diff --git a/xCAT-server/lib/perl/xCAT/Template.pm b/xCAT-server/lib/perl/xCAT/Template.pm
index f8b4d88bf..34c2f1e5a 100644
--- a/xCAT-server/lib/perl/xCAT/Template.pm
+++ b/xCAT-server/lib/perl/xCAT/Template.pm
@@ -131,17 +131,35 @@ sub subvars {
     if ($pkglistfile) {
       # handle empty and non-empty $pkglistfile's
 
+      my @tmp_array=();
+
       if (open PKGLISTFILE, "<$pkglistfile") {
         my $pkglist = '';
         # append preseed directive lines
         while (<PKGLISTFILE>) {
           chomp $_;
-          if ((/^\s*#.*/ ) || ( $_ =~ /^-/ )){ 
-            next;
-          }
-          $pkglist .= " " . $_;
+          s/\s+$//;   #remove trailing white spaces
+          next if /^\s*$/; #-- skip empty lines
+          next
+          if (   /^\s*#/
+              && !/^\s*#INCLUDE:[^#^\n]+#/
+              && !/^\s*#NEW_INSTALL_LIST#/
+              && !/^\s*#ENV:[^#^\n]+#/);    #-- skip comments
+          push(@tmp_array,$_);
+        }
+        if ( @tmp_array > 0) {
+            $pkglist=join(' ',@tmp_array);
+            #handle the #INLCUDE# tag recursively
+            my $idir = dirname($pkglistfile);
+            my $doneincludes=0;
+            while (not $doneincludes) {
+                $doneincludes=1;
+                if ($pkglist =~ /#INCLUDE:[^#^\n]+#/) {
+                    $doneincludes=0;
+                    $pkglist =~ s/#INCLUDE:([^#^\n]+)#/debian_includefile($1,$idir)/eg;
+                }
+            }
         }
-
         $inc =~ s/#INCLUDE_DEFAULT_PKGLIST_PRESEED#/$pkglist/g;
         close PKGLISTFILE;
       }
@@ -1514,5 +1532,35 @@ sub getNM_GW()
     return (undef, undef);
 }
 
+sub debian_includefile
+{
+   my $file = shift;
+   my $idir = shift;
+   my @text = ();
+   unless ($file =~ /^\//) {
+       $file = $idir."/".$file;
+   }
+
+   open(INCLUDE,$file) ||
+       return "#INCLUDEBAD:cannot open $file#";
+
+   while(<INCLUDE>) {
+       chomp($_);
+       s/\s+$//;  #remove trailing spaces
+       next if /^\s*$/; #-- skip empty lines
+       next
+          if (   /^\s*#/
+              && !/^\s*#INCLUDE:[^#^\n]+#/
+              && !/^\s*#NEW_INSTALL_LIST#/
+              && !/^\s*#ENV:[^#^\n]+#/);    #-- skip comments
+       push(@text, $_);
+   }
+
+   close(INCLUDE);
+
+   return join(' ', @text);
+}
+
+
 
 1;