diff --git a/lib/model-builder.js b/lib/model-builder.js
index b152bbf6..89cd6793 100644
--- a/lib/model-builder.js
+++ b/lib/model-builder.js
@@ -9,6 +9,7 @@ var assert = require('assert');
 var DefaultModelBaseClass = require('./model.js');
 var List = require('./list.js');
 var ModelDefinition = require('./model-definition.js');
+var mergeSettings = require('./utils').mergeSettings;
 
 // Set up types
 require('./types')(ModelBuilder);
@@ -283,11 +284,15 @@ ModelBuilder.prototype.define = function defineClass(className, properties, sett
         });
 
         // Merge the settings
+        subclassSettings = mergeSettings(settings, subclassSettings);
+
+        /*
         Object.keys(settings).forEach(function (key) {
           if(subclassSettings[key] === undefined) {
             subclassSettings[key] = settings[key];
           }
         });
+        */
 
         // Define the subclass
         var subClass = modelBuilder.define(className, subclassProperties, subclassSettings, ModelClass);
diff --git a/lib/utils.js b/lib/utils.js
index 56a24334..2dd6da47 100644
--- a/lib/utils.js
+++ b/lib/utils.js
@@ -3,6 +3,7 @@ exports.fieldsToArray = fieldsToArray;
 exports.selectFields = selectFields;
 exports.removeUndefined = removeUndefined;
 exports.parseSettings = parseSettings;
+exports.mergeSettings = mergeSettings;
 
 var traverse = require('traverse');
 
@@ -127,3 +128,53 @@ function parseSettings(urlStr) {
     }
     return settings;
 }
+
+/**
+ * Merge model settings
+ *
+ * Folked from https://github.com/nrf110/deepmerge/blob/master/index.js
+ *
+ * The original function tries to merge array items if they are objects
+ *
+ * @param {Object} target The target settings object
+ * @param {Object} src The source settings object
+ * @returns {Object} The merged settings object
+ */
+function mergeSettings(target, src) {
+  var array = Array.isArray(src);
+  var dst = array && [] || {};
+
+  if (array) {
+    target = target || [];
+    dst = dst.concat(target);
+    src.forEach(function (e, i) {
+      if (typeof target[i] === 'undefined') {
+        dst[i] = e;
+      } else {
+        if (target.indexOf(e) === -1) {
+          dst.push(e);
+        }
+      }
+    });
+  } else {
+    if (target && typeof target === 'object') {
+      Object.keys(target).forEach(function (key) {
+        dst[key] = target[key];
+      });
+    }
+    Object.keys(src).forEach(function (key) {
+      if (typeof src[key] !== 'object' || !src[key]) {
+        dst[key] = src[key];
+      }
+      else {
+        if (!target[key]) {
+          dst[key] = src[key]
+        } else {
+          dst[key] = mergeSettings(target[key], src[key])
+        }
+      }
+    });
+  }
+
+  return dst;
+}
\ No newline at end of file
diff --git a/test/loopback-dl.test.js b/test/loopback-dl.test.js
index 75c0115e..229d1526 100644
--- a/test/loopback-dl.test.js
+++ b/test/loopback-dl.test.js
@@ -649,6 +649,96 @@ describe('Load models from json', function () {
 
         done(null, customer);
     });
+
+  it('should be able to extend models with merged settings', function (done) {
+    var modelBuilder = new ModelBuilder();
+
+    var User = modelBuilder.define('User', {
+      name: String
+    }, {
+      defaultPermission: 'ALLOW',
+      acls: [
+        {
+          principalType: 'ROLE',
+          principalId: '$everyone',
+          permission: 'ALLOW'
+        }
+      ],
+      relations: {
+        posts: {
+          type: 'hasMany',
+          model:'Post'
+        }
+      }
+    });
+
+      var Customer = User.extend('Customer',
+        {customerId: {type: String, id: true}},
+        {
+          defaultPermission: 'DENY',
+          acls: [
+            {
+              principalType: 'ROLE',
+              principalId: '$unauthenticated',
+              permission: 'DENY'
+            }
+          ],
+          relations: {
+            orders: {
+              type: 'hasMany',
+              model:'Order'
+            }
+          }
+        }
+      );
+
+      assert.deepEqual(User.settings, {
+        defaultPermission: 'ALLOW',
+        acls: [
+          {
+            principalType: 'ROLE',
+            principalId: '$everyone',
+            permission: 'ALLOW'
+          }
+        ],
+        relations: {
+          posts: {
+            type: 'hasMany',
+            model:'Post'
+          }
+        },
+        strict: false
+      });
+
+      assert.deepEqual(Customer.settings, {
+        defaultPermission: 'DENY',
+        acls: [
+          {
+            principalType: 'ROLE',
+            principalId: '$everyone',
+            permission: 'ALLOW'
+          },
+          {
+            principalType: 'ROLE',
+            principalId: '$unauthenticated',
+            permission: 'DENY'
+          }
+        ],
+        relations: {
+          posts: {
+            type: 'hasMany',
+            model:'Post'
+          },
+          orders: {
+            type: 'hasMany',
+            model:'Order'
+          }
+        },
+        strict: false
+      });
+
+      done();
+    });
 });
 
 describe('DataSource constructor', function(){