diff --git a/lib/ddtrace/contrib/active_record/patcher.rb b/lib/ddtrace/contrib/active_record/patcher.rb
index fb796ecdfaf..3d9a64c2f39 100644
--- a/lib/ddtrace/contrib/active_record/patcher.rb
+++ b/lib/ddtrace/contrib/active_record/patcher.rb
@@ -80,12 +80,18 @@ def self.sql(_name, start, finish, _id, payload)
             span_type: span_type
           )
 
+          # Find out if the SQL query has been cached in this request. This meta is really
+          # helpful to users because some spans may have 0ns of duration because the query
+          # is simply cached from memory, so the notification is fired with start == finish.
+          cached = payload[:cached] || (payload[:name] == 'CACHE')
+
           # the span should have the query ONLY in the Resource attribute,
           # so that the ``sql.query`` tag will be set in the agent with an
           # obfuscated version
           span.span_type = Datadog::Ext::SQL::TYPE
           span.set_tag('active_record.db.vendor', adapter_name)
           span.set_tag('active_record.db.name', database_name)
+          span.set_tag('active_record.db.cached', cached) if cached
           span.set_tag('out.host', adapter_host)
           span.set_tag('out.port', adapter_port)
           span.start_time = start
diff --git a/lib/ddtrace/contrib/rails/active_record.rb b/lib/ddtrace/contrib/rails/active_record.rb
index 6a90d73ec13..b8c2af1053e 100644
--- a/lib/ddtrace/contrib/rails/active_record.rb
+++ b/lib/ddtrace/contrib/rails/active_record.rb
@@ -33,13 +33,10 @@ def self.sql(_name, start, finish, _id, payload)
             span_type: span_type
           )
 
-          # find out if the SQL query has been cached in this request. This meta is really
+          # Find out if the SQL query has been cached in this request. This meta is really
           # helpful to users because some spans may have 0ns of duration because the query
           # is simply cached from memory, so the notification is fired with start == finish.
-          # TODO[manu]: this feature has been merged into master but has not yet released.
-          # We're supporting this action as a best effort, but we should add a test after
-          # a new version of Rails is out.
-          cached = payload[:cached]
+          cached = payload[:cached] || (payload[:name] == 'CACHE')
 
           # the span should have the query ONLY in the Resource attribute,
           # so that the ``sql.query`` tag will be set in the agent with an
diff --git a/test/contrib/rails/database_test.rb b/test/contrib/rails/database_test.rb
index 32251b7eb94..9524756e0a3 100644
--- a/test/contrib/rails/database_test.rb
+++ b/test/contrib/rails/database_test.rb
@@ -37,6 +37,25 @@ class DatabaseTracingTest < ActiveSupport::TestCase
     assert_nil(span.get_tag('sql.query'))
   end
 
+  test 'active record is sets cached tag' do
+    # Make sure query caching is enabled...
+    Article.cache do
+      # Do two queries (second should cache.)
+      Article.count
+      Article.count
+
+      # Assert correct number of spans
+      spans = @tracer.writer.spans
+      assert_equal(spans.length, 2)
+
+      # Assert cached flag not present on first query
+      assert_nil(spans.first.get_tag('rails.db.cached'))
+
+      # Assert cached flag set correctly on second query
+      assert_equal('true', spans.last.get_tag('rails.db.cached'))
+    end
+  end
+
   test 'doing a database call uses the proper service name if it is changed' do
     # update database configuration
     update_config(:database_service, 'customer-db')
diff --git a/test/contrib/sinatra/tracer_activerecord_test.rb b/test/contrib/sinatra/tracer_activerecord_test.rb
index ac9531d4904..a1646d60c61 100644
--- a/test/contrib/sinatra/tracer_activerecord_test.rb
+++ b/test/contrib/sinatra/tracer_activerecord_test.rb
@@ -4,12 +4,27 @@
 require 'contrib/sinatra/tracer_test_base'
 
 class TracerActiveRecordTest < TracerTestBase
+  class ApplicationRecord < ActiveRecord::Base
+    self.abstract_class = true
+  end
+
+  class Article < ApplicationRecord
+  end
+
   class TracerActiveRecordTestApp < Sinatra::Application
     post '/request' do
       conn = settings.datadog_test_conn
       conn.connection.execute('SELECT 42')
       ''
     end
+
+    post '/cached_request' do
+      Article.cache do
+        # Do two queries (second should cache.)
+        Article.count
+        Article.count
+      end
+    end
   end
 
   def app
@@ -32,6 +47,18 @@ def setup
     super
   end
 
+  def migrate_db
+    Article.exists?
+  rescue ActiveRecord::StatementInvalid
+    ActiveRecord::Schema.define(version: 20180101000000) do
+      create_table 'articles', force: :cascade do |t|
+        t.string   'title'
+        t.datetime 'created_at', null: false
+        t.datetime 'updated_at', null: false
+      end
+    end
+  end
+
   def test_request
     post '/request'
     assert_equal(200, last_response.status)
@@ -66,4 +93,30 @@ def test_request
     assert_equal(0, sinatra_span.status)
     assert_nil(sinatra_span.parent)
   end
+
+  # Testing AR query caching requires use of a model.
+  # Create a model, query it a few times, make sure cached tag gets set.
+  def test_cached_tag
+    # Make sure Article table exists
+    migrate_db
+
+    # Do query with cached query
+    post '/cached_request'
+
+    # Assert correct number of spans (ignoring transactions, etc.)
+    spans = all_spans.select { |s| s.resource.include?('SELECT COUNT(*) FROM "articles"') }
+    assert_equal(2, spans.length)
+
+    # Assert cached flag not present on first query
+    assert_nil(spans.first.get_tag('active_record.db.cached'))
+
+    # Assert cached flag set correctly on second query
+    assert_equal('true', spans.last.get_tag('active_record.db.cached'))
+  end
+
+  private
+
+  def all_spans
+    @writer.spans(:keep)
+  end
 end