--- a/src/lexer.l
+++ b/src/lexer.l
@@ -298,12 +298,51 @@ int cfg_lexer_include(cfg_t *cfg, const char *filename)
     cfg_include_stack[cfg_include_stack_ptr].line = cfg->line;
     cfg_include_stack_ptr++;
 
-    xfilename = cfg_tilde_expand(filename);
+    xfilename = NULL;
+
+    if(filename[0] != '/'
+       && filename[0] != '~'
+       /* ensure that the existing file has directories in it */
+#ifdef _WIN32
+       && (strchr(cfg->filename, '\\')
+	   || strchr(cfg->filename, '/'))
+#else
+       && cfg->filename[0] == '/'
+#endif
+       )
+      /* then this path is relative to the file it was included from */
+      {
+	char *lastslash;
+	size_t prefixlen;
+
+	lastslash = strrchr(cfg->filename, '/');
+#ifdef _WIN32
+	{
+	  char *win32slash;
+
+	  win32slash = strrchr(cfg->filename, '\\');
+	  if(!lastslash
+	     || win32slash > lastslash)
+	    lastslash = win32slash;
+	}
+#endif
+	assert(lastslash);
+	prefixlen = lastslash - cfg->filename + 1; /* length of prefix including slash */
+	xfilename = malloc(prefixlen
+			   + strlen(filename)
+			   + 1); /* NULL terminator */
+	assert(xfilename);
+	strncpy(xfilename, cfg->filename, prefixlen);
+	strcpy(xfilename + prefixlen, filename);
+      }
+
+    if(!xfilename)
+      xfilename = cfg_tilde_expand(filename);
 
     cfg_yyin = fopen(xfilename, "r");
 
     if(!cfg_yyin) {
-        cfg_error(cfg, "%s: %s", xfilename, strerror(errno));
+        cfg_error(cfg, "%s (expanded from %s): %s", xfilename, filename, strerror(errno));
         free(xfilename);
         return 1;
     }