diff --git a/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TestTransactionManager.java b/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TestTransactionManager.java
index 4032773161..dcae0b1269 100644
--- a/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TestTransactionManager.java
+++ b/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TestTransactionManager.java
@@ -38,6 +38,8 @@ public class TestTransactionManager extends AbstractPlatformTransactionManager {
 
 	private final CountDownLatch latch = new CountDownLatch(1);
 
+	private volatile TransactionDefinition lastDefinition;
+
 
 	public int getCommitCount() {
 		return this.commitCounter.get();
@@ -47,12 +49,17 @@ public class TestTransactionManager extends AbstractPlatformTransactionManager {
 		return this.rollbackCounter.get();
 	}
 
+	public TransactionDefinition getLastDefinition() {
+		return this.lastDefinition;
+	}
+
 	public void waitForCompletion(long timeout) throws InterruptedException {
 		this.latch.await(timeout, TimeUnit.MILLISECONDS);
 	}
 
 	@Override
 	protected void doBegin(Object transaction, TransactionDefinition definition) throws TransactionException {
+		this.lastDefinition = definition;
 	}
 
 	@Override
diff --git a/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TransactionInterceptorTests.java b/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TransactionInterceptorTests.java
index 08dbdb3254..9621ccf5b0 100644
--- a/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TransactionInterceptorTests.java
+++ b/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/TransactionInterceptorTests.java
@@ -24,8 +24,14 @@ import org.junit.Test;
 
 import org.springframework.context.support.ClassPathXmlApplicationContext;
 import org.springframework.integration.channel.MessageChannel;
+import org.springframework.integration.endpoint.MessageEndpoint;
 import org.springframework.integration.message.Message;
 import org.springframework.integration.message.StringMessage;
+import org.springframework.transaction.IllegalTransactionStateException;
+import org.springframework.transaction.TransactionStatus;
+import org.springframework.transaction.annotation.Propagation;
+import org.springframework.transaction.support.TransactionCallback;
+import org.springframework.transaction.support.TransactionTemplate;
 
 /**
  * @author Mark Fisher
@@ -66,4 +72,94 @@ public class TransactionInterceptorTests {
 		assertEquals(1, txManager.getRollbackCount());		
 	}
 
