diff --git a/engine/schema/src/com/cloud/storage/VMTemplateStoragePoolVO.java b/engine/schema/src/com/cloud/storage/VMTemplateStoragePoolVO.java
index 10ced67244f..8ee0c4a5955 100644
--- a/engine/schema/src/com/cloud/storage/VMTemplateStoragePoolVO.java
+++ b/engine/schema/src/com/cloud/storage/VMTemplateStoragePoolVO.java
@@ -266,6 +266,11 @@ public class VMTemplateStoragePoolVO implements VMTemplateStorageResourceAssoc,
         return this.state;
     }
 
+    //TODO: this should be revisited post-4.2 to completely use state transition machine
+    public void setState(ObjectInDataStoreStateMachine.State state) {
+        this.state = state;
+    }
+
     public long getUpdatedCount() {
         return this.updatedCount;
     }
diff --git a/engine/storage/volume/src/org/apache/cloudstack/storage/volume/VolumeServiceImpl.java b/engine/storage/volume/src/org/apache/cloudstack/storage/volume/VolumeServiceImpl.java
index 07ae6a9f0e3..0c2eaee677b 100644
--- a/engine/storage/volume/src/org/apache/cloudstack/storage/volume/VolumeServiceImpl.java
+++ b/engine/storage/volume/src/org/apache/cloudstack/storage/volume/VolumeServiceImpl.java
@@ -25,48 +25,37 @@ import java.util.Map;
 
 import javax.inject.Inject;
 
+import org.apache.log4j.Logger;
+import org.springframework.stereotype.Component;
+
+import com.amazonaws.services.storagegateway.model.ChapInfo;
+
 import org.apache.cloudstack.engine.cloud.entity.api.VolumeEntity;
 import org.apache.cloudstack.engine.subsystem.api.storage.CopyCommandResult;
 import org.apache.cloudstack.engine.subsystem.api.storage.CreateCmdResult;
-import org.apache.cloudstack.engine.subsystem.api.storage.DataMotionService;
 import org.apache.cloudstack.engine.subsystem.api.storage.DataObject;
 import org.apache.cloudstack.engine.subsystem.api.storage.DataStore;
-import org.apache.cloudstack.engine.subsystem.api.storage.EndPoint;
-import org.apache.cloudstack.engine.subsystem.api.storage.EndPointSelector;
-import org.apache.cloudstack.engine.subsystem.api.storage.ObjectInDataStoreStateMachine;
-import org.apache.cloudstack.engine.subsystem.api.storage.Scope;
-import org.apache.cloudstack.engine.subsystem.api.storage.ObjectInDataStoreStateMachine.Event;
 import org.apache.cloudstack.engine.subsystem.api.storage.DataStoreDriver;
-import org.apache.cloudstack.engine.subsystem.api.storage.PrimaryDataStoreDriver;
-import org.apache.cloudstack.engine.subsystem.api.storage.SnapshotInfo;
-import org.apache.cloudstack.engine.subsystem.api.storage.TemplateInfo;
-import org.apache.cloudstack.engine.subsystem.api.storage.ChapInfo;
-import org.apache.cloudstack.engine.subsystem.api.storage.VolumeDataFactory;
+import org.apache.cloudstack.engine.subsystem.api.storage.EndPoint;
+import org.apache.cloudstack.engine.subsystem.api.storage.Scope;
 import org.apache.cloudstack.engine.subsystem.api.storage.VolumeInfo;
-import org.apache.cloudstack.engine.subsystem.api.storage.VolumeService;
 import org.apache.cloudstack.framework.async.AsyncCallFuture;
 import org.apache.cloudstack.framework.async.AsyncCallbackDispatcher;
 import org.apache.cloudstack.framework.async.AsyncCompletionCallback;
-import org.apache.cloudstack.framework.async.AsyncRpcContext;
 import org.apache.cloudstack.framework.config.dao.ConfigurationDao;
-import org.apache.cloudstack.storage.command.CommandResult;
-import org.apache.cloudstack.storage.command.DeleteCommand;
 import org.apache.cloudstack.storage.datastore.DataObjectManager;
 import org.apache.cloudstack.storage.datastore.ObjectInDataStoreManager;
 import org.apache.cloudstack.storage.datastore.PrimaryDataStore;
 import org.apache.cloudstack.storage.datastore.PrimaryDataStoreProviderManager;
-import org.apache.cloudstack.storage.datastore.db.VolumeDataStoreDao;
-import org.apache.cloudstack.storage.datastore.db.VolumeDataStoreVO;
-import org.apache.cloudstack.storage.to.VolumeObjectTO;
-
-import org.apache.log4j.Logger;
-import org.springframework.stereotype.Component;
+import org.apache.cloudstack.storage.datastore.VolumeDataFactory;
+import org.apache.cloudstack.storage.endpoint.EndPointSelector;
+import org.apache.cloudstack.storage.image.TemplateInfo;
+import org.apache.cloudstack.storage.motion.DataMotionService;
+import org.apache.cloudstack.storage.snapshot.SnapshotInfo;
+import org.apache.cloudstack.storage.volume.db.VolumeVO;
 
