diff --git a/src/build/build-request.jam b/src/build/build-request.jam
index 8f26de0d3..2614b0615 100644
--- a/src/build/build-request.jam
+++ b/src/build/build-request.jam
@@ -32,9 +32,7 @@ rule expand-no-defaults ( property-sets * )
     # Now combine all of the expanded property-sets
     local product = [ x-product $(expanded-property-sets) : $(feature-space) ] ;
     
-    return [ 
-      sequence.transform apply-to-property-set feature.expand-composites
-        : $(product) ] ;
+    return $(product) ;
 }
 
 # implementaiton of x-product, below
diff --git a/src/build/property-set.jam b/src/build/property-set.jam
index 283f3191c..4f85c049b 100644
--- a/src/build/property-set.jam
+++ b/src/build/property-set.jam
@@ -104,7 +104,17 @@ local rule property-set ( raw-properties * )
         }
         return $(self.refined.$(ps)) ;
     }
-        
+    
+    rule expand-composites ( )
+    {
+        if ! $(self.composites)
+        {
+            self.composites = [ property-set.create
+                [ feature.expand-composites $(self.raw) ] ] ;
+        }
+        return $(self.composites) ;
+    }
+                
     rule evaluate-conditionals ( context ? )
     {
         context ?= $(__name__) ;
diff --git a/src/build/targets.jam b/src/build/targets.jam
index de3998c3e..ad740735c 100644
--- a/src/build/targets.jam
+++ b/src/build/targets.jam
@@ -412,6 +412,7 @@ rule main-target ( name : project )
         local result ;
         for local p in $(all-property-sets)
         {
+            p = [ $(p).expand-composites ] ;
             p = [ $(p).add-defaults ] ;
             local r = [ generate-really $(p) ] ;
             usage-requirements = [ $(usage-requirements).add $(r[1]) ] ;
diff --git a/test/property_expansion.py b/test/property_expansion.py
new file mode 100644
index 000000000..88f1495d3
--- /dev/null
+++ b/test/property_expansion.py
@@ -0,0 +1,34 @@
+#!/usr/bin/python
+
+#  Copyright (C) Vladimir Prus 2003. Permission to copy, use, modify, sell and
+#  distribute this software is granted provided this copyright notice appears in
+#  all copies. This software is provided "as is" without express or implied
+#  warranty, and with no claim as to its suitability for any purpose.
+
+from BoostBuild import Tester, List
+
+# Test that free property inside 
+t = Tester()
+
+t.write("project-root.jam", """
+project ;
+
+variant debug-AA : debug : <define>AA ;
+
+alias all : hello ;
+exe hello : hello.cpp ;
+explicit hello ;
+""")
+t.write("hello.cpp", """
+#ifdef AA
+int main()
+{
+    return 0;
+}
+#endif
+""")
+
+t.run_build_system("debug-AA")
+
+
+t.cleanup()
diff --git a/test/test_all.py b/test/test_all.py
index 6bbcbfc2a..d3a3fde89 100644
--- a/test/test_all.py
+++ b/test/test_all.py
@@ -99,6 +99,7 @@ tests = [ "project_test1",
           "c_file",
           "inline",
           "conditionals2",
+          "property_expansion",
 	  ]
 
 if os.name == 'posix':