diff --git a/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.test.ts b/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.test.ts
index 2bced11900..2fa00336df 100644
--- a/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.test.ts
+++ b/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.test.ts
@@ -218,4 +218,58 @@ describe('fetch:template', () => {
       });
     });
   });
+
+  describe('cookiecutter compatibility mode', () => {
+    let context: ActionContext<FetchTemplateInput>;
+
+    beforeEach(async () => {
+      context = mockContext({
+        values: {
+          name: 'test-project',
+          count: 1234,
+          itemList: ['first', 'second', 'third'],
+        },
+        cookieCutterCompat: true,
+      });
+
+      mockFetchContents.mockImplementation(({ outputPath }) => {
+        mockFs({
+          [outputPath]: {
+            '{{ cookiecutter.name }}.txt': 'static content',
+            subdir: {
+              'templated-content.txt':
+                '{{ cookiecutter.name }}: {{ cookiecutter.count }}',
+            },
+            '{{ cookiecutter.name }}.json':
+              '{{ cookiecutter.itemList | jsonify }}',
+          },
+        });
+
+        return Promise.resolve();
+      });
+
+      await action.handler(context);
+    });
+
+    it('copies files with cookiecutter-style templated names successfully', async () => {
+      await expect(
+        fs.readFile(`${workspacePath}/target/test-project.txt`, 'utf-8'),
+      ).resolves.toEqual('static content');
+    });
+
+    it('copies files with cookiecutter-style templated content successfully', async () => {
+      await expect(
+        fs.readFile(
+          `${workspacePath}/target/subdir/templated-content.txt`,
+          'utf-8',
+        ),
+      ).resolves.toEqual('test-project: 1234');
+    });
+
+    it('includes the jsonify filter', async () => {
+      await expect(
+        fs.readFile(`${workspacePath}/target/test-project.json`, 'utf-8'),
+      ).resolves.toEqual('["first","second","third"]');
+    });
+  });
 });
diff --git a/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.ts b/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.ts
index f4cfacb175..e2f0047542 100644
--- a/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.ts
+++ b/plugins/scaffolder-backend/src/scaffolder/actions/builtin/fetch/template.ts
@@ -24,11 +24,25 @@ import globby from 'globby';
 import nunjucks from 'nunjucks';
 import fs from 'fs-extra';
 
+/*
+ * Maximise compatibility with Jinja (and therefore cookiecutter)
+ * using nunjucks jinja compat mode. Since this method mutates
+ * the global nunjucks instance, we can't enable this per-template,
+ * or only for templates with cookiecutter compat enabled, so the
+ * next best option is to explicitly enable it globally and allow
+ * folks to rely on jinja compatibility behaviour in fetch:template
+ * templates if they wish.
+ *
+ * cf. https://mozilla.github.io/nunjucks/api.html#installjinjacompat
+ */
+nunjucks.installJinjaCompat();
+
 export type FetchTemplateInput = {
   url: string;
   targetPath?: string;
   values: any;
   copyWithoutRender?: string[];
+  cookieCutterCompat?: boolean;
 };
 
 export function createFetchTemplateAction(options: {
@@ -72,6 +86,13 @@ export function createFetchTemplateAction(options: {
               type: 'string',
             },
           },
+          cookieCutterCompat: {
+            title: 'Cookiecutter compatibility mode',
+            // TODO(mtlewis): documentation for cookiecutter compat mode
+            description:
+              'Enable features to maximise compatibility with templates built for fetch:cookiecutter',
+            type: 'boolean',
+          },
           // TODO(mtlewis/orkohunter): do we need to replicate the template extensions support
           // from fetch:cookiecutter?
         },
@@ -109,8 +130,6 @@ export function createFetchTemplateAction(options: {
         outputPath: templateDir,
       });
 
-      // at this point the templateDir contains the unprocessed contents of the skeleton directory
-
       ctx.logger.info(
         'Fetched template, beginning templating process with values',
         ctx.input.values,
@@ -138,39 +157,51 @@ export function createFetchTemplateAction(options: {
         ).flat(),
       );
 
-      // Nice for Cookiecutter compat
-      //
-      // TODO(mtlewis/orkohunter): parameterize all jinja2/cookiecutter compat
-      // TODO(mtlewis): introduce "cookiecutter" prefix for input variables when
-      // compat is enabled?
-      nunjucks.installJinjaCompat();
+      ctx.logger.info(allEntriesInTemplate);
 
       // Create a templater
       const templater = nunjucks.configure({
         // TODO(mtlewis/orkohunter): Document Why we are changing the literals? Not here, but on scaffolder docs. ADR?
-        tags: {
-          variableStart: '${{',
-          variableEnd: '}}',
-        },
+        ...(ctx.input.cookieCutterCompat
+          ? {}
+          : {
+              tags: {
+                variableStart: '${{',
+                variableEnd: '}}',
+              },
+            }),
         // We don't want this builtin auto-escaping, since uses HTML escape sequences
         // like `&quot;` - the correct way to escape strings in our case depends on
         // the file type.
         autoescape: false,
       });
 
-      // TODO(mtlewis/orkohunter) Evaluate whether this behavior is still appropriate when using nunjucks.
-      // As of now jsonify seems to be the most reliable way to do escaping,
-      // but is there a builtin filter to do this inside nunjucks
-      // (other than `autoescape` inside `configure` which escapes strings as HTML, which isn't right.).
-      templater.addFilter('jsonify', s => JSON.stringify(s));
+      if (ctx.input.cookieCutterCompat) {
+        // The "jsonify" filter built into cookiecutter is common
+        // in fetch:cookiecutter templates, so when compat mode
+        // is enabled we alias the "dump" filter from nunjucks as
+        // jsonify. Dump accepts an optional `spaces` parameter
+        // which enables indented output, but when this parameter
+        // is not supplied it works identically to jsonify.
+        //
+        // cf. https://cookiecutter.readthedocs.io/en/latest/advanced/template_extensions.html?highlight=jsonify#jsonify-extension
+        // cf. https://mozilla.github.io/nunjucks/templating.html#dump
+        templater.addFilter('jsonify', templater.getFilter('dump'));
+      }
+
+      // Cookiecutter prefixes all parameters in templates with
+      // `cookiecutter.`. To replicate this, we wrap our parameters
+      // in an object with a `cookiecutter` property when compat
+      // mode is enabled.
+      const parameters = ctx.input.cookieCutterCompat
+        ? { cookiecutter: ctx.input.values }
+        : ctx.input.values;
 
       for (const location of allEntriesInTemplate) {
         const isTemplated = !nonTemplatedEntries.has(location);
         const outputPath = resolvePath(
           outputDir,
-          isTemplated
-            ? templater.renderString(location, ctx.input.values)
-            : location,
+          isTemplated ? templater.renderString(location, parameters) : location,
         );
 
         if (location.endsWith('/')) {
@@ -184,7 +215,7 @@ export function createFetchTemplateAction(options: {
           await fs.outputFile(
             outputPath,
             isTemplated
-              ? templater.renderString(inputFileContents, ctx.input.values)
+              ? templater.renderString(inputFileContents, parameters)
               : inputFileContents,
           );
         }