diff --git a/new/project-root.jam b/new/project-root.jam
index cd1dc283c..0fa2393c8 100644
--- a/new/project-root.jam
+++ b/new/project-root.jam
@@ -153,6 +153,8 @@ rule project-root-object (
         {
             case path :
                 value = [ path.root [ path.native $(value) ] $(self.location) ] ;
+                # Now make the value absolute path
+                value = [ path.root $(value) [ path.pwd ] ] ;
         }
         if ! $(name) in $(self.constants)
         {
diff --git a/test/stage.py b/test/stage.py
index 4089daa9c..3b65cc4d1 100644
--- a/test/stage.py
+++ b/test/stage.py
@@ -31,4 +31,25 @@ t.expect_addition("ds/a.dll")
 t.run_build_system("release")
 t.expect_addition("rs/a.dll")
 
+# Test the <location> property in subprojects. 
+# Thanks to Kirill Lapshin for bug report.
+
+t.write("project-root.jam", """
+path-constant DIST : dist ;
+""")
+t.write("Jamfile", "build-project d ;")
+t.write("d/Jamfile","""
+exe a : a.cpp ;
+stage dist : a : <location>$(DIST) ;
+""")
+t.write("d/a.cpp", "int main() { return 0;}\n")
+
+t.run_build_system()
+t.expect_addition("dist/a.exe")
+
+t.rm("dist")
+t.run_build_system(subdir="d")
+t.expect_addition("dist/a.exe")
+
+
 t.cleanup()
diff --git a/v2/project-root.jam b/v2/project-root.jam
index cd1dc283c..0fa2393c8 100644
--- a/v2/project-root.jam
+++ b/v2/project-root.jam
@@ -153,6 +153,8 @@ rule project-root-object (
         {
             case path :
                 value = [ path.root [ path.native $(value) ] $(self.location) ] ;
+                # Now make the value absolute path
+                value = [ path.root $(value) [ path.pwd ] ] ;
         }
         if ! $(name) in $(self.constants)
         {
diff --git a/v2/test/stage.py b/v2/test/stage.py
index 4089daa9c..3b65cc4d1 100644
--- a/v2/test/stage.py
+++ b/v2/test/stage.py
@@ -31,4 +31,25 @@ t.expect_addition("ds/a.dll")
 t.run_build_system("release")
 t.expect_addition("rs/a.dll")
 
+# Test the <location> property in subprojects. 
+# Thanks to Kirill Lapshin for bug report.
+
+t.write("project-root.jam", """
+path-constant DIST : dist ;
+""")
+t.write("Jamfile", "build-project d ;")
+t.write("d/Jamfile","""
+exe a : a.cpp ;
+stage dist : a : <location>$(DIST) ;
+""")
+t.write("d/a.cpp", "int main() { return 0;}\n")
+
+t.run_build_system()
+t.expect_addition("dist/a.exe")
+
+t.rm("dist")
+t.run_build_system(subdir="d")
+t.expect_addition("dist/a.exe")
+
+
 t.cleanup()