diff --git a/manifests/federation-apiserver-deployment.yaml b/manifests/federation-apiserver-deployment.yaml
index c58801c7..df7e2022 100644
--- a/manifests/federation-apiserver-deployment.yaml
+++ b/manifests/federation-apiserver-deployment.yaml
@@ -32,6 +32,7 @@ spec:
         - --admission-control={{.FEDERATION_ADMISSION_CONTROL}}
         - --token-auth-file=/srv/kubernetes/known-tokens.csv
         - --anonymous-auth=false
+        - --storage-backend=etcd2
         ports:
         - containerPort: 443
           name: https
@@ -42,9 +43,9 @@ spec:
           mountPath: /srv/kubernetes/
           readOnly: true
       - name: etcd
-        image: quay.io/coreos/etcd:v2.3.3
+        image: gcr.io/google_containers/etcd:3.0.14-alpha.1
         command:
-          - /etcd
+          - /usr/local/bin/etcd
           - --data-dir
           - /var/etcd/data
         volumeMounts:
diff --git a/pkg/kubefed/init/init.go b/pkg/kubefed/init/init.go
index a9dc591c..eaf619c6 100644
--- a/pkg/kubefed/init/init.go
+++ b/pkg/kubefed/init/init.go
@@ -123,6 +123,7 @@ func NewCmdInit(cmdOut io.Writer, config util.AdminConfig) *cobra.Command {
 	cmd.Flags().String("dns-provider", "google-clouddns", "Dns provider to be used for this deployment.")
 	cmd.Flags().String("etcd-pv-capacity", "10Gi", "Size of persistent volume claim to be used for etcd.")
 	cmd.Flags().Bool("dry-run", false, "dry run without sending commands to server.")
+	cmd.Flags().String("storage-backend", "etcd2", "The storage backend for persistence. Options: 'etcd2' (default), 'etcd3'.")
 	return cmd
 }
 
@@ -146,6 +147,7 @@ func initFederation(cmdOut io.Writer, config util.AdminConfig, cmd *cobra.Comman
 	dnsProvider := cmdutil.GetFlagString(cmd, "dns-provider")
 	etcdPVCapacity := cmdutil.GetFlagString(cmd, "etcd-pv-capacity")
 	dryRun := cmdutil.GetDryRunFlag(cmd)
+	storageBackend := cmdutil.GetFlagString(cmd, "storage-backend")
 
 	hostFactory := config.HostFactory(initFlags.Host, initFlags.Kubeconfig)
 	hostClientset, err := hostFactory.ClientSet()
@@ -212,7 +214,7 @@ func initFederation(cmdOut io.Writer, config util.AdminConfig, cmd *cobra.Comman
 	}
 
 	// 6. Create federation API server
-	_, err = createAPIServer(hostClientset, initFlags.FederationSystemNamespace, serverName, image, serverCredName, pvc.Name, advertiseAddress, dryRun)
+	_, err = createAPIServer(hostClientset, initFlags.FederationSystemNamespace, serverName, image, serverCredName, pvc.Name, advertiseAddress, storageBackend, dryRun)
 	if err != nil {
 		return err
 	}
@@ -416,7 +418,7 @@ func createPVC(clientset *client.Clientset, namespace, svcName, etcdPVCapacity s
 	return clientset.Core().PersistentVolumeClaims(namespace).Create(pvc)
 }
 
-func createAPIServer(clientset *client.Clientset, namespace, name, image, credentialsName, pvcName, advertiseAddress string, dryRun bool) (*extensions.Deployment, error) {
+func createAPIServer(clientset *client.Clientset, namespace, name, image, credentialsName, pvcName, advertiseAddress, storageBackend string, dryRun bool) (*extensions.Deployment, error) {
 	command := []string{
 		"/hyperkube",
 		"federation-apiserver",
@@ -426,6 +428,7 @@ func createAPIServer(clientset *client.Clientset, namespace, name, image, creden
 		"--client-ca-file=/etc/federation/apiserver/ca.crt",
 		"--tls-cert-file=/etc/federation/apiserver/server.crt",
 		"--tls-private-key-file=/etc/federation/apiserver/server.key",
+		fmt.Sprintf("--storage-backend=%s", storageBackend),
 	}
 
