diff --git a/railties/lib/generator/generators/app.rb b/railties/lib/generator/generators/app.rb
index f5e83460d7a3c39102f80f14c73c2f6b026f47ba..b54f8dc41fe4c8a9e8b98fb221386bc07181d02d 100644
--- a/railties/lib/generator/generators/app.rb
+++ b/railties/lib/generator/generators/app.rb
@@ -167,7 +167,7 @@ def create_vendor_files
     def apply_rails_template
       apply options[:template] if options[:template]
     rescue LoadError, Errno::ENOENT => e
-      raise "The template [#{template}] could not be loaded. Error: #{e}"
+      raise Error, "The template [#{options[:template]}] could not be loaded. Error: #{e}"
     end
 
     def freeze?
diff --git a/railties/test/generator/actions_test.rb b/railties/test/generator/actions_test.rb
index 4977765d40b9e73767c713f5fcf0cbd2eafbd42a..60db8905d719e3091e30e69d7da0a33fd288276b 100644
--- a/railties/test/generator/actions_test.rb
+++ b/railties/test/generator/actions_test.rb
@@ -4,12 +4,11 @@
 class ActionsTest < GeneratorTestCase
   def setup
     super
-
     @git_plugin_uri = 'git://github.com/technoweenie/restful-authentication.git'
     @svn_plugin_uri = 'svn://svnhub.com/technoweenie/restful-authentication/trunk'
   end
 
-  def test_apply_loads_a_template_and_evaluates_it
+  def test_apply_loads_and_evaluates_a_template
     template = <<-TEMPLATE
       @foo = "FOO"
     TEMPLATE
diff --git a/railties/test/generator/app_test.rb b/railties/test/generator/app_test.rb
new file mode 100644
index 0000000000000000000000000000000000000000..ab0554d0cfd48faea74070e1061c8be213c95398
--- /dev/null
+++ b/railties/test/generator/app_test.rb
@@ -0,0 +1,65 @@
+require 'abstract_unit'
+require 'generator/generator_test_helper'
+
+class AppTest < GeneratorTestCase
+
+  def test_application_skeleton_is_created
+    run_generator
+
+    %w(
+      app/controllers
+      app/helpers
+      app/models
+      app/views/layouts
+      config/environments
+      config/initializers
+      config/locales
+      db
+      doc
+      lib
+      lib/tasks
+      log
+      public/images
+      public/javascripts
+      public/stylesheets
+      script/performance
+      test/fixtures
+      test/functional
+      test/integration
+      test/performance
+      test/unit
+      vendor
+      vendor/plugins
+      tmp/sessions
+      tmp/sockets
+      tmp/cache
+      tmp/pids
+    ).each{ |path| assert_file path }
+  end
+
+  def test_template_raises_an_error_with_invalid_path
+    content = capture(:stderr){ run_generator(["-m", "non/existant/path"]) }
+    assert_match /The template \[.*\] could not be loaded/, content
+    assert_match /non\/existant\/path/, content
+  end
+
+  def test_template_is_executed_when_supplied
+    path = "http://gist.github.com/103208.txt"
+    template = %{ say "It works!" }
+    template.instance_eval "def read; self; end" # Make the string respond to read
+
+    generator(:template => path, :database => "sqlite3").expects(:open).with(path).returns(template)
+    assert_match /It works!/, silence(:stdout){ generator.invoke(:all) }
+  end
+
+  protected
+
+    def run_generator(args=[])
+      silence(:stdout) { Rails::Generators::App.start [destination_root].concat(args) }
+    end
+
+    def generator(options={})
+      @generator ||= Rails::Generators::App.new([destination_root], options, :root => destination_root)
+    end
+
+end