diff --git a/src/metpy/xarray.py b/src/metpy/xarray.py
index b6650b4caa..2c8aa6413a 100644
--- a/src/metpy/xarray.py
+++ b/src/metpy/xarray.py
@@ -835,9 +835,10 @@ def parse_cf(self, varname=None, coordinates=None):
 
         # Attempt to build the crs coordinate
         crs = None
-        if 'grid_mapping' in var.attrs:
-            # Use given CF grid_mapping
-            proj_name = var.attrs['grid_mapping']
+
+        # Check both raw attribute and xarray-handled and moved to encoding
+        proj_name = var.encoding.get('grid_mapping', var.attrs.get('grid_mapping'))
+        if proj_name is not None:
             try:
                 proj_var = self._dataset.variables[proj_name]
             except KeyError:
diff --git a/tests/test_xarray.py b/tests/test_xarray.py
index 2571944f80..7a5513ad25 100644
--- a/tests/test_xarray.py
+++ b/tests/test_xarray.py
@@ -18,10 +18,11 @@
                           grid_deltas_from_dataarray, preprocess_and_wrap)
 
 
-@pytest.fixture
-def test_ds():
+@pytest.fixture(params=[True, 'all'])
+def test_ds(request):
     """Provide an xarray dataset for testing."""
-    return xr.open_dataset(get_test_data('narr_example.nc', as_file_obj=False))
+    return xr.open_dataset(get_test_data('narr_example.nc', as_file_obj=False),
+                           decode_coords=request.param)
 
 
 @pytest.fixture
@@ -47,7 +48,8 @@ def test_var(test_ds):
 def test_var_multidim_full(test_ds):
     """Provide a variable with x/y coords and multidimensional lat/lon auxiliary coords."""
     return (test_ds[{'isobaric': [6, 12], 'y': [95, 96], 'x': [122, 123]}]
-            .squeeze().set_coords(['lat', 'lon'])['Temperature'])
+            .squeeze().drop_vars('Lambert_Conformal')
+            .set_coords(['lat', 'lon'])['Temperature'])
 
 
 @pytest.fixture
@@ -676,11 +678,6 @@ def test_find_axis_number_bad_identifier(test_var):
     assert 'axis is not valid' in str(exc.value)
 
 
-def test_cf_parse_with_grid_mapping(test_var):
-    """Test cf_parse dont delete grid_mapping attribute."""
-    assert test_var.grid_mapping == 'Lambert_Conformal'
-
-
 def test_data_array_loc_get_with_units(test_var):
     """Test the .loc indexer on the metpy accessor."""
     truth = test_var.loc[:, 850.]