 	if advertiseAddress != "" {
@@ -473,9 +476,9 @@ func createAPIServer(clientset *client.Clientset, namespace, name, image, creden
 						},
 						{
 							Name:  "etcd",
-							Image: "quay.io/coreos/etcd:v2.3.3",
+							Image: "gcr.io/google_containers/etcd:3.0.14-alpha.1",
 							Command: []string{
-								"/etcd",
+								"/usr/local/bin/etcd",
 								"--data-dir",
 								"/var/etcd/data",
 							},
diff --git a/pkg/kubefed/init/init_test.go b/pkg/kubefed/init/init_test.go
index 8aadf0d9..c5149c39 100644
--- a/pkg/kubefed/init/init_test.go
+++ b/pkg/kubefed/init/init_test.go
@@ -79,6 +79,7 @@ func TestInitFederation(t *testing.T) {
 		etcdPVCapacity     string
 		expectedErr        string
 		dnsProvider        string
+		storageBackend     string
 		dryRun             string
 	}{
 		{
@@ -91,6 +92,7 @@ func TestInitFederation(t *testing.T) {
 			etcdPVCapacity:     "5Gi",
 			expectedErr:        "",
 			dnsProvider:        "test-dns-provider",
+			storageBackend:     "etcd2",
 			dryRun:             "",
 		},
 		{
@@ -103,6 +105,7 @@ func TestInitFederation(t *testing.T) {
 			etcdPVCapacity:     "", //test for default value of pvc-size
 			expectedErr:        "",
 			dnsProvider:        "", //test for default value of dns provider
+			storageBackend:     "etcd2",
 			dryRun:             "",
 		},
 		{
@@ -115,8 +118,22 @@ func TestInitFederation(t *testing.T) {
 			etcdPVCapacity:     "",
 			expectedErr:        "",
 			dnsProvider:        "test-dns-provider",
+			storageBackend:     "etcd2",
 			dryRun:             "valid-run",
 		},
+		{
+			federation:         "union",
+			kubeconfigGlobal:   fakeKubeFiles[0],
+			kubeconfigExplicit: "",
+			dnsZoneName:        "example.test.",
+			lbIP:               "10.20.30.40",
+			image:              "example.test/foo:bar",
+			etcdPVCapacity:     "5Gi",
+			expectedErr:        "",
+			dnsProvider:        "test-dns-provider",
+			storageBackend:     "etcd3",
+			dryRun:             "",
+		},
 	}
 
 	//TODO: implement a negative case for dry run
@@ -131,7 +148,7 @@ func TestInitFederation(t *testing.T) {
 		} else {
 			dnsProvider = "google-clouddns" //default value of dns-provider
 		}
-		hostFactory, err := fakeInitHostFactory(tc.federation, util.DefaultFederationSystemNamespace, tc.lbIP, tc.dnsZoneName, tc.image, dnsProvider, tc.etcdPVCapacity)
+		hostFactory, err := fakeInitHostFactory(tc.federation, util.DefaultFederationSystemNamespace, tc.lbIP, tc.dnsZoneName, tc.image, dnsProvider, tc.etcdPVCapacity, tc.storageBackend)
 		if err != nil {
 			t.Fatalf("[%d] unexpected error: %v", i, err)
 		}
@@ -147,6 +164,9 @@ func TestInitFederation(t *testing.T) {
 		cmd.Flags().Set("host-cluster-context", "substrate")
 		cmd.Flags().Set("dns-zone-name", tc.dnsZoneName)
 		cmd.Flags().Set("image", tc.image)
+		if tc.storageBackend != "" {
+			cmd.Flags().Set("storage-backend", tc.storageBackend)
+		}
 		if tc.dnsProvider != "" {
 			cmd.Flags().Set("dns-provider", tc.dnsProvider)
 		}
@@ -423,7 +443,7 @@ func TestCertsHTTPS(t *testing.T) {
 	}
 }
 
-func fakeInitHostFactory(federationName, namespaceName, ip, dnsZoneName, image, dnsProvider, etcdPVCapacity string) (cmdutil.Factory, error) {
+func fakeInitHostFactory(federationName, namespaceName, ip, dnsZoneName, image, dnsProvider, etcdPVCapacity, storageProvider string) (cmdutil.Factory, error) {
 	svcName := federationName + "-apiserver"
 	svcUrlPrefix := "/api/v1/namespaces/federation-system/services"
 	credSecretName := svcName + "-credentials"
@@ -566,6 +586,7 @@ func fakeInitHostFactory(federationName, namespaceName, ip, dnsZoneName, image,
 								"--client-ca-file=/etc/federation/apiserver/ca.crt",
 								"--tls-cert-file=/etc/federation/apiserver/server.crt",
 								"--tls-private-key-file=/etc/federation/apiserver/server.key",
+								fmt.Sprintf("--storage-backend=%s", storageProvider),
 								"--advertise-address=" + ip,
 							},
 							Ports: []v1.ContainerPort{
@@ -588,9 +609,9 @@ func fakeInitHostFactory(federationName, namespaceName, ip, dnsZoneName, image,
 						},
 						{
 							Name:  "etcd",
-							Image: "quay.io/coreos/etcd:v2.3.3",
+							Image: "gcr.io/google_containers/etcd:3.0.14-alpha.1",
 							Command: []string{
-								"/etcd",
+								"/usr/local/bin/etcd",
 								"--data-dir",
 								"/var/etcd/data",
 							},