diff --git a/bin/tests/system/nsupdate/ns1/named.conf.in b/bin/tests/system/nsupdate/ns1/named.conf.in
index 1d999adc39..87904f43aa 100644
--- a/bin/tests/system/nsupdate/ns1/named.conf.in
+++ b/bin/tests/system/nsupdate/ns1/named.conf.in
@@ -36,6 +36,11 @@ key altkey {
 	secret "1234abcd8765";
 };
 
+key restricted.example.nil {
+	algorithm hmac-md5;
+	secret "1234abcd8765";
+};
+
 include "ddns.key";
 
 zone "example.nil" {
@@ -45,6 +50,7 @@ zone "example.nil" {
 	check-mx ignore;
 	update-policy {
 		grant ddns-key.example.nil subdomain example.nil ANY;
+		grant restricted.example.nil subdomain restricted.example.nil ANY;
 	};
 	allow-transfer { any; };
 };
diff --git a/bin/tests/system/nsupdate/tests.sh b/bin/tests/system/nsupdate/tests.sh
index 44436dbce8..7f0c3f3ecc 100755
--- a/bin/tests/system/nsupdate/tests.sh
+++ b/bin/tests/system/nsupdate/tests.sh
@@ -631,6 +631,31 @@ then
 echo_i "failed"; status=1
 fi
 
+n=`expr $n + 1`
+ret=0
+echo_i "check that 'update-policy subdomain' is properly enforced ($n)"
+# "restricted.example.nil" matches "grant ... subdomain restricted.example.nil"
+# and thus this UPDATE should succeed.
+$NSUPDATE -d <<END > nsupdate.out1-$n 2>&1 || ret=1
+server 10.53.0.1 ${PORT}
+key restricted.example.nil 1234abcd8765
+update add restricted.example.nil 0 IN TXT everywhere.
+send
+END
+$DIG $DIGOPTS +tcp @10.53.0.1 restricted.example.nil TXT > dig.out.1.test$n || ret=1
+grep "TXT.*everywhere" dig.out.1.test$n > /dev/null || ret=1
+# "example.nil" does not match "grant ... subdomain restricted.example.nil" and
+# thus this UPDATE should fail.
+$NSUPDATE -d <<END > nsupdate.out2-$n 2>&1 && ret=1
+server 10.53.0.1 ${PORT}
+key restricted.example.nil 1234abcd8765
+update add example.nil 0 IN TXT everywhere.
+send
+END
+$DIG $DIGOPTS +tcp @10.53.0.1 example.nil TXT > dig.out.2.test$n || ret=1
+grep "TXT.*everywhere" dig.out.2.test$n > /dev/null && ret=1
+[ $ret = 0 ] || { echo_i "failed"; status=1; }
+
 n=`expr $n + 1`
 ret=0
 echo_i "check that changes to the DNSKEY RRset TTL do not have side effects ($n)"