diff --git a/v2/build-system.jam b/v2/build-system.jam
index f33155295..c0551767e 100755
--- a/v2/build-system.jam
+++ b/v2/build-system.jam
@@ -122,7 +122,10 @@ if --version in [ modules.peek : ARGV ]
 # We always load project in "." so that 'use-project' directives has
 # any chance of been seen. Otherwise, we won't be able to refer to
 # subprojects using target ids.
-current-project = [ project.target [ project.load "." ] ] ;
+if [ project.find "." : "." ]
+{    
+    current-project = [ project.target [ project.load "." ] ] ;
+}    
 
 if ! [ feature.values <toolset> ] 
 {
@@ -162,6 +165,50 @@ if "--clean" in [ modules.peek : ARGV ]
 
 local bjam-targets ;
 
+# Given a target it, try to find and return corresponding target.
+# This is only invoked when there's no Jamfile in "."
+# This code somewhat duplicates code in project-target.find but we can't  reuse
+# that code without project-targets instance.
+rule find-target ( target-id )
+{
+    local split = [ MATCH (.*)//(.*) : $(target-id) ] ;        
+    
+    local pm ;
+    if $(split)
+    {
+        pm = [ project.find $(split[1]) : "." ] ;
+    }
+    else
+    {
+        pm = [ project.find $(target-id) : "." ] ;
+    }
+        
+    local result ;    
+    if $(pm)
+    {
+        result = [ project.target $(pm) ] ;
+    }
+        
+    if $(split)
+    {
+        result = [ $(result).find $(split[2]) ] ;
+    }
+    
+    return $(result) ;
+}
+
+
+
+if ! $(current-project) 
+{
+    if ! $(target-ids)
+    {        
+        ECHO "error: no Jamfile in current directory found, and no target references specified."  ;
+        EXIT ;
+    }
+}
+
+
 for local id in $(target-ids)
 {
     if $(id) = clean
@@ -170,7 +217,16 @@ for local id in $(target-ids)
     }
     else
     {
-        local t = [ $(current-project).find $(id) : no-error ] ;
+        local t ;
+        if $(current-project)
+        {
+            t = [ $(current-project).find $(id) : no-error ] ;
+        }
+        else
+        {
+            t = [ find-target $(id) ] ;
+        }
+        
         if ! $(t)
         {
             ECHO "notice: could not find main target " $(id) ;
diff --git a/v2/build/project.jam b/v2/build/project.jam
index b39e7714b..c463c1692 100644
--- a/v2/build/project.jam
+++ b/v2/build/project.jam
@@ -159,7 +159,7 @@ rule find ( name : current-location )
         project-module = [ module-name $(location) ] ;
         if ! $(project-module) in $(.jamfile-modules) 
         {
-            if [ find-jamfile $(location) : no-error ]
+            if [ path.glob $(location) : $(JAMROOT) $(JAMFILE) ]
             {
                 project-module = [ load $(location) ] ;            
             }        
diff --git a/v2/test/out_of_tree.py b/v2/test/out_of_tree.py
new file mode 100644
index 000000000..647709870
--- /dev/null
+++ b/v2/test/out_of_tree.py
@@ -0,0 +1,46 @@
+#!/usr/bin/python
+
+#  Copyright (C) FILL SOMETHING HERE 2005.
+#  Distributed under the Boost Software License, Version 1.0. (See
+#  accompanying file LICENSE_1_0.txt or copy at
+#  http://www.boost.org/LICENSE_1_0.txt)
+
+#  Tests that we can build a project when the current directory is outside of
+#  that project tree, that is:
+#     bjam some_dir
+#  works.
+from BoostBuild import Tester, List
+
+# Create a temporary working directory
+t = Tester()
+
+# Create the needed files
+t.write("p1/Jamroot", """
+exe hello : hello.cpp ;
+""")
+t.write("p1/hello.cpp", """
+int main()
+{
+    return 0;
+}
+
+""")
+
+t.write("p2/Jamroot", """
+exe hello2 : hello.cpp ;
+exe hello3 : hello.cpp ;
+""")
+t.write("p2/hello.cpp", """
+int main()
+{
+    return 0;
+}
+
+""")
+
+t.run_build_system("p1 p2//hello3")
+
+t.expect_addition("p1/bin/$toolset/debug/hello.exe")
+t.expect_addition("p2/bin/$toolset/debug/hello3.exe")
+
+t.cleanup()
diff --git a/v2/test/test_all.py b/v2/test/test_all.py
index 7df9aed9d..0eb83c83b 100644
--- a/v2/test/test_all.py
+++ b/v2/test/test_all.py
@@ -129,6 +129,7 @@ tests = [ "rebuilds",
           "wrong_project",
           "using",
           "source_locations",
+          "out_of_tree",
           ]
 
 if os.name == 'posix':