+	@Test
+	public void testPropagationRequired() {
+		ClassPathXmlApplicationContext context = new ClassPathXmlApplicationContext(
+				"transactionInterceptorPropagationTests.xml", this.getClass());
+		TestTransactionManager txManager = (TestTransactionManager) context.getBean("txManager");
+		final MessageEndpoint endpoint = (MessageEndpoint) context.getBean("required");
+		assertEquals(0, txManager.getCommitCount());
+		endpoint.invoke(new StringMessage("test"));
+		assertEquals(1, txManager.getCommitCount());
+		TestTransactionManager outerTxManager = new TestTransactionManager();
+		TransactionTemplate txTemplate = new TransactionTemplate(outerTxManager);
+		txTemplate.execute(new TransactionCallback() {
+			public Object doInTransaction(TransactionStatus status) {
+				return endpoint.invoke(new StringMessage("test"));
+			}
+		});
+		assertEquals(1, outerTxManager.getCommitCount());
+		assertEquals(2, txManager.getCommitCount());
+		assertEquals(Propagation.REQUIRED.value(), txManager.getLastDefinition().getPropagationBehavior());
+	}
+
+	@Test
+	public void testPropagationRequiresNew() {
+		ClassPathXmlApplicationContext context = new ClassPathXmlApplicationContext(
+				"transactionInterceptorPropagationTests.xml", this.getClass());
+		TestTransactionManager txManager = (TestTransactionManager) context.getBean("txManager");
+		final MessageEndpoint endpoint = (MessageEndpoint) context.getBean("requiresNew");
+		assertEquals(0, txManager.getCommitCount());
+		endpoint.invoke(new StringMessage("test"));
+		assertEquals(1, txManager.getCommitCount());
+		TestTransactionManager outerTxManager = new TestTransactionManager();
+		TransactionTemplate txTemplate = new TransactionTemplate(outerTxManager);
+		txTemplate.execute(new TransactionCallback() {
+			public Object doInTransaction(TransactionStatus status) {
+				return endpoint.invoke(new StringMessage("test"));
+			}
+		});
+		assertEquals(1, outerTxManager.getCommitCount());
+		assertEquals(2, txManager.getCommitCount());
+		assertEquals(Propagation.REQUIRES_NEW.value(), txManager.getLastDefinition().getPropagationBehavior());
+	}
+
+	@Test
+	public void testPropagationSupports() {
+		ClassPathXmlApplicationContext context = new ClassPathXmlApplicationContext(
+				"transactionInterceptorPropagationTests.xml", this.getClass());
+		TestTransactionManager txManager = (TestTransactionManager) context.getBean("txManager");
+		final MessageEndpoint endpoint = (MessageEndpoint) context.getBean("supports");
+		assertEquals(0, txManager.getCommitCount());
+		endpoint.invoke(new StringMessage("test"));
+		assertEquals(0, txManager.getCommitCount());
+		TestTransactionManager outerTxManager = new TestTransactionManager();
+		TransactionTemplate txTemplate = new TransactionTemplate(outerTxManager);
+		txTemplate.execute(new TransactionCallback() {
+			public Object doInTransaction(TransactionStatus status) {
+				return endpoint.invoke(new StringMessage("test"));
+			}
+		});
+		assertEquals(0, txManager.getCommitCount());
+		assertEquals(1, outerTxManager.getCommitCount());
+	}
+
+	@Test
+	public void testPropagationNotSupported() {
+		ClassPathXmlApplicationContext context = new ClassPathXmlApplicationContext(
+				"transactionInterceptorPropagationTests.xml", this.getClass());
+		TestTransactionManager txManager = (TestTransactionManager) context.getBean("txManager");
+		final MessageEndpoint endpoint = (MessageEndpoint) context.getBean("notSupported");
+		assertEquals(0, txManager.getCommitCount());
+		endpoint.invoke(new StringMessage("test"));
+		assertEquals(0, txManager.getCommitCount());
+		TestTransactionManager outerTxManager = new TestTransactionManager();
+		TransactionTemplate txTemplate = new TransactionTemplate(outerTxManager);
+		txTemplate.execute(new TransactionCallback() {
+			public Object doInTransaction(TransactionStatus status) {
+				return endpoint.invoke(new StringMessage("test"));
+			}
+		});
+		assertEquals(0, txManager.getCommitCount());
+		assertEquals(1, outerTxManager.getCommitCount());
+	}
+
+	@Test(expected = IllegalTransactionStateException.class)
+	public void testPropagationMandatoryCalledWithoutTransaction() {
+		ClassPathXmlApplicationContext context = new ClassPathXmlApplicationContext(
+				"transactionInterceptorPropagationTests.xml", this.getClass());
+		final MessageEndpoint endpoint = (MessageEndpoint) context.getBean("mandatory");
+		endpoint.invoke(new StringMessage("test"));
+	}
+
 }
diff --git a/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/transactionInterceptorPropagationTests.xml b/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/transactionInterceptorPropagationTests.xml
new file mode 100644
index 0000000000..d59e8184d4
--- /dev/null
+++ b/org.springframework.integration/src/test/java/org/springframework/integration/endpoint/interceptor/transactionInterceptorPropagationTests.xml
@@ -0,0 +1,74 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<beans:beans xmlns="http://www.springframework.org/schema/integration"
+	xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
+	xmlns:beans="http://www.springframework.org/schema/beans"
+	xsi:schemaLocation="http://www.springframework.org/schema/beans
+			http://www.springframework.org/schema/beans/spring-beans-2.5.xsd
+			http://www.springframework.org/schema/integration
+			http://www.springframework.org/schema/integration/spring-integration-core-1.0.xsd">
+
+	<message-bus/>
+
+	<channel id="input"/>
+	<channel id="output"/>
+
+	<handler-endpoint id="required"
+	                  input-channel="input"
+	                  handler="testBean"
+	                  method="good"
+                      output-channel="output">
+        <schedule period="10000"/>
+    	<interceptors>
+			<transaction-interceptor transaction-manager="txManager" propagation="REQUIRED"/>
+    	</interceptors>
+    </handler-endpoint>
+
+	<handler-endpoint id="requiresNew"
+	                  input-channel="input"
+	                  handler="testBean"
+	                  method="good"
+                      output-channel="output">
+        <schedule period="10000"/>
+    	<interceptors>
+			<transaction-interceptor transaction-manager="txManager" propagation="REQUIRES_NEW"/>
+    	</interceptors>
+    </handler-endpoint>
+
+	<handler-endpoint id="supports"
+	                  input-channel="input"
+	                  handler="testBean"
+	                  method="good"
+                      output-channel="output">
+        <schedule period="10000"/>
+    	<interceptors>
+			<transaction-interceptor transaction-manager="txManager" propagation="SUPPORTS"/>
+    	</interceptors>
+    </handler-endpoint>
+
+	<handler-endpoint id="notSupported"
+	                  input-channel="input"
+	                  handler="testBean"
+	                  method="good"
+                      output-channel="output">
+        <schedule period="10000"/>
+    	<interceptors>
+			<transaction-interceptor transaction-manager="txManager" propagation="NOT_SUPPORTED"/>
+    	</interceptors>
+    </handler-endpoint>
+
+	<handler-endpoint id="mandatory"
+	                  input-channel="input"
+	                  handler="testBean"
+	                  method="good"
+                      output-channel="output">
+        <schedule period="10000"/>
+    	<interceptors>
+			<transaction-interceptor transaction-manager="txManager" propagation="MANDATORY"/>
+    	</interceptors>
+    </handler-endpoint>
+
+	<beans:bean id="testBean" class="org.springframework.integration.endpoint.interceptor.TestBean"/>
+
+	<beans:bean id="txManager" class="org.springframework.integration.endpoint.interceptor.TestTransactionManager"/>
+
+</beans:beans>