diff --git a/functional/agent/handler.go b/functional/agent/handler.go
index d30e8d4c4..0c16a14ad 100644
--- a/functional/agent/handler.go
+++ b/functional/agent/handler.go
@@ -25,6 +25,7 @@ import (
 	"syscall"
 	"time"
 
+	"github.com/coreos/etcd/embed"
 	"github.com/coreos/etcd/functional/rpcpb"
 	"github.com/coreos/etcd/pkg/fileutil"
 	"github.com/coreos/etcd/pkg/proxy"
@@ -99,19 +100,21 @@ func (srv *Server) handle_INITIAL_START_ETCD(req *rpcpb.Request) (*rpcpb.Respons
 	}
 	srv.lg.Info("created base directory", zap.String("path", srv.Member.BaseDir))
 
-	if err = srv.createEtcdLogFile(); err != nil {
-		return nil, err
+	if srv.etcdServer == nil {
+		if err = srv.createEtcdLogFile(); err != nil {
+			return nil, err
+		}
 	}
 
-	srv.creatEtcdCmd(false)
-
+	if err = srv.creatEtcd(false); err != nil {
+		return nil, err
+	}
 	if err = srv.saveTLSAssets(); err != nil {
 		return nil, err
 	}
-	if err = srv.startEtcdCmd(); err != nil {
+	if err = srv.startEtcd(); err != nil {
 		return nil, err
 	}
-	srv.lg.Info("started etcd", zap.String("command-path", srv.etcdCmd.Path))
 	if err = srv.loadAutoTLSAssets(); err != nil {
 		return nil, err
 	}
@@ -224,30 +227,47 @@ func (srv *Server) stopProxy() {
 
 func (srv *Server) createEtcdLogFile() error {
 	var err error
-	srv.etcdLogFile, err = os.Create(srv.Member.EtcdLogPath)
+	srv.etcdLogFile, err = os.Create(srv.Member.Etcd.LogOutput)
 	if err != nil {
 		return err
 	}
-	srv.lg.Info("created etcd log file", zap.String("path", srv.Member.EtcdLogPath))
+	srv.lg.Info("created etcd log file", zap.String("path", srv.Member.Etcd.LogOutput))
 	return nil
 }
 
-func (srv *Server) creatEtcdCmd(fromSnapshot bool) {
-	etcdPath, etcdFlags := srv.Member.EtcdExec, srv.Member.Etcd.Flags()
-	if fromSnapshot {
-		etcdFlags = srv.Member.EtcdOnSnapshotRestore.Flags()
+func (srv *Server) creatEtcd(fromSnapshot bool) error {
+	if !fileutil.Exist(srv.Member.EtcdExec) || srv.Member.EtcdExec != "embed" {
+		return fmt.Errorf("unknown etcd exec %q or path does not exist", srv.Member.EtcdExec)
 	}
-	u, _ := url.Parse(srv.Member.FailpointHTTPAddr)
-	srv.lg.Info("creating etcd command",
-		zap.String("etcd-exec", etcdPath),
-		zap.Strings("etcd-flags", etcdFlags),
-		zap.String("failpoint-http-addr", srv.Member.FailpointHTTPAddr),
-		zap.String("failpoint-addr", u.Host),
-	)
-	srv.etcdCmd = exec.Command(etcdPath, etcdFlags...)
-	srv.etcdCmd.Env = []string{"GOFAIL_HTTP=" + u.Host}
-	srv.etcdCmd.Stdout = srv.etcdLogFile
-	srv.etcdCmd.Stderr = srv.etcdLogFile
+
+	if fileutil.Exist(srv.Member.EtcdExec) && srv.Member.EtcdExec != "embed" {
+		etcdPath, etcdFlags := srv.Member.EtcdExec, srv.Member.Etcd.Flags()
+		if fromSnapshot {
+			etcdFlags = srv.Member.EtcdOnSnapshotRestore.Flags()
+		}
+		u, _ := url.Parse(srv.Member.FailpointHTTPAddr)
+		srv.lg.Info("creating etcd command",
+			zap.String("etcd-exec", etcdPath),
+			zap.Strings("etcd-flags", etcdFlags),
+			zap.String("failpoint-http-addr", srv.Member.FailpointHTTPAddr),
+			zap.String("failpoint-addr", u.Host),
+		)
+		srv.etcdCmd = exec.Command(etcdPath, etcdFlags...)
+		srv.etcdCmd.Env = []string{"GOFAIL_HTTP=" + u.Host}
+		srv.etcdCmd.Stdout = srv.etcdLogFile
+		srv.etcdCmd.Stderr = srv.etcdLogFile
+	} else if srv.Member.EtcdExec == "embed" {
+		cfg, err := srv.Member.Etcd.EmbedConfig()
+		if err != nil {
+			return err
+		}
+		srv.etcdServer, err = embed.StartEtcd(cfg)
+		if err != nil {
+			return err
+		}
+		// TODO: set up logging
+	}
+	return nil
 }
 
