diff --git a/api/konfig/builtinpluginconsts/varreference.go b/api/konfig/builtinpluginconsts/varreference.go
index 823745716..dbf2b45be 100644
--- a/api/konfig/builtinpluginconsts/varreference.go
+++ b/api/konfig/builtinpluginconsts/varreference.go
@@ -190,5 +190,7 @@ varReference:
   kind: StatefulSet
 
 - path: metadata/labels
+
+- path: metadata/annotations
 `
 )
diff --git a/api/krusty/variableref_test.go b/api/krusty/variableref_test.go
index 8ca85f9fc..37b9bf082 100644
--- a/api/krusty/variableref_test.go
+++ b/api/krusty/variableref_test.go
@@ -1157,6 +1157,8 @@ vars:
     name: my-deployment
     labels:
       my-label: $(NAMESPACE)
+    annotations:
+      my-annotation: $(NAMESPACE)
   spec:
     template:
       spec:
@@ -1176,6 +1178,8 @@ vars:
 apiVersion: apps/v1
 kind: Deployment
 metadata:
+  annotations:
+    my-annotation: my-namespace
   labels:
     my-label: my-namespace
   name: my-deployment