diff --git a/dao/pom.xml b/dao/pom.xml
index 4cddf8ba91..7686f10033 100644
--- a/dao/pom.xml
+++ b/dao/pom.xml
@@ -174,6 +174,11 @@
             <artifactId>h2</artifactId>
             <scope>test</scope>
         </dependency>
+        <dependency>
+            <groupId>ru.yandex.qatools.embed</groupId>
+            <artifactId>postgresql-embedded</artifactId>
+            <scope>test</scope>
+        </dependency>
     </dependencies>
     <build>
         <plugins>
diff --git a/dao/src/test/java/org/thingsboard/server/dao/CustomPostgresUnit.java b/dao/src/test/java/org/thingsboard/server/dao/CustomPostgresUnit.java
new file mode 100644
index 0000000000..c0025ce9d7
--- /dev/null
+++ b/dao/src/test/java/org/thingsboard/server/dao/CustomPostgresUnit.java
@@ -0,0 +1,109 @@
+/**
+ * Copyright © 2016-2017 The Thingsboard Authors
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+package org.thingsboard.server.dao;
+
+import com.google.common.base.Charsets;
+import com.google.common.io.Resources;
+import lombok.extern.slf4j.Slf4j;
+import org.junit.Before;
+import org.junit.rules.ExternalResource;
+import org.junit.rules.TestRule;
+import org.junit.runner.Description;
+import org.junit.runners.model.Statement;
+import ru.yandex.qatools.embed.postgresql.EmbeddedPostgres;
+
+import java.io.IOException;
+import java.io.InputStream;
+import java.net.URL;
+import java.sql.Connection;
+import java.sql.DriverManager;
+import java.sql.SQLException;
+import java.util.List;
+import java.util.Properties;
+
+import static ru.yandex.qatools.embed.postgresql.distribution.Version.Main.V9_6;
+
+/**
+ * Created by Valerii Sosliuk on 6/24/2017.
+ */
+@Slf4j
+public class CustomPostgresUnit extends ExternalResource {
+
+    private static final String HOST = "host";
+    private static final String PORT = "port";
+    private static final String DATABASE = "database";
+    private static final String USERNAME = "username";
+    private static final String PASSWORD = "password";
+
+    private List<String> sqlFiles;
+    private Properties properties;
+
+    private EmbeddedPostgres postgres;
+
+    public CustomPostgresUnit(List<String> sqlFiles, String configurationFileName) {
+        this.sqlFiles = sqlFiles;
+        this.properties = loadProperties(configurationFileName);
+    }
+
+    @Override
+    public void before() {
+        postgres = new EmbeddedPostgres(V9_6);
+        load();
+    }
+
+    @Override
+    public void after() {
+        postgres.stop();
+    }
+
+    private void load() {
+        Connection conn = null;
+        try {
+            String url = postgres.start(properties.getProperty(HOST),
+                                        Integer.parseInt(properties.getProperty(PORT)),
+                                        properties.getProperty(DATABASE),
+                                        properties.getProperty(USERNAME),
+                                        properties.getProperty(PASSWORD));
+
+            conn = DriverManager.getConnection(url);
+            for (String sqlFile : sqlFiles) {
+                URL sqlFileUrl = Resources.getResource(sqlFile);
+                String sql = Resources.toString(sqlFileUrl, Charsets.UTF_8);
+                conn.createStatement().execute(sql);
+            }
+        } catch (IOException | SQLException e) {
+            throw new RuntimeException("Unable to start embedded postgres. Reason: " + e.getMessage(), e);
+        } finally {
+            if (conn != null) {
+                try {
+                    conn.close();
+                } catch (SQLException e) {
+                    log.error(e.getMessage(), e);
+                }
+            }
+        }
+    }
+
+    private Properties loadProperties(String fileName) {
+        final Properties properties = new Properties();
+        try (final InputStream stream = this.getClass().getClassLoader().getResourceAsStream(fileName)) {
+            properties.load(stream);
+            return properties;
+        } catch (IOException e) {
+            throw new RuntimeException(e.getMessage(), e);
+        }
+    }
+}
diff --git a/dao/src/test/java/org/thingsboard/server/dao/DaoTestSuite.java b/dao/src/test/java/org/thingsboard/server/dao/DaoTestSuite.java
index 845c4c67c8..9d2b38ed6e 100644
--- a/dao/src/test/java/org/thingsboard/server/dao/DaoTestSuite.java
+++ b/dao/src/test/java/org/thingsboard/server/dao/DaoTestSuite.java
@@ -20,9 +20,16 @@ import org.junit.ClassRule;
 import org.junit.extensions.cpsuite.ClasspathSuite;
 import org.junit.extensions.cpsuite.ClasspathSuite.ClassnameFilters;
 import org.junit.runner.RunWith;
+import ru.yandex.qatools.embed.postgresql.EmbeddedPostgres;
 
+import java.io.IOException;
+import java.sql.Connection;
+import java.sql.DriverManager;
+import java.sql.SQLException;
 import java.util.Arrays;
 
+import static ru.yandex.qatools.embed.postgresql.distribution.Version.Main.V9_6;
+
 @RunWith(ClasspathSuite.class)
 @ClassnameFilters({
         "org.thingsboard.server.dao.service.*Test",
@@ -41,4 +48,10 @@ public class DaoTestSuite {
                             new ClassPathCQLDataSet("cassandra/system-data.cql", false, false),
                             new ClassPathCQLDataSet("system-test.cql", false, false)),
                     "cassandra-test.yaml", 30000l);
+
+    @ClassRule
+    public static CustomPostgresUnit postgresUnit = new CustomPostgresUnit(
+                    Arrays.asList("postgres/schema.sql", "postgres/system-data.sql"),
+                    "postgres-embedded-test.properties");
+
 }
diff --git a/dao/src/test/resources/jpa-test.properties b/dao/src/test/resources/jpa-test.properties
index 80ae6ffc29..f2ce4b2df9 100644
--- a/dao/src/test/resources/jpa-test.properties
+++ b/dao/src/test/resources/jpa-test.properties
@@ -5,7 +5,7 @@ sql.enabled=true
 spring.jpa.show-sql=false
 spring.jpa.hibernate.ddl-auto=validate
 
-spring.datasource.url=jdbc:postgresql://localhost:5432/thingsboard
+spring.datasource.url=jdbc:postgresql://localhost:5433/thingsboard
 spring.datasource.username=postgres
 spring.datasource.password=postgres
 
diff --git a/dao/src/test/resources/postgres-embedded-test.properties b/dao/src/test/resources/postgres-embedded-test.properties
new file mode 100644
index 0000000000..557aad5905
--- /dev/null
+++ b/dao/src/test/resources/postgres-embedded-test.properties
@@ -0,0 +1,5 @@
+host: localhost
+port: 5433
+database: thingsboard
+username: postgres
+password: postgres
\ No newline at end of file
diff --git a/pom.xml b/pom.xml
index d09e4ca517..393fbbaea4 100755
--- a/pom.xml
+++ b/pom.xml
@@ -745,6 +745,13 @@
                 <groupId>com.h2database</groupId>
                 <artifactId>h2</artifactId>
                 <version>${h2.version}</version>
+                <scope>test</scope>
+            </dependency>
+            <dependency>
+                <groupId>ru.yandex.qatools.embed</groupId>
+                <artifactId>postgresql-embedded</artifactId>
+                <version>2.2</version>
+                <scope>test</scope>
             </dependency>
             <dependency>
                 <groupId>com.sun.winsw</groupId>