diff --git a/news/431.bugfix b/news/431.bugfix
new file mode 100644
index 000000000..19af09c97
--- /dev/null
+++ b/news/431.bugfix
@@ -0,0 +1 @@
+Fix bug where interpolations were unnecessarily resolved during merge
diff --git a/omegaconf/basecontainer.py b/omegaconf/basecontainer.py
index 05d1d2f02..4f7eabbf3 100644
--- a/omegaconf/basecontainer.py
+++ b/omegaconf/basecontainer.py
@@ -281,6 +281,10 @@ def _map_merge(dest: "BaseContainer", src: "BaseContainer") -> None:
         assert isinstance(src, DictConfig)
         src_type = src._metadata.object_type
 
+        # if source DictConfig is an interpolation set the DictConfig one to be the same interpolation.
+        if src._is_interpolation():
+            dest._set_value(src._value())
+            return
         # if source DictConfig is missing set the DictConfig one to be missing too.
         if src._is_missing():
             dest._set_value("???")
@@ -298,7 +302,7 @@ def expand(node: Container) -> None:
                 else:
                     node._set_value(type_)
 
-        if dest._is_missing():
+        if dest._is_interpolation() or dest._is_missing():
             expand(dest)
 
         for key, src_value in src.items_ex(resolve=False):
@@ -387,12 +391,11 @@ def _merge_with(
             if isinstance(self, DictConfig) and isinstance(other, DictConfig):
                 BaseContainer._map_merge(self, other)
             elif isinstance(self, ListConfig) and isinstance(other, ListConfig):
-                if self._is_none() or self._is_missing() or self._is_interpolation():
-                    self.__dict__["_content"] = []
-                else:
-                    self.__dict__["_content"].clear()
+                self.__dict__["_content"] = []
 
-                if other._is_missing():
+                if other._is_interpolation():
+                    self._set_value(other._value())
+                elif other._is_missing():
                     self._set_value("???")
                 elif other._is_none():
                     self._set_value(None)
@@ -577,7 +580,9 @@ def _is_none(self) -> bool:
 
     def _is_missing(self) -> bool:
         try:
-            self._dereference_node(throw_on_missing=True)
+            self._dereference_node(
+                throw_on_resolution_failure=False, throw_on_missing=True
+            )
             return False
         except MissingMandatoryValue:
             ret = True
diff --git a/tests/__init__.py b/tests/__init__.py
index 72faaa35f..aff8302d2 100644
--- a/tests/__init__.py
+++ b/tests/__init__.py
@@ -154,3 +154,13 @@ class SubscriptedList:
 @dataclass
 class SubscriptedDict:
     dict: Dict[str, int] = field(default_factory=lambda: {"foo": 4})
+
+
+@dataclass
+class InterpolationList:
+    list: List[float] = II("optimization.lr")
+
+
+@dataclass
+class InterpolationDict:
+    dict: Dict[str, int] = II("optimization.lr")
diff --git a/tests/test_merge.py b/tests/test_merge.py
index 5944f4db3..b4daa1196 100644
--- a/tests/test_merge.py
+++ b/tests/test_merge.py
@@ -23,6 +23,8 @@
     ConfWithMissingDict,
     Group,
     IllegalType,
+    InterpolationDict,
+    InterpolationList,
     MissingDict,
     MissingList,
     Package,
@@ -484,3 +486,51 @@ def test_merge_allow_objects() -> None:
     cfg._set_flag("allow_objects", True)
     ret = OmegaConf.merge(cfg, {"foo": iv})
     assert ret == {"a": 10, "foo": iv}
+
+
+@pytest.mark.parametrize(  # type:ignore
+    "dst, other, expected, node",
+    [
+        pytest.param(
+            OmegaConf.structured(InterpolationList),
+            OmegaConf.create({"list": [0.1]}),
+            {"list": [0.1]},
+            "list",
+            id="merge_interpolation_list_with_list",
+        ),
+        pytest.param(
+            OmegaConf.structured(InterpolationDict),
+            OmegaConf.create({"dict": {"a": 4}}),
+            {"dict": {"a": 4}},
+            "dict",
+            id="merge_interpolation_dict_with_dict",
+        ),
+    ],
+)
+def test_merge_with_src_as_interpolation(
+    dst: Any, other: Any, expected: Any, node: Any
+) -> None:
+    res = OmegaConf.merge(dst, other)
+    assert res == expected
+
+
+@pytest.mark.parametrize(  # type:ignore
+    "dst, other, node",
+    [
+        pytest.param(
+            OmegaConf.structured(InterpolationDict),
+            OmegaConf.structured(InterpolationDict),
+            "dict",
+            id="merge_interpolation_dict_with_interpolation_dict",
+        ),
+        pytest.param(
+            OmegaConf.structured(InterpolationList),
+            OmegaConf.structured(InterpolationList),
+            "list",
+            id="merge_interpolation_list_with_interpolation_list",
+        ),
+    ],
+)
+def test_merge_with_other_as_interpolation(dst: Any, other: Any, node: Any) -> None:
+    res = OmegaConf.merge(dst, other)
+    assert OmegaConf.is_interpolation(res, node)