diff --git a/new/builtin.jam b/new/builtin.jam
index bd2c0ad6f..41a92f497 100644
--- a/new/builtin.jam
+++ b/new/builtin.jam
@@ -377,15 +377,16 @@ type.set-scanner CPP : c-scanner ;
 type.register H : h hpp ;
 type.register C : c ;
 
-# Generator for 'lib' target, which relays to generators for either
-# "STATIC_LIB" or "SHARED_LIB", depending on the value of 
-# "shared" feature.
-rule lib-generator ( ) 
-{
-    generator.__init__ lib-generator true : : LIB : <main-target-type>LIB ;
+rule lib-target-class ( name : project 
+    : sources * : requirements * : default-build * : usage-requirements * )
+{    
+    basic-target.__init__ $(name) : $(project) 
+      : $(sources) : $(requirements) : $(default-build) : $(usage-requirements) ;
     
-    rule run ( project name ? : property-set : sources * )
-    {
+    IMPORT builtin : generators.construct : $(__name__) : generators.construct ;
+            
+    rule construct ( source-targets * : property-set )
+    {        
         local properties = [ $(property-set).raw ] ;
         # Determine the needed target type
         local actual-type ;
@@ -401,15 +402,43 @@ rule lib-generator ( )
         {
             actual-type = STATIC_LIB ;
         }
+        property-set = [ $(property-set).add-raw <main-target-type>LIB ] ;
         # Construct the target.
-        return [ generators.construct $(project) $(name) : $(actual-type) 
-                : $(property-set) : $(sources) ] ;
+        return [ generators.construct $(self.project) $(self.name) : $(actual-type) 
+                : $(property-set) : $(source-targets) : return-all ] ;        
+    }            
+    
+    rule compute-usage-requirements ( rproperties )
+    {
+        local result = [ basic-target.compute-usage-requirements $(rproperties) ] ;
+        local search = [ $(rproperties).get <search> ] ;
+        if $(search)
+        {
+            result = [ $(result).add [ 
+              property-set.create $(search:G=<library-path>) ] ] ;            
+        }
+        return $(result) ;
     }
+    
 }
+class lib-target-class : basic-target ;
 
-class lib-generator : generator ;
-
-generators.register [ new lib-generator ] ;
+rule lib ( name : sources * : requirements * : default-build * 
+    : usage-requirements * )
+{
+    local project = [ CALLER_MODULE ] ;
+        
+    # This is a circular module dependency, so it must be imported here
+    import targets ;
+    targets.main-target-alternative
+      [ new lib-target-class $(name) : $(project) 
+        : $(sources)
+        : [ targets.main-target-requirements $(requirements) : $(project) ] 
+        : [ targets.main-target-default-build $(default-build) : $(project) ]
+        : [ targets.main-target-usage-requirements $(usage-requirements) : $(project) ]
+      ] ;
+}
+IMPORT $(__name__) : lib : : lib ;
 
 rule searched-lib-generator ( )
 {
@@ -555,7 +584,6 @@ rule link-action ( targets + : sources * : action-name : properties * )
             if [ class.is-a $(s) : searched-lib-target ]
             {
                 local name = [ $(s).real-name ] ;
-                local search = [ $(s).search ] ;                
                 if [ $(s).shared ] 
                 {                    
                     properties2 += <find-shared-library>$(name) ;
@@ -568,7 +596,6 @@ rule link-action ( targets + : sources * : action-name : properties * )
                 {
                     properties2 += <find-static-library>$(name) ;
                 }         
-                properties2 += <library-path>$(search) ;
             } 
             else 
             {
@@ -585,7 +612,7 @@ rule link-action ( targets + : sources * : action-name : properties * )
         {                    
             rpaths = [ sequence.unique $(rpaths) ] ;
             properties2 += <dll-path>$(rpaths) ;            
-        }                        
+        }       
         return $(properties2) ;        
     }
     
