diff --git a/src/sbt-test/dependency-management/parent-ivy-settings/changes/ivysettings.xml b/src/sbt-test/dependency-management/parent-ivy-settings/changes/ivysettings.xml
new file mode 100644
index 000000000..7afecf7af
--- /dev/null
+++ b/src/sbt-test/dependency-management/parent-ivy-settings/changes/ivysettings.xml
@@ -0,0 +1,7 @@
+<ivysettings>
+	<settings defaultResolver="lag"/>
+	<caches defaultCacheDir="${ivy.settings.dir}/target/cache"/>
+	<resolvers>
+		<ibiblio name="lag" m2compatible="true" root="http://www.lag.net/repo/"/>
+	</resolvers>
+</ivysettings> 
\ No newline at end of file
diff --git a/src/sbt-test/dependency-management/parent-ivy-settings/project/build.properties b/src/sbt-test/dependency-management/parent-ivy-settings/project/build.properties
new file mode 100644
index 000000000..ad36054d5
--- /dev/null
+++ b/src/sbt-test/dependency-management/parent-ivy-settings/project/build.properties
@@ -0,0 +1,2 @@
+project.version=1.0
+project.name=Settings Test
\ No newline at end of file
diff --git a/src/sbt-test/dependency-management/parent-ivy-settings/project/build/SettingsTest.scala b/src/sbt-test/dependency-management/parent-ivy-settings/project/build/SettingsTest.scala
new file mode 100644
index 000000000..11fa48fcb
--- /dev/null
+++ b/src/sbt-test/dependency-management/parent-ivy-settings/project/build/SettingsTest.scala
@@ -0,0 +1,11 @@
+import sbt._
+
+class SettingsTest(info: ProjectInfo) extends DefaultProject(info)
+{
+	val child = project("sub", "Sub", new SubProject(_))
+
+	class SubProject(info: ProjectInfo) extends DefaultProject(info)
+	{
+		val configgy = "net.lag" % "configgy" % "1.1"
+	}
+}
\ No newline at end of file
diff --git a/src/sbt-test/dependency-management/parent-ivy-settings/test b/src/sbt-test/dependency-management/parent-ivy-settings/test
new file mode 100644
index 000000000..86e43b4a1
--- /dev/null
+++ b/src/sbt-test/dependency-management/parent-ivy-settings/test
@@ -0,0 +1,23 @@
+> update
+[failure]
+> clean-lib
+[success]
+$ copy-file changes/ivysettings.xml sub/ivysettings.xml
+[success]
+
+> update
+[success]
+> clean-lib
+[success]
+
+$ delete sub/ivysettings.xml
+[success]
+> update
+[failure]
+> clean-lib
+[success]
+
+$ copy-file changes/ivysettings.xml ivysettings.xml
+[success]
+> update
+[success]
\ No newline at end of file