diff --git a/flow/compiler.js b/flow/compiler.js
index a3dc1c920fd..d3c49f6b51a 100644
--- a/flow/compiler.js
+++ b/flow/compiler.js
@@ -114,6 +114,9 @@ declare type ASTElement = {
   else?: true;
   ifConditions?: ASTIfConditions;
 
+  locals?: Array<{ alias: string; value: string }>;
+  localsProcessed?: boolean;
+
   for?: string;
   forProcessed?: boolean;
   key?: string;
diff --git a/src/compiler/codegen/index.js b/src/compiler/codegen/index.js
index 1c912c4d96f..1268e10f223 100644
--- a/src/compiler/codegen/index.js
+++ b/src/compiler/codegen/index.js
@@ -56,6 +56,8 @@ export function genElement (el: ASTElement, state: CodegenState): string {
     return genOnce(el, state)
   } else if (el.for && !el.forProcessed) {
     return genFor(el, state)
+  } else if (el.locals && !el.localsProcessed) {
+    return genLocalVariable(el, state)
   } else if (el.if && !el.ifProcessed) {
     return genIf(el, state)
   } else if (el.tag === 'template' && !el.slotTarget) {
@@ -164,6 +166,20 @@ function genIfConditions (
   }
 }
 
+function genLocalVariable (el: ASTElement, state: CodegenState): string {
+  const locals = el.locals || []
+  const localNames: Array<string> = []
+  const localValues: Array<string> = []
+  for (let i = 0, l = locals.length; i < l; ++i) {
+    localNames.push(locals[i].alias)
+    localValues.push(locals[i].value)
+  }
+  el.localsProcessed = true
+  return `((function(${localNames.join(',')}){` +
+    `return ${genElement(el, state)}` +
+  `})(${localValues.join(',')}))`
+}
+
 export function genFor (
   el: any,
   state: CodegenState,
@@ -351,7 +367,9 @@ function genScopedSlot (
     `return ${el.tag === 'template'
       ? el.if
         ? `${el.if}?${genChildren(el, state) || 'undefined'}:undefined`
-        : genChildren(el, state) || 'undefined'
+        : el.locals && !el.localsProcessed
+          ? genLocalVariableScopeSlot(el, state)
+          : genChildren(el, state) || 'undefined'
       : genElement(el, state)
     }}`
   return `{key:${key},fn:${fn}}`
@@ -373,6 +391,24 @@ function genForScopedSlot (
     '})'
 }
 
+function genLocalVariableScopeSlot (
+  el: ASTElement,
+  state: CodegenState
+): string {
+  const locals = el.locals || []
+  const localNames: Array<string> = []
+  const localValues: Array<string> = []
+  for (let i = 0, l = locals.length; i < l; ++i) {
+    localNames.push(locals[i].alias)
+    localValues.push(locals[i].value)
+  }
+
+  el.localsProcessed = true
+  return `((function(${localNames.join(',')}){` +
+    `return ${genChildren(el, state) || 'undefined'}` +
+  `})(${localValues.join(',')}))`
+}
+
 export function genChildren (
   el: ASTElement,
   state: CodegenState,
diff --git a/src/compiler/helpers.js b/src/compiler/helpers.js
index 1d1feddbf01..58cf3defd4a 100644
--- a/src/compiler/helpers.js
+++ b/src/compiler/helpers.js
@@ -32,6 +32,10 @@ export function addRawAttr (el: ASTElement, name: string, value: any) {
   el.attrsList.push({ name, value })
 }
 
+export function addLocalVariable (el: ASTElement, alias: string, value: string) {
+  (el.locals || (el.locals = [])).push({ alias, value })
+}
+
 export function addDirective (
   el: ASTElement,
   name: string,
diff --git a/src/compiler/parser/index.js b/src/compiler/parser/index.js
index ba1b726870a..16e5a9837b0 100644
--- a/src/compiler/parser/index.js
+++ b/src/compiler/parser/index.js
@@ -16,10 +16,12 @@ import {
   addDirective,
   getBindingAttr,
   getAndRemoveAttr,
-  pluckModuleFunction
+  pluckModuleFunction,
+  addLocalVariable
 } from '../helpers'
 
