diff --git a/bootstrap.bash b/bootstrap.bash
index f6056d653..c4c7e35c1 100755
--- a/bootstrap.bash
+++ b/bootstrap.bash
@@ -1,7 +1,27 @@
 #!/bin/bash
 
-export BOOTSTRAP="${BASH_SOURCE[0]}"
-export SRCDIR=$(dirname "${BASH_SOURCE[0]}")
+set -e
+
+ORIG_SRCDIR=$(dirname "${BASH_SOURCE[0]}")
+if [[ "$ORIG_SRCDIR" != "." ]]; then
+  if [[ ! -z "$BUILDDIR" ]]; then
+    echo "error: To use BUILDDIR, run from the source directory"
+    exit 1
+  fi
+  if [[ ${ORIG_SRCDIR:0:1} == '/' ]]; then
+    export BUILDDIR=$PWD
+  else
+    export BUILDDIR=$(python -c "import os; print os.path.relpath('.', '$ORIG_SRCDIR')")
+  fi
+  cd $ORIG_SRCDIR
+fi
+if [[ -z "$BUILDDIR" ]]; then
+  echo "error: Run ${BASH_SOURCE[0]} from the build output directory"
+  exit 1
+fi
+export SRCDIR="."
+export BOOTSTRAP="${SRCDIR}/bootstrap.bash"
+
 export TOPNAME="Android.bp"
 export BOOTSTRAP_MANIFEST="${SRCDIR}/build/soong/build.ninja.in"
 export RUN_TESTS="-t"
@@ -21,16 +41,25 @@ export GOROOT="${SRCDIR}/prebuilts/go/$PREBUILTOS/"
 export GOARCH="amd64"
 export GOCHAR="6"
 
-if [[ $(find . -maxdepth 1 -name $(basename "${BOOTSTRAP}")) ]]; then
-  echo "FAILED: Tried to run "$(basename "${BOOTSTRAP}")" from "$(pwd)""
-  exit 1
-fi
-
 if [[ $# -eq 0 ]]; then
-    sed -e "s|@@SrcDir@@|${SRCDIR}|" \
+    mkdir -p $BUILDDIR
+
+    if [[ $(find $BUILDDIR -maxdepth 1 -name Android.bp) ]]; then
+      echo "FAILED: The build directory must not be a source directory"
+      exit 1
+    fi
+
+    if [[ ${BUILDDIR:0:1} == '/' ]]; then
+      export SRCDIR_FROM_BUILDDIR=$PWD
+    else
+      export SRCDIR_FROM_BUILDDIR=$(python -c "import os; print os.path.relpath('.', '$BUILDDIR')")
+    fi
+
+    sed -e "s|@@BuildDir@@|${BUILDDIR}|" \
+        -e "s|@@SrcDirFromBuildDir@@|${SRCDIR_FROM_BUILDDIR}|" \
         -e "s|@@PrebuiltOS@@|${PREBUILTOS}|" \
-        "${SRCDIR}/build/soong/soong.bootstrap.in" > .soong.bootstrap
-    ln -sf "${SRCDIR}/build/soong/soong.bash" soong
+        "$SRCDIR/build/soong/soong.bootstrap.in" > $BUILDDIR/.soong.bootstrap
+    ln -sf "${SRCDIR_FROM_BUILDDIR}/build/soong/soong.bash" $BUILDDIR/soong
 fi
 
