I can confirm this works on xenial after installing squashfuse.
root@clean-lark:~# lsb_release -a
No LSB modules are available.
Distributor ID: Ubuntu
Description: Ubuntu 16.04.1 LTS
Release: 16.04
Codename: xenial
root@clean-lark:~# uname -a
Linux clean-lark 4.4.0-63-generic #84-Ubuntu SMP Wed Feb 1 17:20:32 UTC 2017
x86_64 x86_64 x86_64 GNU/Linux
root@clean-lark:~# dpkg -l | grep -i 'apparmor\|snap\|squash'
ii apparmor 2.10.95-0ubuntu2.5 amd64
user-space parser utility for AppArmor
ii libapparmor-perl 2.10.95-0ubuntu2.5 amd64
AppArmor library Perl bindings
ii libapparmor1:amd64 2.10.95-0ubuntu2.5 amd64
changehat AppArmor library
ii snap-confine 2.21 amd64
Support executable to apply confinement for snappy apps
ii snapd 2.21 amd64
Tool to interact with Ubuntu Core Snappy.
ii squashfs-tools 1:4.3-3ubuntu2 amd64
Tool to create and append to squashfs filesystems
ii ubuntu-core-launcher 2.21 amd64
Launcher for ubuntu-core (snappy) apps
root@clean-lark:~# snap list
Name Version Rev Developer Notes
core 16.04.1 888 canonical -
hello-world 6.3 27 canonical -
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https://bugs.launchpad.net/bugs/1611078
Title:
Support snaps inside of lxd containers
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