diff --git a/confluent_server/confluent/syncfiles.py b/confluent_server/confluent/syncfiles.py
index a02d03ed..fa898938 100644
--- a/confluent_server/confluent/syncfiles.py
+++ b/confluent_server/confluent/syncfiles.py
@@ -32,6 +32,20 @@ def mkdirp(path):
         if e.errno != 17:
             raise
 
+def get_entries(filename):
+    with open(filename, 'r') as slfile:
+        slist = slfile.read()
+    entries = slist.split('\n')
+    for ent in entries:
+        ent = ent.split('#', 1)[0].strip()
+        if not ent:
+            continue
+        if ent[0] == '<':
+            for subent in get_entries(ent[1:]):
+                yield subent
+        else:
+            yield subent
+
 class SyncList(object):
     def __init__(self, filename, nodename, cfg):
         slist = None
@@ -40,9 +54,7 @@ class SyncList(object):
         self.appendoncemap = {}
         self.mergemap = {}
         self.optmap = {}
-        with open(filename, 'r') as slfile:
-            slist = slfile.read()
-        entries = slist.split('\n')
+        entries = get_entries(filename)
         currmap = self.replacemap
         for ent in entries:
             try:
diff --git a/imgutil/imgutil b/imgutil/imgutil
index edc59bba..fcb8d6fc 100644
--- a/imgutil/imgutil
+++ b/imgutil/imgutil
@@ -409,10 +409,21 @@ class OsHandler(object):
                 'version': odata[1], 'arch': odata[2], 'name': odata[3]}
         return json.dumps(info)
 
-    def list_packages(self):
-        with open(self.pkglist, 'r') as pkglist:
+    def list_packages(self, pkglistfile=None):
+        if pkglistfile is None:
+            pkglistfile = self.pkglist
+        with open(pkglistfile, 'r') as pkglist:
             pkgs = pkglist.read()
             pkgs = pkgs.split()
+        retpkgs = []
+        for pkg in pkgs:
+            pkg = pkg.split('#', 1)[0].strip()
+            if not pkg:
+                continue
+            if pkg[0] == '<':  # Include from specified file
+                pkgs.extend(self.list_packages(pkg[1:]))
+            else:
+                pkgs.append(pkg)
         return pkgs
 
 class SuseHandler(OsHandler):