 export const onRE = /^@|^v-on:/
+export const localRE = /^v-local:/
 export const dirRE = /^v-|^@|^:/
 export const forAliasRE = /(.*?)\s+(?:in|of)\s+(.*)/
 export const forIteratorRE = /,([^,\}\]]*)(?:,([^,\}\]]*))?$/
@@ -552,6 +554,9 @@ function processAttrs (el) {
         } else {
           addAttr(el, name, value)
         }
+      } else if (localRE.test(name)) {
+        name = name.replace(localRE, '')
+        addLocalVariable(el, name, value)
       } else if (onRE.test(name)) { // v-on
         name = name.replace(onRE, '')
         addHandler(el, name, value, modifiers, false, warn)
diff --git a/test/unit/features/directives/local.spec.js b/test/unit/features/directives/local.spec.js
new file mode 100644
index 00000000000..c1d2d1ece41
--- /dev/null
+++ b/test/unit/features/directives/local.spec.js
@@ -0,0 +1,166 @@
+import Vue from 'vue'
+
+describe('Directive v-local', () => {
+  it('should work', () => {
+    const vm = new Vue({
+      template: '<div><span v-local:v="foo.bar">{{v.baz}}</span></div>',
+      data: {
+        foo: {
+          bar: {
+            baz: 1
+          }
+        }
+      }
+    }).$mount()
+    expect(vm.$el.innerHTML).toBe('<span>1</span>')
+  })
+
+  it('should update', done => {
+    const vm = new Vue({
+      template: '<div><span v-local:v="foo.bar">{{v.baz}}</span></div>',
+      data: {
+        foo: {
+          bar: {
+            baz: 1
+          }
+        }
+      }
+    }).$mount()
+    expect(vm.$el.innerHTML).toBe('<span>1</span>')
+    vm.foo.bar.baz = 2
+    waitForUpdate(() => {
+      expect(vm.$el.innerHTML).toBe('<span>2</span>')
+      vm.foo.bar.baz = 'a'
+    }).then(() => {
+      expect(vm.$el.innerHTML).toBe('<span>a</span>')
+    }).then(done)
+  })
+
+  it('should work with v-if', done => {
+    const vm = new Vue({
+      template: '<div><span v-if="v.show" v-local:v="foo.bar">{{v.baz}}</span></div>',
+      data: {
+        foo: {
+          bar: {
+            baz: 1,
+            show: true
+          }
+        }
+      }
+    }).$mount()
+    expect(vm.$el.innerHTML).toBe('<span>1</span>')
+    vm.foo.bar.show = false
+    waitForUpdate(() => {
+      expect(vm.$el.innerHTML).toBe('<!---->')
+      vm.foo.bar.baz = 2
+      vm.foo.bar.show = true
+    }).then(() => {
+      expect(vm.$el.innerHTML).toBe('<span>2</span>')
+    }).then(done)
+  })
+
+  it('should work with v-for', done => {
+    const vm = new Vue({
+      template: '<div><span v-for="item in items" v-local:v="item.foo.bar">{{v.baz}}</span></div>',
+      data: {
+        items: [
+          {
+            foo: {
+              bar: {
+                baz: 1
+              }
+            }
+          }
+        ]
+      }
+    }).$mount()
+    expect(vm.$el.innerHTML).toBe('<span>1</span>')
+    vm.items.push({
+      foo: {
+        bar: {
+          baz: 2
+        }
+      }
+    })
+    waitForUpdate(() => {
+      expect(vm.$el.innerHTML).toBe('<span>1</span><span>2</span>')
+      vm.items.shift()
+    }).then(() => {
+      expect(vm.$el.innerHTML).toBe('<span>2</span>')
+      vm.items = []
+    }).then(() => {
+      expect(vm.$el.innerHTML).toBe('')
+    }).then(done)
+  })
+
+  it('should been called once', () => {
+    const spy = jasmine.createSpy()
+    const vm = new Vue({
+      template: '<div><span v-local:v="getValue()">{{v.foo}}-{{v.bar}}</span></div>',
+      data: {
+        foo: {
+          bar: {
+            baz: 1
+          }
+        }
+      },
+      methods: {
+        getValue () {
+          spy()
+          return {
+            foo: this.foo.bar.baz + 1,
+            bar: this.foo.bar.baz + 2
+          }
+        }
+      }
+    }).$mount()
+    expect(vm.$el.innerHTML).toBe('<span>2-3</span>')
+    expect(spy).toHaveBeenCalledTimes(1)
+  })
+
+  it('should work with scoped-slot', done => {
+    const vm = new Vue({
+      template: `
+        <test ref="test">
+          <template slot="item" slot-scope="props" v-local:v="props.text.foo.bar.baz">
+            <span>{{ v }}</span>
+          </template>
+        </test>
+      `,
+      components: {
+        test: {
+          data () {
+            return {
+              items: [{
+                foo: {
+                  bar: {
+                    baz: 1
+                  }
+                }
+              }]
+            }
+          },
+          template: `
+            <div>
+              <slot v-for="item in items" name="item" :text="item"></slot>
+            </div>
+          `
+        }
+      }
+    }).$mount()
+    expect(vm.$el.innerHTML).toBe('<span>1</span>')
+    vm.$refs.test.items.push({
+      foo: {
+        bar: {
+          baz: 2
+        }
+      }
+    })
+    waitForUpdate(() => {
+      expect(vm.$el.innerHTML).toBe('<span>1</span><span>2</span>')
+      vm.$refs.test.items = []
+    }).then(() => {
+      expect(vm.$el.innerHTML).toBe('')
+    }).then(done)
+  })
+})
diff --git a/test/unit/modules/compiler/codegen.spec.js b/test/unit/modules/compiler/codegen.spec.js
index b1085a571df..f070b67173b 100644
--- a/test/unit/modules/compiler/codegen.spec.js
+++ b/test/unit/modules/compiler/codegen.spec.js
@@ -74,6 +74,62 @@ describe('codegen', () => {
     )
   })
 