-"${SRCDIR}/build/blueprint/bootstrap.bash" "$@"
+"$SRCDIR/build/blueprint/bootstrap.bash" "$@"
diff --git a/build.ninja.in b/build.ninja.in
index cf585f566..d46df7030 100644
--- a/build.ninja.in
+++ b/build.ninja.in
@@ -32,7 +32,7 @@ g.bootstrap.srcDir = @@SrcDir@@
 builddir = ${g.bootstrap.buildDir}/.minibootstrap
 
 rule g.bootstrap.bootstrap
-    command = ${g.bootstrap.bootstrapCmd} -i ${in} -b ${g.bootstrap.buildDir}
+    command = BUILDDIR=${g.bootstrap.buildDir} ${g.bootstrap.bootstrapCmd} -i ${in}
     description = bootstrap ${in}
     generator = true
 
diff --git a/cc/arm64_device.go b/cc/arm64_device.go
index 887e1a4ca..b818ce423 100644
--- a/cc/arm64_device.go
+++ b/cc/arm64_device.go
@@ -61,7 +61,7 @@ func init() {
 	pctx.StaticVariable("arm64GccVersion", "4.9")
 
 	pctx.StaticVariable("arm64GccRoot",
-		"${SrcDir}/prebuilts/gcc/${HostPrebuiltTag}/aarch64/aarch64-linux-android-${arm64GccVersion}")
+		"prebuilts/gcc/${HostPrebuiltTag}/aarch64/aarch64-linux-android-${arm64GccVersion}")
 
 	pctx.StaticVariable("arm64GccTriple", "aarch64-linux-android")
 
diff --git a/cc/arm_device.go b/cc/arm_device.go
index 58553b2bd..15f09135c 100644
--- a/cc/arm_device.go
+++ b/cc/arm_device.go
@@ -135,7 +135,7 @@ func init() {
 	pctx.StaticVariable("armGccVersion", "4.9")
 
 	pctx.StaticVariable("armGccRoot",
-		"${SrcDir}/prebuilts/gcc/${HostPrebuiltTag}/arm/arm-linux-androideabi-${armGccVersion}")
+		"prebuilts/gcc/${HostPrebuiltTag}/arm/arm-linux-androideabi-${armGccVersion}")
 
 	pctx.StaticVariable("armGccTriple", "arm-linux-androideabi")
 
diff --git a/cc/builder.go b/cc/builder.go
index d6d1a02c7..9c9bddd82 100644
--- a/cc/builder.go
+++ b/cc/builder.go
@@ -140,12 +140,14 @@ func TransformSourceToObj(ctx common.AndroidModuleContext, subdir string, srcFil
 
 	for i, srcFile := range srcFiles {
 		var objFile string
-		if strings.HasPrefix(srcFile, srcRoot) {
-			objFile = strings.TrimPrefix(srcFile, srcRoot)
-			objFile = filepath.Join(objDir, objFile)
-		} else if strings.HasPrefix(srcFile, intermediatesRoot) {
+		if strings.HasPrefix(srcFile, intermediatesRoot) {
 			objFile = strings.TrimPrefix(srcFile, intermediatesRoot)
 			objFile = filepath.Join(objDir, "gen", objFile)
+		} else if strings.HasPrefix(srcFile, srcRoot) {
+			srcFile, _ = filepath.Rel(srcRoot, srcFile)
+			objFile = filepath.Join(objDir, srcFile)
+		} else if srcRoot == "." && srcFile[0] != '/' {
+			objFile = filepath.Join(objDir, srcFile)
 		} else {
 			ctx.ModuleErrorf("source file %q is not in source directory %q", srcFile, srcRoot)
 			continue
diff --git a/cc/cc.go b/cc/cc.go
index 398a06563..34a1a56e2 100644
--- a/cc/cc.go
+++ b/cc/cc.go
@@ -64,8 +64,8 @@ var (
 	HostPrebuiltTag = pctx.VariableConfigMethod("HostPrebuiltTag", common.Config.PrebuiltOS)
 	SrcDir          = pctx.VariableConfigMethod("SrcDir", common.Config.SrcDir)
 
-	LibcRoot = pctx.StaticVariable("LibcRoot", "${SrcDir}/bionic/libc")
-	LibmRoot = pctx.StaticVariable("LibmRoot", "${SrcDir}/bionic/libm")
+	LibcRoot = pctx.StaticVariable("LibcRoot", "bionic/libc")
+	LibmRoot = pctx.StaticVariable("LibmRoot", "bionic/libm")
 )
 
