diff --git a/providers/pcep/tunnel/src/test/java/org/onosproject/provider/pcep/tunnel/impl/PcepTunnelAddedTest.java b/providers/pcep/tunnel/src/test/java/org/onosproject/provider/pcep/tunnel/impl/PcepTunnelAddedTest.java
new file mode 100644
index 0000000..76f2bb0
--- /dev/null
+++ b/providers/pcep/tunnel/src/test/java/org/onosproject/provider/pcep/tunnel/impl/PcepTunnelAddedTest.java
@@ -0,0 +1,329 @@
+/*
+ * Copyright 2016-present Open Networking Laboratory
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+package org.onosproject.provider.pcep.tunnel.impl;
+
+import static org.hamcrest.MatcherAssert.assertThat;
+import static org.hamcrest.core.Is.is;
+import static org.onosproject.incubator.net.tunnel.Tunnel.Type.MPLS;
+import static org.onosproject.incubator.net.tunnel.Tunnel.State.INIT;
+import static org.onosproject.provider.pcep.tunnel.impl.PcepAnnotationKeys.BANDWIDTH;
+import static org.onosproject.provider.pcep.tunnel.impl.PcepAnnotationKeys.LOCAL_LSP_ID;
+import static org.onosproject.provider.pcep.tunnel.impl.PcepAnnotationKeys.LSP_SIG_TYPE;
+import static org.onosproject.provider.pcep.tunnel.impl.PcepAnnotationKeys.PCC_TUNNEL_ID;
+import static org.onosproject.provider.pcep.tunnel.impl.PcepAnnotationKeys.PLSP_ID;
+import static org.onosproject.provider.pcep.tunnel.impl.LspType.WITHOUT_SIGNALLING_AND_WITHOUT_SR;
+
+import java.io.IOException;
+import java.util.Collection;
+import java.util.Collections;
+import java.util.HashMap;
+import java.util.HashSet;
+
+import org.jboss.netty.buffer.ChannelBuffer;
+import org.jboss.netty.buffer.ChannelBuffers;
+import org.junit.After;
+import org.junit.Before;
+import org.junit.Test;
+import org.onlab.packet.IpAddress;
+import org.onosproject.cfg.ComponentConfigAdapter;
+import org.onosproject.core.ApplicationId;
+import org.onosproject.incubator.net.tunnel.DefaultTunnel;
+import org.onosproject.incubator.net.tunnel.IpTunnelEndPoint;
+import org.onosproject.incubator.net.tunnel.Tunnel;
+import org.onosproject.incubator.net.tunnel.TunnelDescription;
+import org.onosproject.incubator.net.tunnel.TunnelEndPoint;
+import org.onosproject.incubator.net.tunnel.TunnelId;
+import org.onosproject.incubator.net.tunnel.TunnelName;
+import org.onosproject.incubator.net.tunnel.TunnelProvider;
+import org.onosproject.incubator.net.tunnel.TunnelProviderService;
+import org.onosproject.incubator.net.tunnel.Tunnel.State;
+import org.onosproject.net.DefaultAnnotations;
+import org.onosproject.net.ElementId;
+import org.onosproject.net.Path;
+import org.onosproject.net.SparseAnnotations;
+import org.onosproject.pcepio.exceptions.PcepOutOfBoundMessageException;
+import org.onosproject.pcepio.exceptions.PcepParseException;
+import org.onosproject.pcepio.protocol.PcepFactories;
+import org.onosproject.pcepio.protocol.PcepMessage;
+import org.onosproject.pcepio.protocol.PcepMessageReader;
+import org.onosproject.pcep.controller.ClientCapability;
+import org.onosproject.pcep.controller.PccId;
+
+import com.google.common.collect.ImmutableSet;
+
+/**
+ * Tests handling of PCEP report message.
