diff --git a/new/builtin.jam b/new/builtin.jam
index 34b78ab0f..f90dfdc5f 100644
--- a/new/builtin.jam
+++ b/new/builtin.jam
@@ -65,8 +65,12 @@ rule compile-action ( targets + : sources * : action-name : properties * )
     
     rule adjust-properties ( properties * )
     {
-        ECHO "Gonna adjust includes for action " $(action) ;
-        return $(properties) ;
+        local dg = [ $(self.targets[1]).dg ] ;
+        local target-paths = [ $(dg).all-target-directories ] ;    
+        # Note that target-paths here are already relative to invocation
+        # directory, and can be used as-is.
+        
+        return $(properties) $(target-paths:G=include) ;
     }    
 }
 
diff --git a/new/targets.jam b/new/targets.jam
index d577d73cb..7764d2eef 100644
--- a/new/targets.jam
+++ b/new/targets.jam
@@ -214,8 +214,15 @@ rule main-target ( name : project )
         local pr = [ property.take free : [ property.remove incidental : 
                        [ project.attribute $(self.project) requirements ] ] ] ;
 
-        for local v in $(result)
+        # Process all vtargets that will be created if this main target
+        # is created.
+        local all-targets = 
+            [ sequence.transform virtual-target.traverse : $(result) ] ; 
+        local dg = [ new subvariant-dg "FIXME" : "FIXME" : $(all-targets) ] ;
+        for local v in $(all-targets)          
         {
+            $(v).dg $(dg) ;
+
             local action = [ $(v).action ] ;
             if $(action) 
             {
diff --git a/new/virtual-target.jam b/new/virtual-target.jam
index 2ba077fce..30c92ecaf 100644
--- a/new/virtual-target.jam
+++ b/new/virtual-target.jam
@@ -18,7 +18,7 @@ rule virtual-target ( name : type ? : project
 {
     self.name = $(name) ;
     self.type = $(type) ;
-    self.subvariant = $(subvariant) ;
+    self.subvariant = [ property.remove free incidental : $(subvariant) ] ;
     self.project = $(project) ;
 
     self.includes  = ;
@@ -70,12 +70,24 @@ rule virtual-target ( name : type ? : project
     # Returns the action currently set.
     rule action ( a ? )
     {
-        if $(a) {
+        if $(a) 
+        {
             self.action = $(a) ;
         }
         return $(self.action) ;
     }
 
+    # Sets the dependency graph this target is part of.
+    # 'dg' is an instance of 'subvariant-dg' class.
+    rule dg ( dg ? )
+    {
+        if $(dg)
+        {
+            self.dg = $(dg) ;
+        }
+        return $(self.dg) ;
+    }
+    
     # Specified an extra element to be added to the target path.
     rule extra-path ( p ) 
     {
@@ -102,10 +114,7 @@ rule virtual-target ( name : type ? : project
             local a = [ action ] ;
             if $(a) {
                 $(a).actualize ;
-                local path = [ path.join [ project.attribute $(self.project) location ] 
-                               "bin" [ property.as-path [ subvariant ] ] 
-                               $(self.extra-path) ] ;
-                path = [ path.native $(path) ] ;
+                local path = [ path ] ;
                 LOCATE on $(self.actual-name) = $(path) ;
                 DEPENDS $(self.actual-name) : $(path) ;
                 common.MkDir $(path) ;
@@ -189,6 +198,16 @@ rule virtual-target ( name : type ? : project
         }
         return $(self.actual-name) ;
     }
+    
+    # Returns the directory for this target
+    rule path ( )
+    {
+        local path = [ path.join [ project.attribute $(self.project) location ] 
+          "bin" [ property.as-path [ subvariant ] ] 
+            $(self.extra-path) ] ;
+        return [ path.native $(path) ] ;
+     }
+    
 }
 class virtual-target ;
 
@@ -249,7 +268,7 @@ rule action ( targets + : sources * : action-name : properties * )
             DEPENDS $(actual-targets) : $(actual-sources) ;
 
             $(self.action-name)
-              $(actual-targets) : $(actual-sources) : [ properties ] ;
+              $(actual-targets) : $(actual-sources) : $(properties) ;
         }        
     }    
     
@@ -259,7 +278,7 @@ rule action ( targets + : sources * : action-name : properties * )
     # its argument.
     rule adjust-properties ( properties * )
     {
-        return $(property) ;
+        return $(properties) ;
     }
     