+  it('generate v-local directive', () => {
+    assertCodegen(
+      '<div v-local:value="some.deep.prop">{{value}}</div>',
+      `with(this){return ((function(value){return _c('div',{},[_v(_s(value))])})(some.deep.prop))}`
+    )
+  })
+
+  it('generate multi v-local directive', () => {
+    assertCodegen(
+      '<div v-local:foo="some.deep.prop" v-local:bar="other.deep.prop">{{foo}}{{bar}}</div>',
+      `with(this){return ((function(foo,bar){return _c('div',{},[_v(_s(foo)+_s(bar))])})(some.deep.prop,other.deep.prop))}`
+    )
+  })
+
+  it('generate v-local directive with v-if', () => {
+    assertCodegen(
+      '<div v-local:foo="some.deep.prop" v-if="foo.show">{{foo.value}}</div>',
+      `with(this){return ((function(foo){return (foo.show)?_c('div',{},[_v(_s(foo.value))]):_e()})(some.deep.prop))}`
+    )
+  })
+
+  it('generate v-local directive with v-for', () => {
+    assertCodegen(
+      '<div><span v-for="item in items" v-local:foo="item.deep.prop">{{foo}}</span></div>',
+      `with(this){return _c('div',_l((items),function(item){return ((function(foo){return _c('span',{},[_v(_s(foo))])})(item.deep.prop))}))}`
+    )
+  })
+
+  it('generate v-local directive with other v-local', () => {
+    assertCodegen(
+      '<div v-local:foo="some.deep.prop"><span v-local:bar="foo.deep.prop">{{bar}}</span></div>',
+      `with(this){return ((function(foo){return _c('div',{},[((function(bar){return _c('span',{},[_v(_s(bar))])})(foo.deep.prop))])})(some.deep.prop))}`
+    )
+  })
+
+  it('generate v-local directive with scoped-slot', () => {
+    assertCodegen(
+      '<foo><div v-local:baz="bar.deep.prop" slot-scope="bar">{{baz}}</div></foo>',
+      `with(this){return _c('foo',{scopedSlots:_u([{key:"default",fn:function(bar){return ((function(baz){return _c('div',{},[_v(_s(baz))])})(bar.deep.prop))}}])})}`
+    )
+  })
+
+  it('generate v-local directive with template tag', () => {
+    assertCodegen(
+      '<div><template v-local:v="some.deep.prop"><span>{{ v }}</span></template></div>',
+      `with(this){return _c('div',[((function(v){return [_c('span',[_v(_s(v))])]})(some.deep.prop))],2)}`
+    )
+  })
+
+  it('generate v-local directive with scoped-slot and template tag', () => {
+    assertCodegen(
+      '<test><template slot="item" slot-scope="props" v-local:v="props.text"><span>{{ v }}</span></template></test>',
+      `with(this){return _c('test',{scopedSlots:_u([{key:"item",fn:function(props){return ((function(v){return [_c('span',[_v(_s(v))])]})(props.text))}}])})}`
+    )
+  })
+
   it('generate v-if directive', () => {
     assertCodegen(
       '<p v-if="show">hello</p>',