+ */
+public class PcepTunnelAddedTest {
+
+    static final String PROVIDER_ID = "org.onosproject.provider.tunnel.pcep";
+    PcepTunnelProvider tunnelProvider = new PcepTunnelProvider();
+    private final MockTunnelProviderRegistryAdapter registry = new MockTunnelProviderRegistryAdapter();
+    private final PcepClientControllerAdapter controller = new PcepClientControllerAdapter();
+    private final PcepControllerAdapter ctl = new PcepControllerAdapter();
+    private final PcepTunnelApiMapper pcepTunnelAPIMapper = new PcepTunnelApiMapper();
+    private final MockTunnelServiceAdapter tunnelService = new MockTunnelServiceAdapter();
+
+    private class MockTunnelProviderRegistryAdapter extends TunnelProviderRegistryAdapter {
+        public long tunnelIdCounter;
+
+        @Override
+        public TunnelProviderService register(TunnelProvider provider) {
+            this.provider = provider;
+            return new TestProviderService();
+        }
+
+        private class TestProviderService implements TunnelProviderService {
+
+            @Override
+            public TunnelProvider provider() {
+                return null;
+            }
+
+            @Override
+            public TunnelId tunnelAdded(TunnelDescription tunnel) {
+                return TunnelId.valueOf(String.valueOf(++tunnelIdCounter));
+            }
+
+            @Override
+            public TunnelId tunnelAdded(TunnelDescription tunnel, State state) {
+                return TunnelId.valueOf(String.valueOf(++tunnelIdCounter));
+            }
+
+            @Override
+            public void tunnelRemoved(TunnelDescription tunnel) {
+            }
+
+            @Override
+            public void tunnelUpdated(TunnelDescription tunnel) {
+            }
+
+            @Override
+            public void tunnelUpdated(TunnelDescription tunnel, State state) {
+            }
+
+            @Override
+            public Tunnel tunnelQueryById(TunnelId tunnelId) {
+                return null;
+            }
+        }
+    }
+
+    private class MockTunnelServiceAdapter extends TunnelServiceAdapter {
+        private HashMap<TunnelId, Tunnel> tunnelIdAsKeyStore = new HashMap<>();
+        private int tunnelIdCounter = 0;
+
+        @Override
+        public TunnelId setupTunnel(ApplicationId producerId, ElementId srcElementId, Tunnel tunnel, Path path) {
+            TunnelId tunnelId = TunnelId.valueOf(String.valueOf(++tunnelIdCounter));
+            tunnelIdAsKeyStore.put(tunnelId, tunnel);
+            return tunnelId;
+        }
+
+        @Override
+        public Collection<Tunnel> queryTunnel(TunnelEndPoint src, TunnelEndPoint dst) {
+            Collection<Tunnel> result = new HashSet<>();
+            Tunnel tunnel = null;
+            for (TunnelId tunnelId : tunnelIdAsKeyStore.keySet()) {
+                tunnel = tunnelIdAsKeyStore.get(tunnelId);
+
+                if ((null != tunnel) && (src.equals(tunnel.src())) && (dst.equals(tunnel.dst()))) {
+                    result.add(tunnel);
+                }
+            }
+
+            return result.isEmpty() ? Collections.emptySet() : ImmutableSet.copyOf(result);
+        }
+
+        @Override
+        public Collection<Tunnel> queryAllTunnels() {
+            Collection<Tunnel> result = new HashSet<>();
+
+            for (TunnelId tunnelId : tunnelIdAsKeyStore.keySet()) {
+                result.add(tunnelIdAsKeyStore.get(tunnelId));
+            }
+
+            return result.isEmpty() ? Collections.emptySet() : ImmutableSet.copyOf(result);
+
+        }
+    }
+
+    @Before
+    public void preSetup() {
+        tunnelProvider.tunnelProviderRegistry = registry;
+        tunnelProvider.pcepClientController = controller;
+        tunnelProvider.controller = ctl;
+        tunnelProvider.pcepTunnelApiMapper = pcepTunnelAPIMapper;
+        tunnelProvider.cfgService = new ComponentConfigAdapter();
+        tunnelProvider.tunnelService = tunnelService;
+        tunnelProvider.service = registry.register(tunnelProvider);
+        tunnelProvider.activate();
+    }
+
+    /**
+     * Tests PCRpt msg with sync flag set.
