diff --git a/server/src/com/cloud/api/commands/UpdateVMCmd.java b/server/src/com/cloud/api/commands/UpdateVMCmd.java
index ff788e42e51..a6903097c1c 100644
--- a/server/src/com/cloud/api/commands/UpdateVMCmd.java
+++ b/server/src/com/cloud/api/commands/UpdateVMCmd.java
@@ -66,11 +66,7 @@ public class UpdateVMCmd extends BaseCmd{
         // default userId to SYSTEM user
         if (userId == null) {
             userId = Long.valueOf(1);
-        }
-        
-        //don't accept empty parameter for the group
-        if (group != null && group.isEmpty())
-        	group = null;
+        }
 
         // Verify input parameters
         try {
diff --git a/server/src/com/cloud/server/ManagementServerImpl.java b/server/src/com/cloud/server/ManagementServerImpl.java
index d94d221c5c9..33410c61a32 100755
--- a/server/src/com/cloud/server/ManagementServerImpl.java
+++ b/server/src/com/cloud/server/ManagementServerImpl.java
@@ -2804,9 +2804,14 @@ public class ManagementServerImpl implements ManagementServer {
         }
         
         if (group != null) {
-        	boolean addToGroup = _vmMgr.addInstanceToGroup(Long.valueOf(vmId), group);
-        	if (!addToGroup) {
-        		throw new CloudRuntimeException("Unable to update Vm with the the group " + group);
+        	if (group.isEmpty()) {
+        		_vmMgr.removeInstanceFromGroup(vmId);
+        	}
+        	else {
+        		boolean addToGroup = _vmMgr.addInstanceToGroup(Long.valueOf(vmId), group);
+            	if (!addToGroup) {
+            		throw new CloudRuntimeException("Unable to update Vm with the the group " + group);
+            	}
         	}
         }
 
diff --git a/server/src/com/cloud/vm/UserVmManager.java b/server/src/com/cloud/vm/UserVmManager.java
index 6c70f3c3f42..7e8a3919d22 100644
--- a/server/src/com/cloud/vm/UserVmManager.java
+++ b/server/src/com/cloud/vm/UserVmManager.java
@@ -232,5 +232,7 @@ public interface UserVmManager extends Manager, VirtualMachineManager<UserVmVO>
     boolean addInstanceToGroup(long userVmId, String group);
     
     InstanceGroupVO getGroupForVm(long vmId);
+    
+    void removeInstanceFromGroup(long vmId);
 
 }
diff --git a/server/src/com/cloud/vm/UserVmManagerImpl.java b/server/src/com/cloud/vm/UserVmManagerImpl.java
index 01c1181e2f8..44b834374c2 100755
--- a/server/src/com/cloud/vm/UserVmManagerImpl.java
+++ b/server/src/com/cloud/vm/UserVmManagerImpl.java
@@ -3154,6 +3154,7 @@ public class UserVmManagerImpl implements UserVmManager {
 		}
 	}
 	
+	@Override
 	public void removeInstanceFromGroup(long vmId) {
 		try {
 			List<InstanceGroupVMMapVO> groupVmMaps = _groupVMMapDao.listByInstanceId(vmId);