diff --git a/common/lib/capa/capa/capa_problem.py b/common/lib/capa/capa/capa_problem.py
index 00d3badd5e..e4997db1c6 100644
--- a/common/lib/capa/capa/capa_problem.py
+++ b/common/lib/capa/capa/capa_problem.py
@@ -92,6 +92,7 @@ class LoncapaSystem(object):
         seed,      # Why do we do this if we have self.seed?
         STATIC_URL,                                     # pylint: disable=invalid-name
         xqueue,
+        matlab_api_key=None
     ):
         self.ajax_url = ajax_url
         self.anonymous_student_id = anonymous_student_id
@@ -105,6 +106,7 @@ class LoncapaSystem(object):
         self.seed = seed                     # Why do we do this if we have self.seed?
         self.STATIC_URL = STATIC_URL                    # pylint: disable=invalid-name
         self.xqueue = xqueue
+        self.matlab_api_key = matlab_api_key
 
 
 class LoncapaProblem(object):
diff --git a/common/lib/capa/capa/inputtypes.py b/common/lib/capa/capa/inputtypes.py
index 13627ae0f6..5b906d71cc 100644
--- a/common/lib/capa/capa/inputtypes.py
+++ b/common/lib/capa/capa/inputtypes.py
@@ -783,14 +783,10 @@ class MatlabInput(CodeInput):
     """
     InputType for handling Matlab code input
 
-    TODO: API_KEY will go away once we have a way to specify it per-course
     Example:
      <matlabinput rows="10" cols="80" tabsize="4">
         Initial Text
-        <plot_payload>
-          %api_key=API_KEY
-        </plot_payload>
-    </matlabinput>
+     </matlabinput>
     """
     template = "matlabinput.html"
     tags = ['matlabinput']
@@ -807,8 +803,21 @@ class MatlabInput(CodeInput):
         self.setup_code_response_rendering()
 
         xml = self.xml
-        self.plot_payload = xml.findtext('./plot_payload')
 
+        # the new way to define the api key is to set it in the course advanced settings
+        api_key = getattr(self.capa_system, 'matlab_api_key', None)
+        if api_key:
+            plot_payload = '%api_key={}'.format(api_key)
+        else:
+            plot_payload = ''
+
+        # the old way to define api_key is to add it to the plot_payload xml.
+        # are there other things that go in the payload?
+        xml_payload = xml.findtext('./plot_payload')
+        if xml_payload:
+            plot_payload += '\n{}'.format(xml_payload)
+
+        self.plot_payload = plot_payload
         # Check if problem has been queued
         self.queuename = 'matlab'
         self.queue_msg = ''
diff --git a/common/lib/capa/capa/responsetypes.py b/common/lib/capa/capa/responsetypes.py
index 5b65fb3870..0adbed7eb3 100644
--- a/common/lib/capa/capa/responsetypes.py
+++ b/common/lib/capa/capa/responsetypes.py
@@ -1876,10 +1876,14 @@ class CodeResponse(LoncapaResponse):
             self.answer (an answer to display to the student in the LMS)
             self.payload
         """
-        # Note that CodeResponse is agnostic to the specific contents of
-        # grader_payload
         grader_payload = codeparam.find('grader_payload')
         grader_payload = grader_payload.text if grader_payload is not None else ''
+        # matlab api key can be defined in course settings. if so, add it to the grader payload
+        # only if the problem didn't have an api key already defined.
+        api_key = getattr(self.capa_system, 'matlab_api_key', None)
+        if self.xml.find('matlabinput') and api_key and 'api_key' not in grader_payload:
+            grader_payload += '\n%api_key={}'.format(api_key)
+
         self.payload = {'grader_payload': grader_payload}
 
         self.initial_display = find_with_default(
diff --git a/common/lib/capa/capa/tests/test_inputtypes.py b/common/lib/capa/capa/tests/test_inputtypes.py
index 81acd89afc..ebf8506281 100644
--- a/common/lib/capa/capa/tests/test_inputtypes.py
+++ b/common/lib/capa/capa/tests/test_inputtypes.py
@@ -628,6 +628,21 @@ class MatlabTest(unittest.TestCase):
         context = the_input._get_render_context()
         self.assertEqual(the_input.status, 'unsubmitted')
 
+    def test_matlab_api_key(self):
+        """
+        Test that api_key ends up in the xqueue payload
+        """
+        elt = etree.fromstring(self.xml)
+        system = test_capa_system()
+        system.matlab_api_key = 'test_api_key'
+        the_input = lookup_tag('matlabinput')(system, elt, {})
+
+        data = {'submission': 'x = 1234;'}
+        response = the_input.handle_ajax("plot", data)
+
+        body = system.xqueue['interface'].send_to_queue.call_args[1]['body']
+        payload = json.loads(body)
+        self.assertIn('%api_key=test_api_key', payload['grader_payload'])
 
     def test_get_html(self):
         # usual output
diff --git a/common/lib/xmodule/xmodule/capa_base.py b/common/lib/xmodule/xmodule/capa_base.py
index 45f79df373..a2e73469e6 100644
--- a/common/lib/xmodule/xmodule/capa_base.py
+++ b/common/lib/xmodule/xmodule/capa_base.py
@@ -189,6 +189,7 @@ class CapaFields(object):
         default=False,
         scope=Scope.settings
     )
+    matlab_api_key = String(help="API key for Matlab problems", scope=Scope.settings)
 
 
 class CapaMixin(CapaFields):
@@ -292,6 +293,7 @@ class CapaMixin(CapaFields):
             seed=self.runtime.seed,      # Why do we do this if we have self.seed?
             STATIC_URL=self.runtime.STATIC_URL,
             xqueue=self.runtime.xqueue,
+            matlab_api_key=self.matlab_api_key
         )
 
         return LoncapaProblem(
diff --git a/common/lib/xmodule/xmodule/modulestore/inheritance.py b/common/lib/xmodule/xmodule/modulestore/inheritance.py
index 6555c94d29..0fb8a63915 100644
--- a/common/lib/xmodule/xmodule/modulestore/inheritance.py
+++ b/common/lib/xmodule/xmodule/modulestore/inheritance.py
@@ -86,7 +86,10 @@ class InheritanceMixin(XBlockMixin):
               "If the value is not set, infinite attempts are allowed."),
         values={"min": 0}, scope=Scope.settings
     )
-
+    matlab_api_key = String(
+        help="API key for Matlab problems",
+        scope=Scope.settings
+    )
 
 
 def compute_inherited_metadata(descriptor):