 import com.cloud.agent.api.Answer;
-import com.cloud.agent.api.storage.ListVolumeAnswer;
-import com.cloud.agent.api.storage.ListVolumeCommand;
 import com.cloud.agent.api.to.VirtualMachineTO;
-import com.cloud.alert.AlertManager;
 import com.cloud.configuration.Config;
 import com.cloud.configuration.Resource.ResourceType;
 import com.cloud.event.EventTypes;
@@ -74,19 +63,12 @@ import com.cloud.event.UsageEventUtils;
 import com.cloud.exception.ConcurrentOperationException;
 import com.cloud.exception.ResourceAllocationException;
 import com.cloud.host.Host;
-import com.cloud.storage.DataStoreRole;
-import com.cloud.storage.ScopeType;
 import com.cloud.storage.StoragePool;
-import com.cloud.storage.VMTemplateStoragePoolVO;
 import com.cloud.storage.VMTemplateStorageResourceAssoc;
 import com.cloud.storage.VMTemplateStorageResourceAssoc.Status;
-import com.cloud.storage.Volume.State;
 import com.cloud.storage.Volume;
-import com.cloud.storage.VolumeVO;
-import com.cloud.storage.dao.VMTemplatePoolDao;
-import com.cloud.storage.dao.VolumeDao;
+import com.cloud.storage.Volume.State;
 import com.cloud.storage.snapshot.SnapshotManager;
-import com.cloud.storage.template.TemplateProp;
 import com.cloud.user.AccountManager;
 import com.cloud.user.ResourceLimitService;
 import com.cloud.utils.NumbersUtil;
@@ -504,6 +486,7 @@ public class VolumeServiceImpl implements VolumeService {
             AsyncCallbackDispatcher<VolumeServiceImpl, CopyCommandResult> callback,
             CreateVolumeFromBaseImageContext<VolumeApiResult> context) {
         DataObject vo = context.vo;
+        DataObject tmplOnPrimary = context.templateOnStore;
         CopyCommandResult result = callback.getResult();
         VolumeApiResult volResult = new VolumeApiResult((VolumeObject) vo);
 
@@ -512,8 +495,32 @@ public class VolumeServiceImpl implements VolumeService {
         } else {
             vo.processEvent(Event.OperationFailed);
             volResult.setResult(result.getResult());
+            // hack for Vmware: host is down, previously download template to the host needs to be re-downloaded, so we need to reset
+            // template_spool_ref entry here to NOT_DOWNLOADED and Allocated state
+            Answer ans = result.getAnswer();
+            if ( ans != null && ans instanceof CopyCmdAnswer && ans.getDetails().contains("request template reload")){
+                if (tmplOnPrimary != null){
+                    s_logger.info("Reset template_spool_ref entry so that vmware template can be reloaded in next try");
+                    VMTemplateStoragePoolVO templatePoolRef = _tmpltPoolDao.findByPoolTemplate(tmplOnPrimary.getDataStore().getId(), tmplOnPrimary.getId());
+                    if (templatePoolRef != null) {
+                        long templatePoolRefId = templatePoolRef.getId();
+                        templatePoolRef = _tmpltPoolDao.acquireInLockTable(templatePoolRefId, 1200);
+                        if (templatePoolRef == null) {
+                            s_logger.warn("Reset Template State On Pool failed - unable to lock TemplatePoolRef " + templatePoolRefId);
+                        }
+                        
+                        try {
+                            templatePoolRef.setDownloadState(VMTemplateStorageResourceAssoc.Status.NOT_DOWNLOADED);
+                            templatePoolRef.setState(ObjectInDataStoreStateMachine.State.Allocated);
+                            _tmpltPoolDao.update(templatePoolRefId, templatePoolRef);
+                        } finally {
+                            _tmpltPoolDao.releaseFromLockTable(templatePoolRefId);
+                        }
+                    }
+                }
+            }
         }
-
+        
         AsyncCallFuture<VolumeApiResult> future = context.getFuture();
         future.complete(volResult);
         return null;