diff --git a/driver/iverilog.man b/driver/iverilog.man
index bbf275b1c..23139fbfb 100644
--- a/driver/iverilog.man
+++ b/driver/iverilog.man
@@ -1,4 +1,4 @@
-.TH iverilog 1 "April 22nd, 2008" "" "Version 0.9.devel"
+.TH iverilog 1 "February 4th, 2009" "" "Version 0.9.devel"
 .SH NAME
 iverilog - Icarus Verilog compiler
 
@@ -81,6 +81,13 @@ include directory after all other explicit include directories. This
 standard include directory is a convenient place to install standard
 header files that a Verilog program may include.
 .TP 8
+.B -grelative-include\fI|\fP-gno-relative-include
+Enable or disable (default) adding the local files directory to
+the beginning of the include file search path. This allows files
+to be included relative to the current file not the more common
+files are only found in the working directory or in the specified
+include file search path.
+.TP 8
 .B -gxtypes\fI|\fP-gno-xtypes
 Enable (default) or disable support for extended types. Enabling
 extended types allows for new types that are supported by Icarus
diff --git a/driver/main.c b/driver/main.c
index 31e2190ed..96997d437 100644
--- a/driver/main.c
+++ b/driver/main.c
@@ -120,6 +120,10 @@ const char*gen_system_verilog = "no-system-verilog";
 /* Boolean: true means use a default include dir, false means don't */
 int gen_std_include = 1;
 
+/* Boolean: true means add the local file directory to the start
+   of the include list. */
+int gen_relative_include = 0;
+
 char warning_flags[16] = "";
 
 unsigned integer_width = 32;
@@ -594,6 +598,12 @@ int process_generation(const char*name)
 
       else if (strcmp(name,"no-std-include") == 0)
 	     gen_std_include = 0;
+      
+      else if (strcmp(name,"relative-include") == 0)
+	    gen_relative_include = 1;
+      
+      else if (strcmp(name,"no-relative-include") == 0)
+	    gen_relative_include = 0;
 
       else if (strcmp(name,"io-range-error") == 0)
 	    gen_io_range_error = "io-range-error";
@@ -613,7 +623,7 @@ int process_generation(const char*name)
       else if (strcmp(name,"no-verilog-ams") == 0)
 	    gen_verilog_ams = "no-verilog-ams";
       
-	  else if (strcmp(name,"system-verilog") == 0)
+      else if (strcmp(name,"system-verilog") == 0)
 	    gen_system_verilog = "system-verilog";
 
       else {
@@ -627,10 +637,11 @@ int process_generation(const char*name)
 		            "    specify | no-specify\n"
 		            "    verilog-ams | no-verilog-ams\n"
 		            "    std-include | no-std-include\n"
+		            "    relative-include | no-relative-include\n"
 		            "    xtypes | no-xtypes\n"
 		            "    icarus-misc | no-icarus-misc\n"
 		            "    io-range-error | no-io-range-error\n"
-                    "    strict-ca-eval | no-strict-ca-eval\n"
+		            "    strict-ca-eval | no-strict-ca-eval\n"
 					"    system-verilog\n");
 	    return 1;
       }
@@ -941,7 +952,13 @@ int main(int argc, char **argv)
 	   specifically disabled, then write that directory as the
 	   very last include directory to use... always. */
       if (gen_std_include) {
-	    fprintf(defines_file, "I:%s%cinclude", base, sep);
+	    fprintf(defines_file, "I:%s%cinclude\n", base, sep);
+      }
+
+      if (gen_relative_include) {
+	    fprintf(defines_file, "relative include:true\n");
+      } else {
+	    fprintf(defines_file, "relative include:false\n");
       }
 
       fclose(source_file);
diff --git a/ivlpp/globals.h b/ivlpp/globals.h
index 623baa54a..129db8bcc 100644
--- a/ivlpp/globals.h
+++ b/ivlpp/globals.h
@@ -1,7 +1,7 @@
 #ifndef __globals_H
 #define __globals_H
 /*
- * Copyright (c) 1999-2008 Stephen Williams (steve@icarus.com)
+ * Copyright (c) 1999-2009 Stephen Williams (steve@icarus.com)
  *
  *    This source code is free software; you can redistribute it
  *    and/or modify it in source code form under the terms of the GNU
@@ -34,6 +34,8 @@ extern void dump_precompiled_defines(FILE*out);
 extern char**include_dir;
 extern unsigned include_cnt;
 
+extern int relative_include;
+
 /* This flag is true if #line directives are to be generated. */
 extern int line_direct_flag;
 
diff --git a/ivlpp/lexor.lex b/ivlpp/lexor.lex
index 25ce19777..dbe9371b5 100644
--- a/ivlpp/lexor.lex
+++ b/ivlpp/lexor.lex
@@ -1422,8 +1422,7 @@ static void output_init()
 
 static void include_filename()
 {
-    if(standby)
-    {
+    if(standby) {
         emit_pathline(istack);
         fprintf
         (
@@ -1443,14 +1442,11 @@ static void include_filename()
 static void do_include()
 {
     /* standby is defined by include_filename() */
-    if (standby->path[0] == '/')
-    {
+    if (standby->path[0] == '/') {
         if ((standby->file = fopen(standby->path, "r")))
             goto code_that_switches_buffers;
-    }
-    else
-    {
-        unsigned idx, start = 0;
+    } else {
+        unsigned idx, start = 1;
         char path[4096];
         char *cp;
 
@@ -1458,20 +1454,18 @@ static void do_include()
         strcpy(path, istack->path);
         cp = strrchr(path, '/');
 
-        if (cp == 0)
-            start = 1;  /* A base file so already in [1] */
-        else
-        {
+        /* I may need the relative path for a planned warning even when
+         * we are not in relative mode, so for now keep it around. */
+        if (cp != 0) {
             *cp = '\0';
             include_dir[0] = strdup(path);
+            if (relative_include) start = 0;
         }
 
-        for (idx = start ;  idx < include_cnt ;  idx += 1)
-        {
+        for (idx = start ;  idx < include_cnt ;  idx += 1) {
             sprintf(path, "%s/%s", include_dir[idx], standby->path);
 
-            if ((standby->file = fopen(path, "r")))
-            {
+            if ((standby->file = fopen(path, "r"))) {
                 /* Free the original path before we overwrite it. */
                 free(standby->path);
                 standby->path = strdup(path);
diff --git a/ivlpp/main.c b/ivlpp/main.c
index 15fa23907..5a3e3ee84 100644
--- a/ivlpp/main.c
+++ b/ivlpp/main.c
@@ -83,6 +83,8 @@ void add_source_file(const char*name)
 char**include_dir = 0;
 unsigned include_cnt = 0;
 
+int relative_include = 0;
+
 int line_direct_flag = 0;
 
 unsigned error_count = 0;
@@ -151,6 +153,13 @@ static int flist_read_flags(const char*path)
 			dep_path = strdup(arg);
 		  }
 
+	    } else if (strcmp(cp,"relative include") == 0) {
+		  if (strcmp(arg, "true") == 0) {
+			relative_include = 1;
+		  } else {
+			relative_include = 0;
+		  }
+
 	    } else {
 		  fprintf(stderr, "%s: Invalid keyword %s\n", path, cp);
 	    }