 // Flags used by lots of devices.  Putting them in package static variables will save bytes in
diff --git a/cmd/soong_build/main.go b/cmd/soong_build/main.go
index 65194020a..254f92252 100644
--- a/cmd/soong_build/main.go
+++ b/cmd/soong_build/main.go
@@ -35,7 +35,7 @@ func main() {
 
 	ctx := soong.NewContext()
 
-	configuration, err := common.NewConfig(srcDir)
+	configuration, err := common.NewConfig(srcDir, bootstrap.BuildDir)
 	if err != nil {
 		fmt.Fprintf(os.Stderr, "%s", err)
 		os.Exit(1)
@@ -44,5 +44,5 @@ func main() {
 	// Temporary hack
 	//ctx.SetIgnoreUnknownModuleTypes(true)
 
-	bootstrap.Main(ctx, configuration, common.ConfigFileName, common.ProductVariablesFileName)
+	bootstrap.Main(ctx, configuration, configuration.ConfigFileName, configuration.ProductVariablesFileName)
 }
diff --git a/common/config.go b/common/config.go
index f8231f073..a7675b979 100644
--- a/common/config.go
+++ b/common/config.go
@@ -24,8 +24,8 @@ import (
 )
 
 // The configuration file name
-const ConfigFileName = "soong.config"
-const ProductVariablesFileName = "soong.variables"
+const configFileName = "soong.config"
+const productVariablesFileName = "soong.variables"
 
 // A FileConfigurableOptions contains options which can be configured by the
 // config file. These will be included in the config struct.
@@ -46,7 +46,11 @@ type config struct {
 	FileConfigurableOptions
 	ProductVariables productVariables
 
-	srcDir string // the path of the root source directory
+	ConfigFileName           string
+	ProductVariablesFileName string
+
+	srcDir   string // the path of the root source directory
+	buildDir string // the path of the build output directory
 
 	envLock   sync.Mutex
 	envDeps   map[string]string
@@ -58,12 +62,12 @@ type jsonConfigurable interface {
 }
 
 func loadConfig(config *config) error {
-	err := loadFromConfigFile(&config.FileConfigurableOptions, ConfigFileName)
+	err := loadFromConfigFile(&config.FileConfigurableOptions, config.ConfigFileName)
 	if err != nil {
 		return err
 	}
 
-	return loadFromConfigFile(&config.ProductVariables, ProductVariablesFileName)
+	return loadFromConfigFile(&config.ProductVariables, config.ProductVariablesFileName)
 }
 
 // loads configuration options from a JSON file in the cwd.
@@ -120,12 +124,16 @@ func saveToConfigFile(config jsonConfigurable, filename string) error {
 
 // New creates a new Config object.  The srcDir argument specifies the path to
 // the root source directory. It also loads the config file, if found.
-func NewConfig(srcDir string) (Config, error) {
+func NewConfig(srcDir, buildDir string) (Config, error) {
 	// Make a config with default options
 	config := Config{
 		config: &config{
-			srcDir:  srcDir,
-			envDeps: make(map[string]string),
+			ConfigFileName:           filepath.Join(buildDir, configFileName),
+			ProductVariablesFileName: filepath.Join(buildDir, productVariablesFileName),
+
+			srcDir:   srcDir,
+			buildDir: buildDir,
+			envDeps:  make(map[string]string),
 		},
 	}
 
@@ -142,8 +150,12 @@ func (c *config) SrcDir() string {
 	return c.srcDir
 }
 
+func (c *config) BuildDir() string {
+	return c.buildDir
+}
+
 func (c *config) IntermediatesDir() string {
-	return ".intermediates"
+	return filepath.Join(c.BuildDir(), ".intermediates")
 }
 