     
@@ -339,6 +358,26 @@ rule register ( target )
     return $(result) ;
 }
 
+# Traverses the dependency graph of 'target' and return all targets that will
+# be created before this one is created.
+rule traverse ( target )
+{
+    local result ;
+    if [ $(target).action ]
+    {
+        local action = [ $(target).action ] ;
+        # This includes 'target' as well
+        result += [ $(action).targets ] ;
+
+        for local t in [ $(action).sources ] 
+        {
+            result += [ traverse $(t) ] ;
+        }        
+    }
+    return $(result) ;
+}
+
+
 # Clones a virtual target, copying all fields that can be set in ctor, setting
 # project of new targets to 'project'. 
 # If 'dont-recurse' is not set, clones action as well, which causes cloning
@@ -415,3 +454,23 @@ local rule clone-action-template ( action from cloned-from project name type suf
     
     return $(cloned) ;    
 }
+
+local rule subvariant-dg ( main-target : properties * : virtual-targets * )
+{
+    self.main-target = $(main-target) ;
+    self.properties = $(properties) ;
+    self.virtual-targets = $(virtual-targets) ;
+
+    rule all-target-directories ( )
+    {
+        local result ;
+        for local t in $(self.virtual-targets) 
+        {
+            result = [ sequence.merge $(result) : [ $(t).path ] ] ;
+        }
+        return $(result) ;                
+    }    
+}
+
+class subvariant-dg ;
+
diff --git a/test/dependency_test.py b/test/dependency_test.py
new file mode 100644
index 000000000..54e86a884
--- /dev/null
+++ b/test/dependency_test.py
@@ -0,0 +1,12 @@
+#!/usr/bin/python
+
+from BoostBuild import Tester, List
+
+t = Tester()
+
+t.set_tree("dependency-test")
+t.run_build_system()
+# Do not bother checking for created files now.
+
+
+t.cleanup()
diff --git a/test/test_all.py b/test/test_all.py
index 8bec314f4..19e34050d 100644
--- a/test/test_all.py
+++ b/test/test_all.py
@@ -19,3 +19,4 @@ import project_test1
 import project_test3
 import project_test4
 import generators_test
+import dependency_test
diff --git a/v2/build/targets.jam b/v2/build/targets.jam
index d577d73cb..7764d2eef 100644
--- a/v2/build/targets.jam
+++ b/v2/build/targets.jam
@@ -214,8 +214,15 @@ rule main-target ( name : project )
         local pr = [ property.take free : [ property.remove incidental : 
                        [ project.attribute $(self.project) requirements ] ] ] ;
 
-        for local v in $(result)
+        # Process all vtargets that will be created if this main target
+        # is created.
+        local all-targets = 
+            [ sequence.transform virtual-target.traverse : $(result) ] ; 
+        local dg = [ new subvariant-dg "FIXME" : "FIXME" : $(all-targets) ] ;
+        for local v in $(all-targets)          
         {
+            $(v).dg $(dg) ;
+
             local action = [ $(v).action ] ;
             if $(action) 
             {
diff --git a/v2/build/virtual-target.jam b/v2/build/virtual-target.jam
index 2ba077fce..30c92ecaf 100644
--- a/v2/build/virtual-target.jam
+++ b/v2/build/virtual-target.jam
@@ -18,7 +18,7 @@ rule virtual-target ( name : type ? : project
 {
     self.name = $(name) ;
     self.type = $(type) ;
-    self.subvariant = $(subvariant) ;
+    self.subvariant = [ property.remove free incidental : $(subvariant) ] ;
     self.project = $(project) ;
 
     self.includes  = ;
@@ -70,12 +70,24 @@ rule virtual-target ( name : type ? : project
     # Returns the action currently set.
     rule action ( a ? )
     {
-        if $(a) {
+        if $(a) 
+        {
             self.action = $(a) ;
         }
         return $(self.action) ;
     }
 
