diff --git a/modules/@angular/upgrade/src/upgrade_adapter.ts b/modules/@angular/upgrade/src/upgrade_adapter.ts
index d4f4b2de176..ac305581289 100644
--- a/modules/@angular/upgrade/src/upgrade_adapter.ts
+++ b/modules/@angular/upgrade/src/upgrade_adapter.ts
@@ -656,67 +656,59 @@ function ng1ComponentDirective(info: ComponentInfo, idPrefix: string): Function
       restrict: 'E',
       terminal: true,
       require: REQUIRE_INJECTOR,
-      compile: (templateElement: angular.IAugmentedJQuery, templateAttributes: angular.IAttributes,
-                transclude: angular.ITranscludeFunction) => {
+      link: (scope: angular.IScope, element: angular.IAugmentedJQuery, attrs: angular.IAttributes,
+             parentInjector: Injector | ParentInjectorPromise): void => {
         // We might have compile the contents lazily, because this might have been triggered by the
         // UpgradeNg1ComponentAdapterBuilder, when the ng2 templates have not been compiled yet
-        return {
-          post: (scope: angular.IScope, element: angular.IAugmentedJQuery,
-                 attrs: angular.IAttributes, parentInjector: Injector | ParentInjectorPromise,
-                 transclude: angular.ITranscludeFunction): void => {
-            let id = idPrefix + (idCount++);
-            (<any>element[0]).id = id;
 
-            let injectorPromise = new ParentInjectorPromise(element);
+        let id = idPrefix + (idCount++);
+        (<any>element[0]).id = id;
 
-            const ng2Compiler = ng1Injector.get(NG2_COMPILER) as Compiler;
-            const ngContentSelectors = ng2Compiler.getNgContentSelectors(info.type);
-            const linkFns = compileProjectedNodes(templateElement, ngContentSelectors);
+        let injectorPromise = new ParentInjectorPromise(element);
 
-            const componentFactory: ComponentFactory<any> = componentFactoryRefMap[info.selector];
-            if (!componentFactory)
-              throw new Error('Expecting ComponentFactory for: ' + info.selector);
+        const ng2Compiler = ng1Injector.get(NG2_COMPILER) as Compiler;
+        const ngContentSelectors = ng2Compiler.getNgContentSelectors(info.type);
+        const linkFns = compileProjectedNodes(element, ngContentSelectors);
 
-            element.empty();
-            let projectableNodes = linkFns.map(link => {
-              let projectedClone: Node[];
-              link(scope, (clone: Node[]) => {
-                projectedClone = clone;
-                element.append(clone);
-              });
-              return projectedClone;
-            });
+        const componentFactory: ComponentFactory<any> = componentFactoryRefMap[info.selector];
+        if (!componentFactory) throw new Error('Expecting ComponentFactory for: ' + info.selector);
 
-            parentInjector = parentInjector || ng1Injector.get(NG2_INJECTOR);
+        element.empty();
+        let projectableNodes = linkFns.map(link => {
+          let projectedClone: Node[];
+          link(scope, (clone: Node[]) => {
+            projectedClone = clone;
+            element.append(clone);
+          });
+          return projectedClone;
+        });
 
-            if (parentInjector instanceof ParentInjectorPromise) {
-              parentInjector.then((resolvedInjector: Injector) => downgrade(resolvedInjector));
-            } else {
-              downgrade(parentInjector);
-            }
+        parentInjector = parentInjector || ng1Injector.get(NG2_INJECTOR);
 
-            function downgrade(injector: Injector) {
-              const facade = new DowngradeNg2ComponentAdapter(
-                  info, element, attrs, scope, injector, parse, componentFactory);
-              facade.setupInputs();
-              facade.bootstrapNg2(projectableNodes);
-              facade.setupOutputs();
-              facade.registerCleanup();
-              injectorPromise.resolve(facade.componentRef.injector);
-            }
-          }
-        };
+        if (parentInjector instanceof ParentInjectorPromise) {
+          parentInjector.then((resolvedInjector: Injector) => downgrade(resolvedInjector));
+        } else {
+          downgrade(parentInjector);
+        }
+
+        function downgrade(injector: Injector) {
+          const facade = new DowngradeNg2ComponentAdapter(
+              info, element, attrs, scope, injector, parse, componentFactory);
+          facade.setupInputs();
+          facade.bootstrapNg2(projectableNodes);
+          facade.setupOutputs();
+          facade.registerCleanup();
+          injectorPromise.resolve(facade.componentRef.injector);
+        }
       }
     };
 
     function compileProjectedNodes(
-        templateElement: angular.IAugmentedJQuery,
-        ngContentSelectors: string[]): angular.ILinkFn[] {
+        element: angular.IAugmentedJQuery, ngContentSelectors: string[]): angular.ILinkFn[] {
       if (!ngContentSelectors)
         throw new Error('Expecting ngContentSelectors for: ' + info.selector);
       // We have to sort the projected content before we compile it, hence the terminal: true
-      let projectableTemplateNodes =
-          sortProjectableNodes(ngContentSelectors, templateElement.contents());
+      let projectableTemplateNodes = sortProjectableNodes(ngContentSelectors, element.contents());
       return projectableTemplateNodes.map(nodes => ng1Compile(nodes));
     }
   }
diff --git a/modules/@angular/upgrade/test/aot/integration/content_projection_spec.ts b/modules/@angular/upgrade/test/aot/integration/content_projection_spec.ts
index 7c48ac8b46f..e9b5adbf01a 100644
--- a/modules/@angular/upgrade/test/aot/integration/content_projection_spec.ts
+++ b/modules/@angular/upgrade/test/aot/integration/content_projection_spec.ts
@@ -6,14 +6,14 @@
  * found in the LICENSE file at https://angular.io/license
  */
 
