diff --git a/hadoop-mapreduce-project/CHANGES.txt b/hadoop-mapreduce-project/CHANGES.txt
index 1ec852aef3..3060dfdad7 100644
--- a/hadoop-mapreduce-project/CHANGES.txt
+++ b/hadoop-mapreduce-project/CHANGES.txt
@@ -1406,6 +1406,9 @@ Release 0.23.0 - Unreleased
 
     MAPREDUCE-3073. Fixed build issues in MR1. (mahadev via acmurthy)
 
+    MAPREDUCE-2691. Increase threadpool size for launching containers in
+    MapReduce ApplicationMaster. (vinodkv via acmurthy)
+
 Release 0.22.0 - Unreleased
 
   INCOMPATIBLE CHANGES
diff --git a/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-app/src/main/java/org/apache/hadoop/mapreduce/v2/app/launcher/ContainerLauncherImpl.java b/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-app/src/main/java/org/apache/hadoop/mapreduce/v2/app/launcher/ContainerLauncherImpl.java
index 982f7d334a..95e17d8f4f 100644
--- a/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-app/src/main/java/org/apache/hadoop/mapreduce/v2/app/launcher/ContainerLauncherImpl.java
+++ b/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-app/src/main/java/org/apache/hadoop/mapreduce/v2/app/launcher/ContainerLauncherImpl.java
@@ -73,6 +73,8 @@ public class ContainerLauncherImpl extends AbstractService implements
 
   private AppContext context;
   private ThreadPoolExecutor launcherPool;
+  private static final int INITIAL_POOL_SIZE = 10;
+  private int limitOnPoolSize;
   private Thread eventHandlingThread;
   private BlockingQueue<ContainerLauncherEvent> eventQueue =
       new LinkedBlockingQueue<ContainerLauncherEvent>();
@@ -96,16 +98,17 @@ public synchronized void init(Configuration conf) {
         YarnConfiguration.YARN_SECURITY_INFO,
         ContainerManagerSecurityInfo.class, SecurityInfo.class);
     this.recordFactory = RecordFactoryProvider.getRecordFactory(conf);
+    this.limitOnPoolSize = conf.getInt(
+        MRJobConfig.MR_AM_CONTAINERLAUNCHER_THREAD_COUNT_LIMIT,
+        MRJobConfig.DEFAULT_MR_AM_CONTAINERLAUNCHER_THREAD_COUNT_LIMIT);
     super.init(myLocalConfig);
   }
 
   public void start() {
-    launcherPool =
-        new ThreadPoolExecutor(getConfig().getInt(
-            MRJobConfig.MR_AM_CONTAINERLAUNCHER_THREAD_COUNT, 10),
-            Integer.MAX_VALUE, 1, TimeUnit.HOURS,
-            new LinkedBlockingQueue<Runnable>());
-    launcherPool.prestartAllCoreThreads(); // Wait for work.
+    // Start with a default core-pool size of 10 and change it dynamically.
+    launcherPool = new ThreadPoolExecutor(INITIAL_POOL_SIZE,
+        Integer.MAX_VALUE, 1, TimeUnit.HOURS,
+        new LinkedBlockingQueue<Runnable>());
     eventHandlingThread = new Thread(new Runnable() {
       @Override
       public void run() {
@@ -117,6 +120,26 @@ public void run() {
             LOG.error("Returning, interrupted : " + e);
             return;
           }
+
+          int poolSize = launcherPool.getCorePoolSize();
+
+          // See if we need up the pool size only if haven't reached the
+          // maximum limit yet.
+          if (poolSize != limitOnPoolSize) {
+
+            // nodes where containers will run at *this* point of time. This is
+            // *not* the cluster size and doesn't need to be.
+            int numNodes = ugiMap.size();
+            int idealPoolSize = Math.min(limitOnPoolSize, numNodes);
+
+            if (poolSize <= idealPoolSize) {
+              // Bump up the pool size to idealPoolSize+INITIAL_POOL_SIZE, the
+              // later is just a buffer so we are not always increasing the
+              // pool-size
+              launcherPool.setCorePoolSize(idealPoolSize + INITIAL_POOL_SIZE);
+            }
+          }
+
           // the events from the queue are handled in parallel
           // using a thread pool
           launcherPool.execute(new EventProcessor(event));
diff --git a/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-core/src/main/java/org/apache/hadoop/mapreduce/MRJobConfig.java b/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-core/src/main/java/org/apache/hadoop/mapreduce/MRJobConfig.java
index c456d52deb..accfdddc3d 100644
--- a/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-core/src/main/java/org/apache/hadoop/mapreduce/MRJobConfig.java
+++ b/hadoop-mapreduce-project/hadoop-mapreduce-client/hadoop-mapreduce-client-core/src/main/java/org/apache/hadoop/mapreduce/MRJobConfig.java
@@ -332,9 +332,15 @@ public interface MRJobConfig {
     MR_AM_PREFIX+"num-progress-splits";
   public static final int DEFAULT_MR_AM_NUM_PROGRESS_SPLITS = 12;
 
-  /** Number of threads user to launch containers in the app master.*/
-  public static final String MR_AM_CONTAINERLAUNCHER_THREAD_COUNT =
-    MR_AM_PREFIX+"containerlauncher.thread-count";
+  /**
+   * Upper limit on the number of threads user to launch containers in the app
+   * master. Expect level config, you shouldn't be needing it in most cases.
+   */
+  public static final String MR_AM_CONTAINERLAUNCHER_THREAD_COUNT_LIMIT =
+    MR_AM_PREFIX+"containerlauncher.thread-count-limit";
+
+  public static final int DEFAULT_MR_AM_CONTAINERLAUNCHER_THREAD_COUNT_LIMIT = 
+      500;
 
   /** Number of threads to handle job client RPC requests.*/
   public static final String MR_AM_JOB_CLIENT_THREAD_COUNT =