diff --git a/src/Avalonia.ReactiveUI/AutoDataTemplateBindingHook.cs b/src/Avalonia.ReactiveUI/AutoDataTemplateBindingHook.cs
index d7cfebf1d8..3f41f54363 100644
--- a/src/Avalonia.ReactiveUI/AutoDataTemplateBindingHook.cs
+++ b/src/Avalonia.ReactiveUI/AutoDataTemplateBindingHook.cs
@@ -16,19 +16,16 @@ namespace Avalonia.ReactiveUI
     /// </summary>
     public class AutoDataTemplateBindingHook : IPropertyBindingHook
     {
-        private static Lazy<FuncDataTemplate> DefaultItemTemplate { get; } = new Lazy<FuncDataTemplate>(() =>
+        private static FuncDataTemplate DefaultItemTemplate = new FuncDataTemplate<object>(x =>
         {
-            return new FuncDataTemplate<object>(x =>
-            {
-                var control = new ViewModelViewHost();
-                var context = control.GetObservable(Control.DataContextProperty);
-                control.Bind(ViewModelViewHost.ViewModelProperty, context);
-                control.HorizontalContentAlignment = HorizontalAlignment.Stretch;
-                control.VerticalContentAlignment = VerticalAlignment.Stretch;
-                return control;
-            },
-            true);
-        });
+            var control = new ViewModelViewHost();
+            var context = control.GetObservable(Control.DataContextProperty);
+            control.Bind(ViewModelViewHost.ViewModelProperty, context);
+            control.HorizontalContentAlignment = HorizontalAlignment.Stretch;
+            control.VerticalContentAlignment = VerticalAlignment.Stretch;
+            return control;
+        },
+        true);
 
         /// <inheritdoc/>
         public bool ExecuteHook(
@@ -51,7 +48,7 @@ namespace Avalonia.ReactiveUI
             if (itemsControl.ItemTemplate != null)
                 return true;
 
-            itemsControl.ItemTemplate = DefaultItemTemplate.Value;
+            itemsControl.ItemTemplate = DefaultItemTemplate;
             return true;
         }
     }
diff --git a/tests/Avalonia.ReactiveUI.UnitTests/AutoDataTemplateBindingHookTest.cs b/tests/Avalonia.ReactiveUI.UnitTests/AutoDataTemplateBindingHookTest.cs
index 4ff3e1fed6..667462eb91 100644
--- a/tests/Avalonia.ReactiveUI.UnitTests/AutoDataTemplateBindingHookTest.cs
+++ b/tests/Avalonia.ReactiveUI.UnitTests/AutoDataTemplateBindingHookTest.cs
@@ -13,6 +13,8 @@ using System.Linq;
 using Avalonia.VisualTree;
 using Avalonia.Controls.Presenters;
 using Splat;
+using System.Threading.Tasks;
+using System;
 
 namespace Avalonia.ReactiveUI.UnitTests
 {
@@ -42,8 +44,8 @@ namespace Avalonia.ReactiveUI.UnitTests
         public AutoDataTemplateBindingHookTest() 
         {
             Locator.CurrentMutable.RegisterConstant(new AutoDataTemplateBindingHook(), typeof(IPropertyBindingHook));
-            Locator.CurrentMutable.Register(() => new ExampleView(), typeof(IViewFor<ExampleViewModel>));
             Locator.CurrentMutable.RegisterConstant(new AvaloniaActivationForViewFetcher(), typeof(IActivationForViewFetcher));
+            Locator.CurrentMutable.Register(() => new NestedView(), typeof(IViewFor<NestedViewModel>));
         }
 
         [Fact]
@@ -70,6 +72,30 @@ namespace Avalonia.ReactiveUI.UnitTests
             Assert.IsType<ViewModelViewHost>(container.Child);
         }
 
+        [Fact]
+        public void Should_Resolve_And_Embedd_Appropriate_View_Model()
+        {
+            var view = new ExampleView();
+            var root = new TestRoot { Child = view };
+            view.ViewModel.Items.Add(new NestedViewModel());
+
+            view.List.Template = GetTemplate();
+            view.List.ApplyTemplate();
+            view.List.Presenter.ApplyTemplate();
+
+            var child = view.List.Presenter.Panel.Children[0];
+            var container = (ContentPresenter) child;
+            container.UpdateChild();
+
+            var host = (ViewModelViewHost) container.Child;
+            Assert.IsType<NestedViewModel>(host.ViewModel);
+            Assert.IsType<NestedViewModel>(host.DataContext);
+
+            host.DataContext = "changed context";
+            Assert.IsType<string>(host.ViewModel);
+            Assert.IsType<string>(host.DataContext);
+        }
+
         private FuncControlTemplate GetTemplate()
         {
             return new FuncControlTemplate<ItemsControl>(parent =>