diff --git a/new/generators.jam b/new/generators.jam
index 4d4a66ab3..af7700415 100644
--- a/new/generators.jam
+++ b/new/generators.jam
@@ -970,7 +970,8 @@ local rule construct-without-caching (
 # 'construct' in stack, returns only targets of requested 'target-type',
 # otherwise, returns also unused sources and additionally generated
 # targets.    
-rule construct ( project name ? : target-type multiple ? : property-set * : sources * )
+rule construct ( project name ? : target-type multiple ? : property-set * : sources * 
+   : return-all ? )
 {
     if (.construct-stack)
     {
@@ -1014,7 +1015,13 @@ rule construct ( project name ? : target-type multiple ? : property-set * : sour
             local type = [ $(t).type ] ; 
             assert.nonempty-variable type ;
             assert.nonempty-variable target-type ;
-            if $(type) = $(target-type) || [ type.is-derived $(type) $(target-type) ]
+            
+            # Return only targets of the requested type, unless 'return-all'
+            # is specified. If we don't do this, then all targets calling
+            # 'construct' will get unused target returned, which will break
+            # checking for unused sources a bit harder.
+            if $(return-all) || 
+              $(type) = $(target-type) || [ type.is-derived $(type) $(target-type) ]
             {
                   result2 += $(t) ;
             }
diff --git a/new/property-set.jam b/new/property-set.jam
index 718cd7c8e..283f3191c 100644
--- a/new/property-set.jam
+++ b/new/property-set.jam
@@ -163,6 +163,12 @@ local rule property-set ( raw-properties * )
         return $(self.added.$(ps)) ;
     }            
     
+    rule add-raw ( properties * )
+    {
+        return [ add [ property-set.create $(properties) ] ] ;
+    }            
+
+    
     # Returns all values of 'feature'.
     rule get ( feature )
     {
diff --git a/new/targets.jam b/new/targets.jam
index 8d967d3a1..2f9a22e7d 100644
--- a/new/targets.jam
+++ b/new/targets.jam
@@ -819,7 +819,7 @@ rule basic-target ( name : project
     # Given the set of generated targets, and refined build 
     # properties, determines and sets appripriate usage requirements
     # on those targets.
-    local rule compute-usage-requirements ( rproperties )
+    rule compute-usage-requirements ( rproperties )
     {
         xusage-requirements = [ $(self.usage-requirements).evaluate-conditionals 
           $(rproperties) ] ;                
@@ -855,8 +855,11 @@ rule basic-target ( name : project
     }
     
         
-    # Check that 'result' makes use of all the 'sources'. If not,
-    # issues a warning. Note that 'result' *can* be empty. For
+    # Check that 'result' makes use of all the 'sources', i.e. Specifically,
+    # that for all specified sources, at least one virtual target is either
+    # present in result directly, or as dependency of some returned virtual
+    # target. If this is not the case, issues a warning. 
+    # Note that 'result' *can* be empty. For
     # example, in this use case:
     #    alias platform-sources ;
     #    alias platform-sources : a.cpp : <os>NT ;
@@ -866,7 +869,7 @@ rule basic-target ( name : project
         local used-sources ;
         for local r in $(result)
         {
-            used-sources += [ virtual-target.traverse $(r) : include-roots : 1 ] ; #: includes-sources ] ;
+            used-sources += [ virtual-target.traverse $(r) : include-roots : 1 ] ;
         }
                
         local group ;
@@ -878,6 +881,7 @@ rule basic-target ( name : project
             }
             else
             {
+                
                 # We've collected a group of targets that originates from single
                 # dependency main target, and must check that at least one of them
                 # is used. If no targets were created for dependency, it's OK.                
diff --git a/test/searched_lib.py b/test/searched_lib.py
index f8e9a0b16..51d00cd57 100644
--- a/test/searched_lib.py
+++ b/test/searched_lib.py
@@ -30,6 +30,19 @@ else:
     t.copy("lib/bin/$toolset/debug/test_lib.dll", "lib/libtest_lib.dll")
 
 
+# Test that the simplest usage of searched library works.
+t.write('project-root.jam', '')
+t.write('Jamfile', """
+exe main : main.cpp test_lib ;
+lib test_lib : : <name>test_lib <search>lib ;
+""")
+t.write("main.cpp", """
+void foo();
+int main() { foo(); return 0; }
+""")
+t.run_build_system()
+t.expect_addition("bin/$toolset/debug/main-target-main/main.exe")
+t.rm("bin/$toolset/debug/main-target-main/main.exe")
 
 # A regression test: <library>property referring to
 # searched-lib was mishandled. As the result, we were
@@ -41,13 +54,7 @@ else:
 # This problem shows up when searched libs are in usage
 # requirements.
 