 // if started with manual TLS, stores TLS assets
@@ -322,7 +342,6 @@ func (srv *Server) saveTLSAssets() error {
 			zap.String("client-trusted-ca", srv.Member.ClientTrustedCAPath),
 		)
 	}
-
 	return nil
 }
 
@@ -413,8 +432,22 @@ func (srv *Server) loadAutoTLSAssets() error {
 }
 
 // start but do not wait for it to complete
-func (srv *Server) startEtcdCmd() error {
-	return srv.etcdCmd.Start()
+func (srv *Server) startEtcd() error {
+	if srv.etcdCmd != nil {
+		srv.lg.Info(
+			"started etcd",
+			zap.String("command-path", srv.etcdCmd.Path),
+		)
+		return srv.etcdCmd.Start()
+	}
+	select {
+	case <-srv.etcdServer.Server.ReadyNotify():
+		srv.lg.Info("started embedded etcd")
+	case <-time.After(time.Minute):
+		srv.etcdServer.Close()
+		return fmt.Errorf("took too long to start %v", <-srv.etcdServer.Err())
+	}
+	return nil
 }
 
 func (srv *Server) handle_RESTART_ETCD() (*rpcpb.Response, error) {
@@ -426,15 +459,15 @@ func (srv *Server) handle_RESTART_ETCD() (*rpcpb.Response, error) {
 		}
 	}
 
-	srv.creatEtcdCmd(false)
-
+	if err = srv.creatEtcd(false); err != nil {
+		return nil, err
+	}
 	if err = srv.saveTLSAssets(); err != nil {
 		return nil, err
 	}
-	if err = srv.startEtcdCmd(); err != nil {
+	if err = srv.startEtcd(); err != nil {
 		return nil, err
 	}
-	srv.lg.Info("restarted etcd", zap.String("command-path", srv.etcdCmd.Path))
 	if err = srv.loadAutoTLSAssets(); err != nil {
 		return nil, err
 	}
@@ -479,8 +512,12 @@ func (srv *Server) handle_SIGQUIT_ETCD_AND_REMOVE_DATA() (*rpcpb.Response, error
 	}
 	srv.lg.Info("killed etcd", zap.String("signal", syscall.SIGQUIT.String()))
 
-	srv.etcdLogFile.Sync()
-	srv.etcdLogFile.Close()
+	if srv.etcdServer != nil {
+		srv.etcdServer.GetLogger().Sync()
+	} else {
+		srv.etcdLogFile.Sync()
+		srv.etcdLogFile.Close()
+	}
 