+     */
+    @Test
+    public void tunnelProviderAddedTest1() throws PcepParseException, PcepOutOfBoundMessageException {
+        byte[] reportMsg = new byte[] {0x20, 0x0a, 0x00, (byte) 0x84,
+                0x21, 0x10, 0x00, 0x14,  0x00, 0x00, 0x00, 0x00,  0x00, 0x00, 0x00, 0x01, //SRP object
+                0x00, 0x1c, 0x00, 0x04, // PATH-SETUP-TYPE TLV
+                0x00, 0x00, 0x00, 0x02,
+                0x20, 0x10, 0x00, 0x24, 0x00, 0x00, 0x10, 0x03, //LSP object
+                0x00, 0x11, 0x00, 0x02, 0x54, 0x31, 0x00, 0x00, //symbolic path tlv
+                0x00, 0x12, 0x00, 0x10, // IPv4-LSP-IDENTIFIER-TLV
+                0x01, 0x01, 0x01, 0x01,
+                0x00, 0x01, 0x00, 0x01,
+                0x01, 0x01, 0x01, 0x01,
+                0x05, 0x05, 0x05, 0x05,
+
+                0x07, 0x10, 0x00, 0x14, //ERO object
+                0x01, 0x08, (byte) 0x01, 0x01, 0x01, 0x01, 0x04, 0x00, // ERO IPv4 sub objects
+                0x01, 0x08, (byte) 0x05, 0x05, 0x05, 0x05, 0x04, 0x00,
+
+                0x08, 0x10, 0x00, 0x34, //RRO object
+                0x01, 0x08, 0x11, 0x01, 0x01, 0x01, 0x04, 0x00, // RRO IPv4 sub objects
+                0x01, 0x08, 0x11, 0x01, 0x01, 0x02, 0x04, 0x00,
+                0x01, 0x08, 0x06, 0x06, 0x06, 0x06, 0x04, 0x00,
+                0x01, 0x08, 0x12, 0x01, 0x01, 0x02, 0x04, 0x00,
+                0x01, 0x08, 0x12, 0x01, 0x01, 0x01, 0x04, 0x00,
+                0x01, 0x08, 0x05, 0x05, 0x05, 0x05, 0x04, 0x00
+                };
+
+        ChannelBuffer buffer = ChannelBuffers.dynamicBuffer();
+        buffer.writeBytes(reportMsg);
+
+        PcepMessageReader<PcepMessage> reader = PcepFactories.getGenericReader();
+        PcepMessage message = reader.readFrom(buffer);
+        controller.processClientMessage(PccId.pccId(IpAddress.valueOf("1.1.1.1")), message);
+
+        assertThat(registry.tunnelIdCounter, is((long) 1));
+    }
+
+    /**
+     * Tests updating an existing tunnel on receiving asynchronous PCRpt msg,
+     * i.e. without any SRP id.
+     */
+    @Test
+    public void tunnelProviderAddedTest2() throws PcepParseException, PcepOutOfBoundMessageException {
+        byte[] reportMsg = new byte[] {0x20, 0x0a, 0x00, (byte) 0x50,
+                                       0x21, 0x10, 0x00, 0x14, //SRP object
+                                       0x00, 0x00, 0x00, 0x00,
+                                       0x00, 0x00, 0x00, 0x00,
+                                       0x00, 0x1c, 0x00, 0x04, // PATH-SETUP-TYPE TLV
+                                       0x00, 0x00, 0x00, 0x02,
+                                       0x20, 0x10, 0x00, 0x24, 0x00, 0x00, 0x10, 0x19, //LSP object
+                                       0x00, 0x11, 0x00, 0x02, 0x54, 0x31, 0x00, 0x00, //symbolic path TLV
+                                       0x00, 0x12, 0x00, 0x10, // IPv4-LSP-IDENTIFIER-TLV
+                                       0x4e, 0x1f, 0x04, 0x00,
+                                       0x00, 0x01, 0x00, 0x01,
+                                       0x4e, 0x1f, 0x04, 0x00,
+                                       0x4e, 0x20, 0x04, 0x00,
+                                       0x07, 0x10, 0x00, 0x14, //ERO object
+                                       0x01, 0x08, (byte) 0xb6, 0x02, 0x4e, 0x1f, 0x04, 0x00, // ERO IPv4 sub objects
+                                       0x01, 0x08, (byte) 0xb6, 0x02, 0x4e, 0x20, 0x04, 0x00,
+                                       };
+
+        ChannelBuffer buffer = ChannelBuffers.dynamicBuffer();
+        buffer.writeBytes(reportMsg);
+
+        PcepMessageReader<PcepMessage> reader = PcepFactories.getGenericReader();
+        PcepMessage message = reader.readFrom(buffer);
+
+        // create an existing tunnel.