 // PrebuiltOS returns the name of the host OS used in prebuilts directories
@@ -204,12 +216,12 @@ func (c *config) DeviceName() string {
 
 // DeviceOut returns the path to out directory for device targets
 func (c *config) DeviceOut() string {
-	return filepath.Join("target/product", c.DeviceName())
+	return filepath.Join(c.BuildDir(), "target/product", c.DeviceName())
 }
 
 // HostOut returns the path to out directory for host targets
 func (c *config) HostOut() string {
-	return filepath.Join("host", c.PrebuiltOS())
+	return filepath.Join(c.BuildDir(), "host", c.PrebuiltOS())
 }
 
 // HostBin returns the path to bin directory for host targets
diff --git a/common/env.go b/common/env.go
index 3214baa8f..8694c28aa 100644
--- a/common/env.go
+++ b/common/env.go
@@ -15,6 +15,8 @@
 package common
 
 import (
+	"path/filepath"
+
 	"android/soong"
 	"android/soong/env"
 
@@ -41,7 +43,7 @@ type envSingleton struct{}
 func (c *envSingleton) GenerateBuildActions(ctx blueprint.SingletonContext) {
 	envDeps := ctx.Config().(Config).EnvDeps()
 
-	envFile := ".soong.environment"
+	envFile := filepath.Join(ctx.Config().(Config).BuildDir(), ".soong.environment")
 
 	err := env.WriteEnvFile(envFile, envDeps)
 	if err != nil {
diff --git a/soong.bash b/soong.bash
index 778f5e0a3..782b0b76e 100755
--- a/soong.bash
+++ b/soong.bash
@@ -1,13 +1,14 @@
 #!/bin/bash
 
-# Determine the build directory location based on the location of this script.
-BPBUILD="${BASH_SOURCE[0]}"
-BUILDDIR=`dirname "${BASH_SOURCE[0]}"`
-BOOTSTRAP="${BUILDDIR}/.soong.bootstrap"
+set -e
+
+# Switch to the build directory
+cd $(dirname "${BASH_SOURCE[0]}")
 
 # The source directory path and operating system will get written to
 # .soong.bootstrap by the bootstrap script.
 
+BOOTSTRAP=".soong.bootstrap"
 if [ ! -f "${BOOTSTRAP}" ]; then
     echo "Error: soong script must be located in a directory created by bootstrap.bash"
     exit 1
@@ -15,13 +16,9 @@ fi
 
 source "${BOOTSTRAP}"
 
-if [[ ${SRCDIR_IN:0:1} == '/' ]]; then
-    # SRCDIR_IN is an absolute path
-    SRCDIR="${SRCDIR_IN}"
-else
-    # SRCDIR_IN is a relative path
-    SRCDIR="${BUILDDIR}/${SRCDIR_IN}"
-fi
+# Now switch to the source directory so that all the relative paths from
+# $BOOTSTRAP are correct
+cd ${SRCDIR_FROM_BUILDDIR}
 
 # Let Blueprint know that the Ninja we're using performs multiple passes that
 # can regenerate the build manifest.
@@ -44,4 +41,4 @@ if [ -f "${ENVFILE}" ]; then
     fi
 fi
 
-"${SRCDIR}/prebuilts/ninja/${PREBUILTOS}/ninja" -C "${BUILDDIR}" "$@"
+"prebuilts/ninja/${PREBUILTOS}/ninja" -f "${BUILDDIR}/build.ninja" "$@"
diff --git a/soong.bootstrap.in b/soong.bootstrap.in
index 79e4a655d..be71d15c5 100644
--- a/soong.bootstrap.in
+++ b/soong.bootstrap.in
@@ -1,2 +1,3 @@
-SRCDIR_IN="@@SrcDir@@"
+BUILDDIR="@@BuildDir@@"
+SRCDIR_FROM_BUILDDIR="@@SrcDirFromBuildDir@@"
 PREBUILTOS="@@PrebuiltOS@@"