4 +782,74 @@ public void verifyHeuristicRulesForZoneTestTemplateNotISOFormatShouldCheckForTem
         Mockito.verify(heuristicRuleHelperMock, Mockito.times(1)).getImageStoreIfThereIsHeuristicRule(1L, HeuristicType.TEMPLATE, vmTemplateVOMock);
     }
 
+    private Account mockUpdateTemplatePermissionsCall(Account.Type ownerType, long callerId, boolean callerIsAdmin) {
+        Account caller = Mockito.mock(Account.class);
+        when(caller.getId()).thenReturn(callerId);
+        CallContext.unregister();
+        CallContext.register(Mockito.mock(User.class), caller);
+
+        Account owner = Mockito.mock(Account.class);
+        when(owner.getType()).thenReturn(ownerType);
+        when(_accountMgr.getAccount(2L)).thenReturn(owner);
+        when(_accountMgr.isAdmin(callerId)).thenReturn(callerIsAdmin);
+
+        VMTemplateVO template = Mockito.mock(VMTemplateVO.class);
+        when(template.getAccountId()).thenReturn(2L);
+        when(template.getFormat()).thenReturn(Storage.ImageFormat.QCOW2);
+        when(vmTemplateDao.findById(10L)).thenReturn(template);
+        return caller;
+    }
+
+    private UpdateTemplatePermissionsCmd mockUpdateTemplatePermissionsCmd() {
+        UpdateTemplatePermissionsCmd cmd = Mockito.mock(UpdateTemplatePermissionsCmd.class);
+        when(cmd.getId()).thenReturn(10L);
+        when(cmd.getAccountNames()).thenReturn(null);
+        when(cmd.getProjectIds()).thenReturn(null);
+        when(cmd.isPublic()).thenReturn(true);
+        when(cmd.isExtractable()).thenReturn(true);
+        return cmd;
+    }
+
+    @Test
+    public void updateTemplateOrIsoPermissionsTestProjectAdminCanUpdateProjectTemplate() {
+        Account caller = mockUpdateTemplatePermissionsCall(Account.Type.PROJECT, 5L, false);
+        when(projectManagerMock.canModifyProjectAccount(caller, 2L)).thenReturn(true);
+        when(vmTemplateDao.createForUpdate()).thenReturn(Mockito.mock(VMTemplateVO.class));
+
+        Assert.assertTrue(templateManager.updateTemplateOrIsoPermissions(mockUpdateTemplatePermissionsCmd()));
+        Mockito.verify(vmTemplateDao, Mockito.times(1)).update(Mockito.eq(0L), Mockito.any(VMTemplateVO.class));
+    }
+
+    @Test(expected = InvalidParameterValueException.class)
+    public void updateTemplateOrIsoPermissionsTestProjectMemberCannotUpdateProjectTemplate() {
+        Account caller = mockUpdateTemplatePermissionsCall(Account.Type.PROJECT, 5L, false);
+        when(projectManagerMock.canModifyProjectAccount(caller, 2L)).thenReturn(false);
+
+        templateManager.updateTemplateOrIsoPermissions(mockUpdateTemplatePermissionsCmd());
+    }
+
+    @Test
+    public void updateTemplateOrIsoPermissionsTestOwnerCanUpdateTemplate() {
+        mockUpdateTemplatePermissionsCall(Account.Type.NORMAL, 2L, false);
+        when(vmTemplateDao.createForUpdate()).thenReturn(Mockito.mock(VMTemplateVO.class));
+
+        Assert.assertTrue(templateManager.updateTemplateOrIsoPermissions(mockUpdateTemplatePermissionsCmd()));
+        Mockito.verify(projectManagerMock, Mockito.never()).canModifyProjectAccount(Mockito.any(Account.class), Mockito.anyLong());
+    }
+
+    @Test
+    public void updateTemplateOrIsoPermissionsTestAdminCanUpdateProjectTemplate() {
+        mockUpdateTemplatePermissionsCall(Account.Type.PROJECT, 5L, true);
+        when(vmTemplateDao.createForUpdate()).thenReturn(Mockito.mock(VMTemplateVO.class));
+
+        Assert.assertTrue(templateManager.updateTemplateOrIsoPermissions(mockUpdateTemplatePermissionsCmd()));
+        Mockito.verify(projectManagerMock, Mockito.never()).canModifyProjectAccount(Mockito.any(Account.class), Mockito.anyLong());
+    }
+
+    @Test(expected = InvalidParameterValueException.class)
+    public void updateTemplateOrIsoPermissionsTestNonOwnerCannotUpdateTemplate() {
+        mockUpdateTemplatePermissionsCall(Account.Type.NORMAL, 5L, false);
+
+        templateManager.updateTemplateOrIsoPermissions(mockUpdateTemplatePermissionsCmd());
+    }
 }