diff --git a/garden-service/src/template-string-parser.pegjs b/garden-service/src/template-string-parser.pegjs
index d3f507c0a9..91d9982071 100644
--- a/garden-service/src/template-string-parser.pegjs
+++ b/garden-service/src/template-string-parser.pegjs
@@ -48,10 +48,10 @@ InvalidFormatString
   }
 
 FormatStart
-  = ws "${" ws
+  = "${" ws
 
 FormatEnd
-  = ws "}" ws
+  = ws "}"
 
 Identifier
   = [a-zA-Z][a-zA-Z0-9_\-]* { return text() }
diff --git a/garden-service/test/unit/src/template-string.ts b/garden-service/test/unit/src/template-string.ts
index 58ef9d407a..16f31dae24 100644
--- a/garden-service/test/unit/src/template-string.ts
+++ b/garden-service/test/unit/src/template-string.ts
@@ -38,6 +38,21 @@ describe("resolveTemplateString", async () => {
     expect(res).to.equal("value-suffix")
   })
 
+  it("should interpolate a format string with a prefix with whitespace", async () => {
+    const res = await resolveTemplateString("prefix ${some}", new TestContext({ some: "value" }))
+    expect(res).to.equal("prefix value")
+  })
+
+  it("should interpolate a format string with a suffix with whitespace", async () => {
+    const res = await resolveTemplateString("${some} suffix", new TestContext({ some: "value" }))
+    expect(res).to.equal("value suffix")
+  })
+
+  it("should correctly interpolate a format string with surrounding whitespace", async () => {
+    const res = await resolveTemplateString("prefix ${some} suffix", new TestContext({ some: "value" }))
+    expect(res).to.equal("prefix value suffix")
+  })
+
   it("should handle a nested key", async () => {
     const res = await resolveTemplateString("${some.nested}", new TestContext({ some: { nested: "value" } }))
     expect(res).to.equal("value")