-import {Component, Directive, ElementRef, Injector, NgModule, destroyPlatform} from '@angular/core';
+import {Component, Directive, ElementRef, Injector, Input, NgModule, destroyPlatform} from '@angular/core';
 import {async} from '@angular/core/testing';
 import {BrowserModule} from '@angular/platform-browser';
 import {platformBrowserDynamic} from '@angular/platform-browser-dynamic';
 import * as angular from '@angular/upgrade/src/angular_js';
 import {UpgradeComponent, UpgradeModule, downgradeComponent} from '@angular/upgrade/static';
 
-import {bootstrap, html} from '../test_helpers';
+import {bootstrap, html, multiTrim} from '../test_helpers';
 
 export function main() {
   describe('content projection', () => {
@@ -52,6 +52,44 @@ export function main() {
          });
        }));
 
+    it('should correctly project structural directives', async(() => {
+         @Component({selector: 'ng2', template: 'ng2-{{ itemId }}(<ng-content></ng-content>)'})
+         class Ng2Component {
+           @Input() itemId: string;
+         }
+
+         @NgModule({
+           imports: [BrowserModule, UpgradeModule],
+           declarations: [Ng2Component],
+           entryComponents: [Ng2Component]
+         })
+         class Ng2Module {
+           ngDoBootstrap() {}
+         }
+
+         const ng1Module =
+             angular.module('ng1', [])
+                 .directive(
+                     'ng2', downgradeComponent({component: Ng2Component, inputs: ['itemId']}))
+                 .run(($rootScope: angular.IRootScopeService) => {
+                   $rootScope['items'] = [
+                     {id: 'a', subitems: [1, 2, 3]}, {id: 'b', subitems: [4, 5, 6]},
+                     {id: 'c', subitems: [7, 8, 9]}
+                   ];
+                 });
+
+         const element = html(`
+           <ng2 ng-repeat="item in items" [item-id]="item.id">
+             <div ng-repeat="subitem in item.subitems">{{ subitem }}</div>
+           </ng2>
+         `);
+
+         bootstrap(platformBrowserDynamic(), Ng2Module, element, ng1Module).then(upgrade => {
+           expect(multiTrim(document.body.textContent))
+               .toBe('ng2-a( 123 )ng2-b( 456 )ng2-c( 789 )');
+         });
+       }));
+
     it('should instantiate ng1 in ng2 template and project content', async(() => {
 
          @Component({
diff --git a/modules/@angular/upgrade/test/upgrade_spec.ts b/modules/@angular/upgrade/test/upgrade_spec.ts
index 9fe7e66b8d7..174c593d29f 100644
--- a/modules/@angular/upgrade/test/upgrade_spec.ts
+++ b/modules/@angular/upgrade/test/upgrade_spec.ts
@@ -491,6 +491,39 @@ export function main() {
            });
          }));
 
+      it('should correctly project structural directives', async(() => {
+           @Component({selector: 'ng2', template: 'ng2-{{ itemId }}(<ng-content></ng-content>)'})
+           class Ng2Component {
+             @Input() itemId: string;
+           }
+
+           @NgModule({imports: [BrowserModule], declarations: [Ng2Component]})
+           class Ng2Module {
+           }
+
+           const adapter: UpgradeAdapter = new UpgradeAdapter(Ng2Module);
+           const ng1Module = angular.module('ng1', [])
+                                 .directive('ng2', adapter.downgradeNg2Component(Ng2Component))
+                                 .run(($rootScope: angular.IRootScopeService) => {
+                                   $rootScope['items'] = [
+                                     {id: 'a', subitems: [1, 2, 3]}, {id: 'b', subitems: [4, 5, 6]},
+                                     {id: 'c', subitems: [7, 8, 9]}
+                                   ];
+                                 });
+
+           const element = html(`
+             <ng2 ng-repeat="item in items" [item-id]="item.id">
+               <div ng-repeat="subitem in item.subitems">{{ subitem }}</div>
+             </ng2>
+           `);
+
+           adapter.bootstrap(element, [ng1Module.name]).ready(ref => {
+             expect(multiTrim(document.body.textContent))
+                 .toBe('ng2-a( 123 )ng2-b( 456 )ng2-c( 789 )');
+             ref.dispose();
+           });
+         }));
+
       it('should allow attribute selectors for components in ng2', async(() => {
            const adapter: UpgradeAdapter = new UpgradeAdapter(forwardRef(() => MyNg2Module));
            const ng1Module = angular.module('myExample', []);
@@ -1901,14 +1934,17 @@ function multiTrim(text: string): string {
 }
 
 function html(html: string): Element {
+  // Don't return `body` itself, because using it as a `$rootElement` for ng1
+  // will attach `$injector` to it and that will affect subsequent tests.
   const body = document.body;
-  body.innerHTML = html;
+  body.innerHTML = `<div>${html.trim()}</div>`;
+  const div = document.body.firstChild as Element;
 
-  if (body.childNodes.length == 1 && body.firstChild instanceof HTMLElement) {
-    return <Element>body.firstChild;
+  if (div.childNodes.length === 1 && div.firstChild instanceof HTMLElement) {
+    return div.firstChild;
   }
 
-  return body;
+  return div;
 }
 
 function nodes(html: string) {