diff --git a/integration/dockerfiles/Dockerfile_test_cache_install b/integration/dockerfiles/Dockerfile_test_cache_install
index 8a6a9a58e..b93eb4ad5 100644
--- a/integration/dockerfiles/Dockerfile_test_cache_install
+++ b/integration/dockerfiles/Dockerfile_test_cache_install
@@ -17,4 +17,7 @@
 # if the cache is implemented correctly
 
 FROM gcr.io/google-appengine/debian9@sha256:1d6a9a6d106bd795098f60f4abb7083626354fa6735e81743c7f8cfca11259f0
+WORKDIR /foo
 RUN apt-get update && apt-get install -y make
+COPY context/bar /context
+RUN echo "hey" > foo
diff --git a/pkg/commands/add.go b/pkg/commands/add.go
index 27cf0c968..7bcbce810 100644
--- a/pkg/commands/add.go
+++ b/pkg/commands/add.go
@@ -131,3 +131,7 @@ func (a *AddCommand) FilesUsedFromContext(config *v1.Config, buildArgs *dockerfi
 	logrus.Infof("Using files from context: %v", files)
 	return files, nil
 }
+
+func (a *AddCommand) MetadataOnly() bool {
+	return false
+}
diff --git a/pkg/commands/base_command.go b/pkg/commands/base_command.go
index 90ee3e445..698b72821 100644
--- a/pkg/commands/base_command.go
+++ b/pkg/commands/base_command.go
@@ -35,3 +35,7 @@ func (b *BaseCommand) FilesToSnapshot() []string {
 func (b *BaseCommand) FilesUsedFromContext(_ *v1.Config, _ *dockerfile.BuildArgs) ([]string, error) {
 	return []string{}, nil
 }
+
+func (b *BaseCommand) MetadataOnly() bool {
+	return true
+}
diff --git a/pkg/commands/commands.go b/pkg/commands/commands.go
index 9ca6e97ae..d6ed04b59 100644
--- a/pkg/commands/commands.go
+++ b/pkg/commands/commands.go
@@ -41,6 +41,8 @@ type DockerCommand interface {
 
 	// Return true if this command depends on the build context.
 	FilesUsedFromContext(*v1.Config, *dockerfile.BuildArgs) ([]string, error)
+
+	MetadataOnly() bool
 }
 
 func GetCommand(cmd instructions.Command, buildcontext string) (DockerCommand, error) {
diff --git a/pkg/commands/copy.go b/pkg/commands/copy.go
index d70d98483..1e8f196b8 100644
--- a/pkg/commands/copy.go
+++ b/pkg/commands/copy.go
@@ -134,3 +134,7 @@ func (c *CopyCommand) FilesUsedFromContext(config *v1.Config, buildArgs *dockerf
 	logrus.Infof("Using files from context: %v", files)
 	return files, nil
 }
+
+func (c *CopyCommand) MetadataOnly() bool {
+	return false
+}
diff --git a/pkg/commands/run.go b/pkg/commands/run.go
index 0290e6f7c..72772922b 100644
--- a/pkg/commands/run.go
+++ b/pkg/commands/run.go
@@ -161,6 +161,10 @@ func (r *RunCommand) CacheCommand(img v1.Image) DockerCommand {
 	}
 }
 
+func (r *RunCommand) MetadataOnly() bool {
+	return false
+}
+
 type CachingRunCommand struct {
 	BaseCommand
 	img            v1.Image
diff --git a/pkg/commands/workdir.go b/pkg/commands/workdir.go
index 12a2f44d8..abc1f9c06 100644
--- a/pkg/commands/workdir.go
+++ b/pkg/commands/workdir.go
@@ -67,3 +67,7 @@ func (w *WorkdirCommand) FilesToSnapshot() []string {
 func (w *WorkdirCommand) String() string {
 	return w.cmd.String()
 }
+
+func (w *WorkdirCommand) MetadataOnly() bool {
+	return false
+}
diff --git a/pkg/executor/build.go b/pkg/executor/build.go
index 35a37d70a..62ad15629 100644
--- a/pkg/executor/build.go
+++ b/pkg/executor/build.go
@@ -86,6 +86,63 @@ func newStageBuilder(opts *config.KanikoOptions, stage config.KanikoStage) (*sta
 	}, nil
 }
 
+func (s *stageBuilder) optimize(compositeKey CompositeCache, cfg v1.Config, cmds []commands.DockerCommand) error {
+	if !s.opts.Cache {
+		return nil
+	}
+
+	args := dockerfile.NewBuildArgs(s.opts.BuildArgs)
+	args.AddMetaArgs(s.stage.MetaArgs)
+
+	layerCache := &cache.RegistryCache{
+		Opts: s.opts,
+	}
+
+	// Possibly replace commands with their cached implementations.
+	// We walk through all the commands, running any commands that only operate on metadata.
+	// We throw the metadata away after, but we need it to properly track command dependencies
+	// for things like COPY ${FOO} or RUN commands that use environment variables.
+	for i, command := range cmds {
+		if command == nil {
+			continue
+		}
+		compositeKey.AddKey(command.String())
+		// If the command uses files from the context, add them.
+		files, err := command.FilesUsedFromContext(&cfg, args)
+		if err != nil {
+			return err
+		}
+		for _, f := range files {
+			if err := compositeKey.AddPath(f); err != nil {
+				return err
+			}
+		}
+
+		ck, err := compositeKey.Hash()
+		if err != nil {
+			return err
+		}
+		img, err := layerCache.RetrieveLayer(ck)
+		if err != nil {
+			logrus.Infof("No cached layer found for cmd %s", command.String())
+			break
+		}
+
+		if cacheCmd := command.CacheCommand(img); cacheCmd != nil {
+			logrus.Infof("Using caching version of cmd: %s", command.String())
+			cmds[i] = cacheCmd
+		}
+
+		// Mutate the config for any commands that require it.
+		if command.MetadataOnly() {
+			if err := command.ExecuteCommand(&cfg, args); err != nil {
+				return err
+			}
+		}
+	}
+	return nil
+}
+
 func (s *stageBuilder) build() error {
 	// Unpack file system to root
 	if _, err := util.GetFSFromImage(constants.RootDir, s.image); err != nil {
@@ -109,34 +166,13 @@ func (s *stageBuilder) build() error {
 		cmds = append(cmds, command)
 	}
 
-	layerCache := &cache.RegistryCache{
-		Opts: s.opts,
-	}
-	if s.opts.Cache {
-		// Possibly replace commands with their cached implementations.
-		for i, command := range cmds {
-			if command == nil {
-				continue
-			}
-			ck, err := compositeKey.Hash()
-			if err != nil {
-				return err
-			}
-			img, err := layerCache.RetrieveLayer(ck)
-			if err != nil {
-				logrus.Infof("No cached layer found for cmd %s", command.String())
-				break
-			}
-
-			if cacheCmd := command.CacheCommand(img); cacheCmd != nil {
-				logrus.Infof("Using caching version of cmd: %s", command.String())
-				cmds[i] = cacheCmd
-			}
-		}
-	}
-
 	args := dockerfile.NewBuildArgs(s.opts.BuildArgs)
 	args.AddMetaArgs(s.stage.MetaArgs)
+
+	// Apply optimizations to the instructions.
+	if err := s.optimize(*compositeKey, s.cf.Config, cmds); err != nil {
+		return err
+	}
 	for index, command := range cmds {
 		if command == nil {
 			continue