diff --git a/lib/svc/method/fs-joyent b/lib/svc/method/fs-joyent
index db1f9e5..1f754fb 100755
--- a/lib/svc/method/fs-joyent
+++ b/lib/svc/method/fs-joyent
@@ -93,7 +93,7 @@ if [ $? -ne 0 ]; then
 
   if [[ -n $(/bin/bootparams | grep '^headnode=true') || \
         -n $(/bin/bootparams | grep '^smartos=true') ]]; then
-        mkdir /usbkey
+        mkdir -p /usbkey
     mount -F zfs ${SYS_ZPOOL}/usbkey /usbkey
   fi
   if [[ -n $(/bin/bootparams | grep '^smartos=true') ]]; then
diff --git a/lib/svc/method/smartdc-config b/lib/svc/method/smartdc-config
index 36ba5b4..9fd9669 100644
--- a/lib/svc/method/smartdc-config
+++ b/lib/svc/method/smartdc-config
@@ -96,7 +96,7 @@ case "$1" in
             [[ ! -f ${USB_PATH}/config ]] && exit $SMF_EXIT_OK
         fi
     elif /bin/bootparams | grep "^smartos=true" > /dev/null 2>&1; then
-        USB_PATH=/`svcprop -p "joyentfs/usb_copy_path" svc:/system/filesystem/smartdc:default`
+        USB_PATH=`svcprop -p "joyentfs/usb_copy_path" svc:/system/filesystem/smartdc:default`
 
         # Check for config and run interactive if it doesn't exist.
         if [[ ! -f ${USB_PATH}/config ]]; then
@@ -110,6 +110,13 @@ case "$1" in
 
             # If user quit from interactive configuration then we're done.
             [[ ! -f ${USB_PATH}/config ]] && exit $SMF_EXIT_OK
+
+        elif [[ -z `zfs mount | awk '{print $2}' | grep "^${USB_PATH}$"` ]]; then
+            # ${USB_PATH}/config exists but ${USB_PATH} isn't ZFS dataset,
+            # so it must be pre-populated image ready for auto-config.
+
+            /smartdc/bin/smartos_prompt_config.sh "${USB_PATH}" \
+                </dev/console >&/dev/console
         fi
     fi
 
diff --git a/smartdc/bin/smartos_prompt_config.sh b/smartdc/bin/smartos_prompt_config.sh
index e89997c..995b5d6 100644
--- a/smartdc/bin/smartos_prompt_config.sh
+++ b/smartdc/bin/smartos_prompt_config.sh
@@ -10,6 +10,9 @@ export PATH
 load_sdc_sysinfo
 load_sdc_config
 
+# Arguments
+USB_PATH=$1
+
 # Defaults
 datacenter_headnode_id=0
 mail_to="root@localhost"
@@ -310,7 +313,7 @@ create_dump()
     # Create the dump zvol
     zfs create -V ${base_size}mb ${SYS_ZPOOL}/dump || \
       fatal "failed to create the dump zvol"
-    dumpadm -d /dev/zvol/dsk/${SYS_ZPOOL}/dump
+    dumpadm -d /dev/zvol/dsk/${SYS_ZPOOL}/dump >/dev/null
 }
 
 #
@@ -338,9 +341,17 @@ setup_datasets()
   if ! echo $datasets | grep ${USBKEYDS} > /dev/null; then
     if [[ -n $(/bin/bootparams | grep "^smartos=true") ]]; then
         printf "%-56s" "Creating config dataset... " 
-        zfs create -o mountpoint=legacy ${USBKEYDS} || \
-          fatal "failed to create the config dataset"
-        mkdir /usbkey
+        zfs create ${USBKEYDS} || fatal "failed to create the config dataset"
+        chmod 700 /${USBKEYDS}
+        if [[ -d /usbkey ]]; then
+            cd /usbkey
+            if ( ! find . -print | cpio -pdm /${USBKEYDS} 2>/dev/null ); then
+                fatal "failed to initialize the config dataset"
+            fi
+            cd /
+        fi
+        zfs set mountpoint=legacy ${USBKEYDS}
+        mkdir -p /usbkey
         mount -F zfs ${USBKEYDS} /usbkey
         printf "%4s\n" "done" 
     fi
@@ -372,6 +383,7 @@ setup_datasets()
     fi
 
     zfs set mountpoint=legacy ${VARDS}
+    printf "%4s\n" "done"
 
     if ! echo $datasets | grep ${SWAPVOL} > /dev/null; then
           printf "%-56s" "Creating swap zvol... " 
@@ -388,8 +400,8 @@ setup_datasets()
           size=${SYSINFO_MiB_of_Memory}
           zfs create -V ${size}mb ${SWAPVOL}
           swap -a /dev/zvol/dsk/${SWAPVOL}
+          printf "%4s\n" "done"
     fi
-    printf "%4s\n" "done" 
   fi
 }
 
@@ -400,7 +412,7 @@ create_zpool()
     pool=zones
 
     # If the pool already exists, don't create it again.
-    if /usr/sbin/zpool list -H -o name $pool; then
+    if /usr/sbin/zpool list -H -o name $pool >/dev/null 2>&1; then
         return 0
     fi
 
@@ -450,6 +462,10 @@ create_zpools()
 {
   devs=$1
 
+  if [[ ${devs} == "all" ]]; then
+      devs=$(disklist -n)
+  fi
+
   export SYS_ZPOOL="zones"
   create_zpool "$devs"
   sleep 5
@@ -524,6 +540,41 @@ export TERM=sun-color
 export TERM=xterm-color
 stty erase ^H
 
+#
+# Auto-config
+#
+if [ -f "${USB_PATH}/config" -a -n "${CONFIG_zpool_disks}" ]; then
+
+    printheader "Automatic Configuration"
+
+    create_zpools "${CONFIG_zpool_disks}"
+
+    if [[ ! -f ${USB_PATH}/shadow ]]; then
+        if [[ -n $CONFIG_root_shadow ]]; then
+            sed -e "s|^root:[^\:]*:|root:${CONFIG_root_shadow}:|" \
+                /etc/shadow > ${USB_PATH}/shadow
+        else
+            cp /etc/shadow ${USB_PATH}/shadow
+        fi
+
+        chmod 400 ${USB_PATH}/shadow
+    fi
+
+    if [[ ! -d ${USB_PATH}/ssh ]]; then
+        cp -rp /etc/ssh ${USB_PATH}/ssh
+    fi
+
+    if [[ ! -d ${USB_PATH}/ipf ]]; then
+        cp -rp /etc/ipf ${USB_PATH}/ipf
+    fi
+
+    echo
+    echo "This system was automatically configured and will now reboot"
+
+    sleep 3
+    reboot
+fi
+
 printheader "Copyright 2011, Joyent, Inc."
 
 message="