+        IpTunnelEndPoint tunnelEndPointSrc = IpTunnelEndPoint.ipTunnelPoint(IpAddress.valueOf(0x4e1f0400));
+        IpTunnelEndPoint tunnelEndPointDst = IpTunnelEndPoint.ipTunnelPoint(IpAddress.valueOf(0x4e200400));
+
+        SparseAnnotations annotations = DefaultAnnotations.builder()
+                .set(BANDWIDTH, (new Integer(1)).toString())
+                .set(LSP_SIG_TYPE, WITHOUT_SIGNALLING_AND_WITHOUT_SR.name())
+                .set(PCC_TUNNEL_ID, String.valueOf(1))
+                .set(PLSP_ID, String.valueOf(1))
+                .set(LOCAL_LSP_ID, String.valueOf(1)).build();
+
+        Tunnel tunnel = new DefaultTunnel(null, tunnelEndPointSrc, tunnelEndPointDst, MPLS, INIT, null, null,
+                                          TunnelName.tunnelName("T123"), null, annotations);
+        tunnelService.setupTunnel(null, null, tunnel, null);
+
+        PccId pccId = PccId.pccId(IpAddress.valueOf(0x4e1f0400));
+        controller.getClient(pccId).setCapability(new ClientCapability(true, true, true));
+        controller.getClient(pccId).setIsSyncComplete(true);
+
+        // Process update message.
+        controller.processClientMessage(pccId, message);
+        assertThat(tunnelService.queryAllTunnels().size(), is(1));
+    }
+
+    /**
+     * Tests adding a new tunnel on receiving asynchronous PCRpt msg,
+     * i.e. without any SRP id.
+     */
+    @Test
+    public void tunnelProviderAddedTest3() throws PcepParseException, PcepOutOfBoundMessageException {
+        byte[] reportMsg = new byte[] {0x20, 0x0a, 0x00, (byte) 0x84,
+                                       0x21, 0x10, 0x00, 0x14, //SRP object
+                                       0x00, 0x00, 0x00, 0x00,
+                                       0x00, 0x00, 0x00, 0x00,
+                                       0x00, 0x1c, 0x00, 0x04, // PATH-SETUP-TYPE TLV
+                                       0x00, 0x00, 0x00, 0x02,
+                                       0x20, 0x10, 0x00, 0x24, 0x00, 0x00, 0x10, 0x19, // LSP object
+                                       0x00, 0x11, 0x00, 0x02, 0x54, 0x31, 0x00, 0x00, // symbolic path TLV
+                                       0x00, 0x12, 0x00, 0x10, // IPv4-LSP-IDENTIFIER-TLV
+                                       0x01, 0x01, 0x01, 0x01,
+                                       0x00, 0x01, 0x00, 0x01,
+                                       0x01, 0x01, 0x01, 0x01,
+                                       0x05, 0x05, 0x05, 0x05,
+
+                                       0x07, 0x10, 0x00, 0x14, //ERO object
+                                       0x01, 0x08, (byte) 0x01, 0x01, 0x01, 0x01, 0x04, 0x00, // ERO IPv4 sub objects
+                                       0x01, 0x08, (byte) 0x05, 0x05, 0x05, 0x05, 0x04, 0x00,
+
+                                       0x08, 0x10, 0x00, 0x34, //RRO object
+                                       0x01, 0x08, 0x11, 0x01, 0x01, 0x01, 0x04, 0x00, // RRO IPv4 sub objects
+                                       0x01, 0x08, 0x11, 0x01, 0x01, 0x02, 0x04, 0x00,
+                                       0x01, 0x08, 0x06, 0x06, 0x06, 0x06, 0x04, 0x00,
+                                       0x01, 0x08, 0x12, 0x01, 0x01, 0x02, 0x04, 0x00,
+                                       0x01, 0x08, 0x12, 0x01, 0x01, 0x01, 0x04, 0x00,
+                                       0x01, 0x08, 0x05, 0x05, 0x05, 0x05, 0x04, 0x00
+                                       };
+
+        ChannelBuffer buffer = ChannelBuffers.dynamicBuffer();
+        buffer.writeBytes(reportMsg);
+
+        PcepMessageReader<PcepMessage> reader = PcepFactories.getGenericReader();
+        PcepMessage message = reader.readFrom(buffer);
+
+        PccId pccId = PccId.pccId(IpAddress.valueOf("1.1.1.1"));
+        controller.getClient(pccId).setIsSyncComplete(true);
+        controller.getClient(pccId).setCapability(new ClientCapability(true, true, true));
+        controller.processClientMessage(pccId, message);
+
+        assertThat(registry.tunnelIdCounter, is((long) 1));
+    }
+
+    @After
+    public void tearDown() throws IOException {
+        tunnelProvider.deactivate();
+        tunnelProvider.controller = null;
+        tunnelProvider.pcepClientController = null;
+        tunnelProvider.tunnelProviderRegistry = null;
+
+        tunnelProvider.pcepTunnelApiMapper = null;
+        tunnelProvider.cfgService = null;
+        tunnelProvider.tunnelService = null;
+        tunnelProvider.service = null;
+    }
+}