diff --git a/command/hcl2_upgrade.go b/command/hcl2_upgrade.go
index a9dec8251..e149e1af0 100644
--- a/command/hcl2_upgrade.go
+++ b/command/hcl2_upgrade.go
@@ -623,6 +623,40 @@ func variableTransposeTemplatingCalls(s []byte) (isLocal bool, body []byte) {
 	return isLocal, str.Bytes()
 }
 
+// referencedUserVariables executes parts of blocks as go template files finding user variables referenced
+// within the template. This function should be called once to extract those variables referenced via the {{user `...`}}
+// template function. The resulting map will contain variables defined in the JSON variables property, and some that
+// are declared via var-files; to avoid duplicates the results of this function should be reconciled against tpl.Variables.
+func referencedUserVariables(s []byte) map[string]*template.Variable {
+	userVars := make([]string, 0)
+	funcMap := texttemplate.FuncMap{
+		"user": func(in string) string {
+			userVars = append(userVars, in)
+			return ""
+		},
+	}
+
+	tpl, err := texttemplate.New("hcl2_upgrade").
+		Funcs(funcMap).
+		Parse(string(s))
+	if err != nil {
+		return nil
+	}
+
+	if err := tpl.Execute(&bytes.Buffer{}, nil); err != nil {
+		return nil
+	}
+
+	vars := make(map[string]*template.Variable)
+	for _, v := range userVars {
+		vars[v] = &template.Variable{
+			Key:      v,
+			Required: true,
+		}
+	}
+	return vars
+}
+
 func jsonBodyToHCL2Body(out *hclwrite.Body, kvs map[string]interface{}) {
 	ks := []string{}
 	for k := range kvs {
@@ -836,6 +870,17 @@ func (p *VariableParser) Parse(tpl *template.Template) error {
 		p.localsOut = []byte{}
 	}
 
+	// JSON supports variable declaration via var-files.
+	// User variables that might be defined in a var-file
+	// but not in the actual JSON template should be accounted for.
+	userVars := referencedUserVariables(tpl.RawContents)
+	for name, variable := range userVars {
+		if _, ok := tpl.Variables[name]; ok {
+			continue
+		}
+		tpl.Variables[name] = variable
+	}
+
 	variables := []*template.Variable{}
 	{
 		// sort variables to avoid map's randomness
@@ -852,7 +897,8 @@ func (p *VariableParser) Parse(tpl *template.Template) error {
 		// field with the "Default" value from the JSON variable.
 
 		// Interpolate Jsonval first as an hcl variable to determine if it is
-		// a local.
+		// a local. Variables referencing some form of variable expression must be defined as a local in HCL2,
+		// as variables in HCL2 must have a known value at parsing time.
 		isLocal, _ := variableTransposeTemplatingCalls([]byte(variable.Default))
 		sensitive := false
 		if isSensitiveVariable(variable.Key, tpl.SensitiveVariables) {
diff --git a/command/hcl2_upgrade_test.go b/command/hcl2_upgrade_test.go
index 598ae4a3f..45da6a1cd 100644
--- a/command/hcl2_upgrade_test.go
+++ b/command/hcl2_upgrade_test.go
@@ -24,15 +24,16 @@ func Test_hcl2_upgrade(t *testing.T) {
 		{folder: "source-name", flags: []string{"-with-annotations"}},
 		{folder: "error-cleanup-provisioner", flags: []string{"-with-annotations"}},
 		{folder: "aws-access-config", flags: []string{}},
-		{folder: "variables-only", flags: []string{}},
-		{folder: "variables-with-variables", flags: []string{}},
-		{folder: "complete-variables-with-template-engine", flags: []string{}},
 		{folder: "escaping", flags: []string{}},
 		{folder: "vsphere_linux_options_and_network_interface", exitCode: 1, flags: []string{}},
 		{folder: "nonexistent", flags: []string{}, exitCode: 1, exitEarly: true},
 		{folder: "placeholders", flags: []string{}, exitCode: 0},
 		{folder: "ami_test", flags: []string{}, exitCode: 0},
 		{folder: "azure_shg", flags: []string{}, exitCode: 0},
+		{folder: "variables-only", flags: []string{}},
+		{folder: "variables-with-variables", flags: []string{}},
+		{folder: "complete-variables-with-template-engine", flags: []string{}},
+		{folder: "undeclared-variables", flags: []string{}, exitCode: 0},
 	}
 
 	for _, tc := range tc {
diff --git a/command/test-fixtures/hcl2_upgrade/undeclared-variables/expected.pkr.hcl b/command/test-fixtures/hcl2_upgrade/undeclared-variables/expected.pkr.hcl
new file mode 100644
index 000000000..cee87f967
--- /dev/null
+++ b/command/test-fixtures/hcl2_upgrade/undeclared-variables/expected.pkr.hcl
@@ -0,0 +1,26 @@
+
+variable "communicator_type" {
+  type = string
+}
+
+variable "foo" {
+  type    = string
+  default = "bar"
+}
+
+variable "scriptpath" {
+  type = string
+}
+
+source "null" "autogenerated_1" {
+  communicator = "${var.communicator_type}"
+}
+
+build {
+  sources = ["source.null.autogenerated_1"]
+
+  provisioner "shell" {
+    script = "${var.scriptpath}"
+  }
+
+}
diff --git a/command/test-fixtures/hcl2_upgrade/undeclared-variables/input.json b/command/test-fixtures/hcl2_upgrade/undeclared-variables/input.json
new file mode 100644
index 000000000..ba6e19858
--- /dev/null
+++ b/command/test-fixtures/hcl2_upgrade/undeclared-variables/input.json
@@ -0,0 +1,18 @@
+{
+    "variables": {
+        "foo": "bar"
+    }, 
+    "builders": [
+        {
+        "type": "null",
+        "communicator": "{{ user `communicator_type` }}"
+        }
+    ],
+    "provisioners": [
+        {
+            "type": "shell",
+            "script": "{{user `scriptpath`}}"
+        }
+    ]
+}
+