diff --git a/src/lib/apply-shim.html b/src/lib/apply-shim.html
index a971c9eb16..19803c8d27 100644
--- a/src/lib/apply-shim.html
+++ b/src/lib/apply-shim.html
@@ -77,7 +77,8 @@
 
   var MIXIN_MATCH = styleUtil.rx.MIXIN_MATCH;
   var VAR_ASSIGN = styleUtil.rx.VAR_ASSIGN;
-  var VAR_MATCH = styleUtil.rx.VAR_MATCH;
+  // match var(--a, --b) to make var(--a, var(--b));
+  var BAD_VAR = /var\(\s*(--[^,]*),\s*(--[^)]*)\)/g;
   var APPLY_NAME_CLEAN = /;\s*/m;
 
   // separator used between mixin-name and mixin-property-name when producing properties
@@ -120,14 +121,11 @@
   function produceCssProperties(matchText, propertyName, valueProperty, valueMixin) {
     // handle case where property value is a mixin
     if (valueProperty) {
-      VAR_MATCH.lastIndex = 0;
-      var m = VAR_MATCH.exec(valueProperty);
-      if (m) {
-        var value = m[2];
-        if (mapGet(value)){
+      styleUtil.processVariableAndFallback(valueProperty, function(prefix, value) {
+        if (value && mapGet(value)) {
           valueMixin = '@apply ' + value + ';';
         }
-      }
+      });
     }
     if (!valueMixin) {
       return matchText;
@@ -160,12 +158,9 @@
 
   // fix shim'd var syntax
   // var(--a, --b) -> var(--a, var(--b));
-  function fixVars(matchText, prefix, value, fallback) {
+  function fixVars(matchText, varA, varB) {
     // if fallback doesn't exist, or isn't a broken variable, abort
-    if (!fallback || fallback.indexOf('--') !== 0) {
-      return matchText;
-    }
-    return [prefix, 'var(', value, ', var(', fallback, '));'].join('');
+    return 'var(' + varA + ',' + 'var(' + varB + '));';
   }
 
   // produce variable consumption at the site of mixin consumption
@@ -233,7 +228,7 @@
     },
     transformCssText: function(cssText) {
       // fix shim variables
-      cssText = cssText.replace(VAR_MATCH, fixVars);
+      cssText = cssText.replace(BAD_VAR, fixVars);
       // produce variables
       cssText = cssText.replace(VAR_ASSIGN, produceCssProperties);
       // consume mixins
diff --git a/src/lib/style-properties.html b/src/lib/style-properties.html
index 13576b751a..81995f2679 100644
--- a/src/lib/style-properties.html
+++ b/src/lib/style-properties.html
@@ -150,14 +150,14 @@
           } else {
             // case (2) variable
             var self = this;
-            var fn = function(all, prefix, value, fallback) {
+            var fn = function(prefix, value, fallback, suffix) {
               var propertyValue = (self.valueForProperty(props[value], props) ||
                 // fallback may be --a or var(--a) or literal
                 self.valueForProperty(props[fallback] || fallback, props) ||
                 fallback);
-              return prefix + (propertyValue || '');
+              return prefix + (propertyValue || '') + suffix;
             };
-            property = property.replace(this.rx.VAR_MATCH, fn);
+            property = styleUtil.processVariableAndFallback(property, fn);
           }
         }
         return property && property.trim() || '';
diff --git a/src/lib/style-util.html b/src/lib/style-util.html
index d10b4e7902..83c6b24fde 100644
--- a/src/lib/style-util.html
+++ b/src/lib/style-util.html
@@ -235,20 +235,53 @@
         return element.getAttribute('css-build');
       },
 