 	// for debugging purposes, rename instead of removing
 	if err = os.RemoveAll(srv.Member.BaseDir + ".backup"); err != nil {
@@ -502,9 +539,6 @@ func (srv *Server) handle_SIGQUIT_ETCD_AND_REMOVE_DATA() (*rpcpb.Response, error
 			return nil, err
 		}
 	}
-	if err = srv.createEtcdLogFile(); err != nil {
-		return nil, err
-	}
 
 	return &rpcpb.Response{
 		Success: true,
@@ -537,15 +571,15 @@ func (srv *Server) handle_RESTORE_RESTART_FROM_SNAPSHOT() (resp *rpcpb.Response,
 }
 
 func (srv *Server) handle_RESTART_FROM_SNAPSHOT() (resp *rpcpb.Response, err error) {
-	srv.creatEtcdCmd(true)
-
+	if err = srv.creatEtcd(true); err != nil {
+		return nil, err
+	}
 	if err = srv.saveTLSAssets(); err != nil {
 		return nil, err
 	}
-	if err = srv.startEtcdCmd(); err != nil {
+	if err = srv.startEtcd(); err != nil {
 		return nil, err
 	}
-	srv.lg.Info("restarted etcd", zap.String("command-path", srv.etcdCmd.Path))
 	if err = srv.loadAutoTLSAssets(); err != nil {
 		return nil, err
 	}
@@ -576,21 +610,27 @@ func (srv *Server) handle_SIGQUIT_ETCD_AND_ARCHIVE_DATA() (*rpcpb.Response, erro
 	}
 	srv.lg.Info("killed etcd", zap.String("signal", syscall.SIGQUIT.String()))
 
-	srv.etcdLogFile.Sync()
-	srv.etcdLogFile.Close()
+	if srv.etcdServer != nil {
+		srv.etcdServer.GetLogger().Sync()
+	} else {
+		srv.etcdLogFile.Sync()
+		srv.etcdLogFile.Close()
+	}
 
 	// TODO: support separate WAL directory
 	if err = archive(
 		srv.Member.BaseDir,
-		srv.Member.EtcdLogPath,
+		srv.Member.Etcd.LogOutput,
 		srv.Member.Etcd.DataDir,
 	); err != nil {
 		return nil, err
 	}
 	srv.lg.Info("archived data", zap.String("base-dir", srv.Member.BaseDir))
 
-	if err = srv.createEtcdLogFile(); err != nil {
-		return nil, err
+	if srv.etcdServer == nil {
+		if err = srv.createEtcdLogFile(); err != nil {
+			return nil, err
+		}
 	}
 
 	srv.lg.Info("cleaning up page cache")
@@ -615,8 +655,12 @@ func (srv *Server) handle_SIGQUIT_ETCD_AND_REMOVE_DATA_AND_STOP_AGENT() (*rpcpb.
 	}
 	srv.lg.Info("killed etcd", zap.String("signal", syscall.SIGQUIT.String()))
 
-	srv.etcdLogFile.Sync()
-	srv.etcdLogFile.Close()
+	if srv.etcdServer != nil {
+		srv.etcdServer.GetLogger().Sync()
+	} else {
+		srv.etcdLogFile.Sync()
+		srv.etcdLogFile.Close()
+	}
 
 	err = os.RemoveAll(srv.Member.BaseDir)
 	if err != nil {
diff --git a/functional/agent/server.go b/functional/agent/server.go
index d6313d955..7f8ec98b5 100644
--- a/functional/agent/server.go
+++ b/functional/agent/server.go
@@ -21,6 +21,7 @@ import (
 	"os/exec"
 	"strings"
 
+	"github.com/coreos/etcd/embed"
 	"github.com/coreos/etcd/functional/rpcpb"
 	"github.com/coreos/etcd/pkg/proxy"
 
@@ -33,8 +34,9 @@ import (
 // no need to lock fields since request operations are
 // serialized in tester-side
 type Server struct {
+	lg *zap.Logger
+
 	grpcServer *grpc.Server
-	lg         *zap.Logger
 
 	network string
 	address string
@@ -46,6 +48,7 @@ type Server struct {
 	*rpcpb.Member
 	*rpcpb.Tester
 
+	etcdServer  *embed.Etcd
 	etcdCmd     *exec.Cmd
 	etcdLogFile *os.File