+    # Sets the dependency graph this target is part of.
+    # 'dg' is an instance of 'subvariant-dg' class.
+    rule dg ( dg ? )
+    {
+        if $(dg)
+        {
+            self.dg = $(dg) ;
+        }
+        return $(self.dg) ;
+    }
+    
     # Specified an extra element to be added to the target path.
     rule extra-path ( p ) 
     {
@@ -102,10 +114,7 @@ rule virtual-target ( name : type ? : project
             local a = [ action ] ;
             if $(a) {
                 $(a).actualize ;
-                local path = [ path.join [ project.attribute $(self.project) location ] 
-                               "bin" [ property.as-path [ subvariant ] ] 
-                               $(self.extra-path) ] ;
-                path = [ path.native $(path) ] ;
+                local path = [ path ] ;
                 LOCATE on $(self.actual-name) = $(path) ;
                 DEPENDS $(self.actual-name) : $(path) ;
                 common.MkDir $(path) ;
@@ -189,6 +198,16 @@ rule virtual-target ( name : type ? : project
         }
         return $(self.actual-name) ;
     }
+    
+    # Returns the directory for this target
+    rule path ( )
+    {
+        local path = [ path.join [ project.attribute $(self.project) location ] 
+          "bin" [ property.as-path [ subvariant ] ] 
+            $(self.extra-path) ] ;
+        return [ path.native $(path) ] ;
+     }
+    
 }
 class virtual-target ;
 
@@ -249,7 +268,7 @@ rule action ( targets + : sources * : action-name : properties * )
             DEPENDS $(actual-targets) : $(actual-sources) ;
 
             $(self.action-name)
-              $(actual-targets) : $(actual-sources) : [ properties ] ;
+              $(actual-targets) : $(actual-sources) : $(properties) ;
         }        
     }    
     
@@ -259,7 +278,7 @@ rule action ( targets + : sources * : action-name : properties * )
     # its argument.
     rule adjust-properties ( properties * )
     {
-        return $(property) ;
+        return $(properties) ;
     }
     
     
@@ -339,6 +358,26 @@ rule register ( target )
     return $(result) ;
 }
 
+# Traverses the dependency graph of 'target' and return all targets that will
+# be created before this one is created.
+rule traverse ( target )
+{
+    local result ;
+    if [ $(target).action ]
+    {
+        local action = [ $(target).action ] ;
+        # This includes 'target' as well
+        result += [ $(action).targets ] ;
+
+        for local t in [ $(action).sources ] 
+        {
+            result += [ traverse $(t) ] ;
+        }        
+    }
+    return $(result) ;
+}
+
+
 # Clones a virtual target, copying all fields that can be set in ctor, setting
 # project of new targets to 'project'. 
 # If 'dont-recurse' is not set, clones action as well, which causes cloning
@@ -415,3 +454,23 @@ local rule clone-action-template ( action from cloned-from project name type suf
     
     return $(cloned) ;    
 }
+
+local rule subvariant-dg ( main-target : properties * : virtual-targets * )
+{
+    self.main-target = $(main-target) ;
+    self.properties = $(properties) ;
+    self.virtual-targets = $(virtual-targets) ;
+
+    rule all-target-directories ( )
+    {
+        local result ;
+        for local t in $(self.virtual-targets) 
+        {
+            result = [ sequence.merge $(result) : [ $(t).path ] ] ;
+        }
+        return $(result) ;                
+    }    
+}
+
+class subvariant-dg ;
+
diff --git a/v2/test/dependency_test.py b/v2/test/dependency_test.py
new file mode 100644
index 000000000..54e86a884
--- /dev/null
+++ b/v2/test/dependency_test.py
@@ -0,0 +1,12 @@
+#!/usr/bin/python
+
+from BoostBuild import Tester, List
+
+t = Tester()
+
+t.set_tree("dependency-test")
+t.run_build_system()
+# Do not bother checking for created files now.
+
+
+t.cleanup()
diff --git a/v2/test/test_all.py b/v2/test/test_all.py
index 8bec314f4..19e34050d 100644
--- a/v2/test/test_all.py
+++ b/v2/test/test_all.py
@@ -19,3 +19,4 @@ import project_test1
 import project_test3
 import project_test4
 import generators_test
+import dependency_test
diff --git a/v2/tools/builtin.jam b/v2/tools/builtin.jam
index 34b78ab0f..f90dfdc5f 100644
--- a/v2/tools/builtin.jam
+++ b/v2/tools/builtin.jam
@@ -65,8 +65,12 @@ rule compile-action ( targets + : sources * : action-name : properties * )
     
     rule adjust-properties ( properties * )
     {
-        ECHO "Gonna adjust includes for action " $(action) ;
-        return $(properties) ;
+        local dg = [ $(self.targets[1]).dg ] ;
+        local target-paths = [ $(dg).all-target-directories ] ;    
+        # Note that target-paths here are already relative to invocation
+        # directory, and can be used as-is.
+        
+        return $(properties) $(target-paths:G=include) ;
     }    
 }