+      // Walk from text[start] matching parens
+      // returns position of the outer end paren
+      _findMatchingParen: function(text, start) {
+        var level = 0;
+        for (var i=start, l=text.length; i < l; i++) {
+          switch (text[i]) {
+            case '(':
+              level++;
+              break;
+            case ')':
+              if (--level === 0) {
+                return i;
+              }
+              break;
+          }
+        }
+        return -1;
+      },
+
+      processVariableAndFallback: function(str, callback) {
+        // find 'var('
+        var start = str.indexOf('var(');
+        if (start === -1) {
+          // no var?, everything is prefix
+          return callback(str, '', '', '');
+        }
+        //${prefix}var(${inner})${suffix}
+        var end = this._findMatchingParen(str, start + 3);
+        var inner = str.substring(start + 4, end);
+        var prefix = str.substring(0, start);
+        // suffix may have other variables
+        var suffix = this.processVariableAndFallback(str.substring(end + 1), callback);
+        var comma = inner.indexOf(',');
+        // value and fallback args should be trimmed to match in property lookup
+        if (comma === -1) {
+          // variable, no fallback
+          return callback(prefix, inner.trim(), '', suffix);
+        }
+        // var(${value},${fallback})
+        var value = inner.substring(0, comma).trim();
+        var fallback = inner.substring(comma + 1).trim();
+        return callback(prefix, value, fallback, suffix);
+      },
+
       rx: {
         VAR_ASSIGN: /(?:^|[;\s{]\s*)(--[\w-]*?)\s*:\s*(?:([^;{]*)|{([^}]*)})(?:(?=[;\s}])|$)/gi,
         MIXIN_MATCH: /(?:^|\W+)@apply\s*\(?([^);\n]*)\)?/gi,
-        // note, this supports:
-        // var(--a)
-        // var(--a, --b)
-        // var(--a, fallback-literal)
-        // var(--a, fallback-literal(with-one-nested-parentheses))
-        // var(--a, var(--b))
-        // var(--a, var(--b, fallback-literal))
-        // var(--a, var(--b, fallback-literal(with-one-nested-parentheses)))
-        // var(--a, var(--b, var(--c, fallback-literal)))
-        // var(--a, var(--b, var(--c, fallback-literal(with-one-nested-parentheses))))
-        VAR_MATCH: /(^|\W+)var\([\s]*([^,)]*)[\s]*,?[\s]*((?:[^,()]*)|(?:[^;()]*\([^;)]*\)+))[\s]*?\)/gi,
         VAR_CONSUMED: /(--[\w-]+)\s*([:,;)]|$)/gi,
         ANIMATION_MATCH: /(animation\s*:)|(animation-name\s*:)/,
         MEDIA_MATCH: /@media[^(]*(\([^)]*\))/,
diff --git a/test/smoke/css-gradient-var.html b/test/smoke/css-gradient-var.html
new file mode 100644
index 0000000000..7fa0e2f3c2
--- /dev/null
+++ b/test/smoke/css-gradient-var.html
@@ -0,0 +1,42 @@
+<!DOCTYPE html>
+<html>
+  <head>
+    <meta charset="utf-8">
+    <title>CSS Gradient in variable</title>
+    <script>Polymer={useNativeCSSProperties: true, lazyRegister: true}</script>
+    <link rel="import" href="../../polymer.html">
+  </head>
+  <body>
+    <style is="custom-style">
+    :root {
+      --a: 10px;
+      --b: 20px;
+      --default1: 10px;
+    }
+    </style>
+    <dom-module id="var-el">
+      <template>
+        <style>
+        :host {
+          display: block;
+          height: 100px;
+          width: 100px;
+          color: var(--undefined, rgb(123, 321, 231));
+          background: var(--fx-webkit-background, -webkit-gradient(linear, left top, left bottom, color-stop(0%,rgba(255,0,0,.65)), color-stop(100%,rgba(0,0,255,.65))));
+          border-width: calc(var(--a) + var(--b));
+          border-color: brown;
+          border-style: solid;
+          padding-bottom: var(--undefined, --default1);
+        }
+        </style>
+        <div>Hi!</div>
+      </template>
+      <script>
+      Polymer({
+        is: 'var-el'
+      })
+      </script>
+    </dom-module>
+    <var-el></var-el>
+  </body>
+</html>