diff --git a/CHANGELOG.md b/CHANGELOG.md
index 7a003fb2..4310c201 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -6,6 +6,8 @@ master (unreleased)
 
 * Fix regression to make `chokidar` an optional dependency again.
 * Fix issue when running `npm install nunjucks` with the `--no-bin-links` flag
+* Fix regression that broke template caching. Fixes
+  [#1074](https://github.com/mozilla/nunjucks/issues/1074)
 
 3.1.0 (Feb 19 2018)
 -------------------
diff --git a/nunjucks/index.js b/nunjucks/index.js
index 05b4ea25..2544ef9d 100644
--- a/nunjucks/index.js
+++ b/nunjucks/index.js
@@ -59,6 +59,9 @@ module.exports = {
   nodes: nodes,
   installJinjaCompat: installJinjaCompat,
   configure: configure,
+  reset() {
+    e = undefined;
+  },
   compile(src, env, path, eagerCompile) {
     if (!e) {
       configure();
diff --git a/nunjucks/src/environment.js b/nunjucks/src/environment.js
index 0d6f7be5..e7fd163b 100644
--- a/nunjucks/src/environment.js
+++ b/nunjucks/src/environment.js
@@ -233,18 +233,25 @@ class Environment extends Obj {
       if (err) {
         if (cb) {
           cb(err);
+          return;
         } else {
           throw err;
         }
+      }
+      let newTmpl;
+      if (!info) {
+        newTmpl = new Template(noopTmplSrc, this, '', eagerCompile);
       } else {
-        info = info || {src: noopTmplSrc, path: ''};
-        const newTmpl = new Template(info.src, this, info.path, eagerCompile);
-        if (cb) {
-          cb(null, newTmpl);
-        } else {
-          syncResult = newTmpl;
+        newTmpl = new Template(info.src, this, info.path, eagerCompile);
+        if (!info.noCache) {
+          info.loader.cache[name] = newTmpl;
         }
       }
+      if (cb) {
+        cb(null, newTmpl);
+      } else {
+        syncResult = newTmpl;
+      }
     };
 
     lib.asyncIter(this.loaders, (loader, i, next, done) => {
diff --git a/package.json b/package.json
index a00906dc..7d85227e 100644
--- a/package.json
+++ b/package.json
@@ -26,6 +26,7 @@
     "eslint-plugin-import": "^2.8.0",
     "expect.js": "*",
     "express": "4.x",
+    "fs-extra": "^5.0.0",
     "get-port": "^3.2.0",
     "mocha": "*",
     "mocha-phantomjs-core": "^2.1.2",
diff --git a/tests/core.js b/tests/core.js
new file mode 100644
index 00000000..948f589e
--- /dev/null
+++ b/tests/core.js
@@ -0,0 +1,76 @@
+(function() {
+  'use strict';
+
+  var expect,
+    nunjucks,
+    fs,
+    os,
+    path;
+
+  if (typeof require !== 'undefined') {
+    expect = require('expect.js');
+    nunjucks = require('../nunjucks/index');
+    fs = require('fs-extra');
+    path = require('path');
+    os = require('os');
+  } else {
+    expect = window.expect;
+    nunjucks = window.nunjucks;
+  }
+
+  function rmdir(dirPath) {
+    fs.emptyDirSync(dirPath);
+    fs.rmdir(dirPath);
+  }
+
+  describe('nunjucks.configure', function() {
+    var tempdir;
+
+    before(function() {
+      if (fs && path && os) {
+        try {
+          tempdir = fs.mkdtempSync(path.join(os.tmpdir(), 'templates'));
+          fs.emptyDirSync(tempdir);
+        } catch (e) {
+          rmdir(tempdir);
+          throw e;
+        }
+      }
+    });
+
+    after(function() {
+      nunjucks.reset();
+      if (typeof tempdir !== 'undefined') {
+        rmdir(tempdir);
+      }
+    });
+
+    it('should cache templates by default', function() {
+      if (typeof fs === 'undefined') {
+        this.skip();
+        return;
+      }
+      nunjucks.configure(tempdir);
+
+      fs.writeFileSync(tempdir + '/test.html', '{{ name }}', 'utf-8');
+      expect(nunjucks.render('test.html', {name: 'foo'})).to.be('foo');
+
+      fs.writeFileSync(tempdir + '/test.html', '{{ name }}-changed', 'utf-8');
+      expect(nunjucks.render('test.html', {name: 'foo'})).to.be('foo');
+    });
+
+    it('should not cache templates with {noCache: true}', function() {
+      if (typeof fs === 'undefined') {
+        this.skip();
+        return;
+      }
+      nunjucks.configure(tempdir, {noCache: true});
+
+      fs.writeFileSync(tempdir + '/test.html', '{{ name }}', 'utf-8');
+      expect(nunjucks.render('test.html', {name: 'foo'})).to.be('foo');
+
+      fs.writeFileSync(tempdir + '/test.html', '{{ name }}-changed', 'utf-8');
+      expect(nunjucks.render('test.html', {name: 'foo'})).to.be('foo-changed');
+    });
+  });
+}());