-t.write('project-root.jam', 'import gcc ;')
 t.write('Jamfile', 'exe main : main.cpp d/d2/a ;')
-t.write("main.cpp", """
-void foo();
-int main() { foo(); return 0; }
-""")
-
 t.write('d/d2/Jamfile', """
 lib test_lib : : <name>test_lib <search>../../lib ;
 lib a : a.cpp : : : <library>test_lib ;
diff --git a/test/unused/project-root.jam b/test/unused/project-root.jam
index 148715306..8994c99d2 100644
--- a/test/unused/project-root.jam
+++ b/test/unused/project-root.jam
@@ -16,10 +16,10 @@ rule test-target-class ( name : project )
     
     rule construct ( source-targets * : property-set )
     {
-	if [ modules.peek : GENERATE_NOTHING ]
-	{
-	    return ;
-	}
+	    if [ modules.peek : GENERATE_NOTHING ]
+	    {
+	        return ;
+	    }
         else if [ modules.peek : GENERATE_ONLY_UNUSABLE ] 
         {
             return [ virtual-target.from-file b.x : $(self.project) ] 
@@ -28,14 +28,14 @@ rule test-target-class ( name : project )
         else
         {            
             return [ virtual-target.from-file b.x : $(self.project) ] 
-                   [ virtual-target.from-file b.cpp : $(self.project) ] 
-              ; 
+              [ virtual-target.from-file b.cpp : $(self.project) ] 
+                ; 
         }        
     }
     
     rule compute-usage-requirements ( rproperties )
     {
-	return [ property-set.create <define>FOO ] ;
+	    return [ property-set.create <define>FOO ] ;
     }
 }
 class test-target-class : basic-target ;
diff --git a/v2/build/generators.jam b/v2/build/generators.jam
index 4d4a66ab3..af7700415 100644
--- a/v2/build/generators.jam
+++ b/v2/build/generators.jam
@@ -970,7 +970,8 @@ local rule construct-without-caching (
 # 'construct' in stack, returns only targets of requested 'target-type',
 # otherwise, returns also unused sources and additionally generated
 # targets.    
-rule construct ( project name ? : target-type multiple ? : property-set * : sources * )
+rule construct ( project name ? : target-type multiple ? : property-set * : sources * 
+   : return-all ? )
 {
     if (.construct-stack)
     {
@@ -1014,7 +1015,13 @@ rule construct ( project name ? : target-type multiple ? : property-set * : sour
             local type = [ $(t).type ] ; 
             assert.nonempty-variable type ;
             assert.nonempty-variable target-type ;
-            if $(type) = $(target-type) || [ type.is-derived $(type) $(target-type) ]
+            
+            # Return only targets of the requested type, unless 'return-all'
+            # is specified. If we don't do this, then all targets calling
+            # 'construct' will get unused target returned, which will break
+            # checking for unused sources a bit harder.
+            if $(return-all) || 
+              $(type) = $(target-type) || [ type.is-derived $(type) $(target-type) ]
             {
                   result2 += $(t) ;
             }
diff --git a/v2/build/property-set.jam b/v2/build/property-set.jam
index 718cd7c8e..283f3191c 100644
--- a/v2/build/property-set.jam
+++ b/v2/build/property-set.jam
@@ -163,6 +163,12 @@ local rule property-set ( raw-properties * )
         return $(self.added.$(ps)) ;
     }            
     
+    rule add-raw ( properties * )
+    {
+        return [ add [ property-set.create $(properties) ] ] ;
+    }            
+
+    
     # Returns all values of 'feature'.
     rule get ( feature )
     {
diff --git a/v2/build/targets.jam b/v2/build/targets.jam
index 8d967d3a1..2f9a22e7d 100644
--- a/v2/build/targets.jam
+++ b/v2/build/targets.jam
@@ -819,7 +819,7 @@ rule basic-target ( name : project
     # Given the set of generated targets, and refined build 
     # properties, determines and sets appripriate usage requirements
     # on those targets.
-    local rule compute-usage-requirements ( rproperties )
+    rule compute-usage-requirements ( rproperties )
     {
         xusage-requirements = [ $(self.usage-requirements).evaluate-conditionals 
           $(rproperties) ] ;                
@@ -855,8 +855,11 @@ rule basic-target ( name : project
     }
     
         
-    # Check that 'result' makes use of all the 'sources'. If not,
-    # issues a warning. Note that 'result' *can* be empty. For
+    # Check that 'result' makes use of all the 'sources', i.e. Specifically,
+    # that for all specified sources, at least one virtual target is either
+    # present in result directly, or as dependency of some returned virtual
+    # target. If this is not the case, issues a warning. 
+    # Note that 'result' *can* be empty. For
     # example, in this use case:
     #    alias platform-sources ;
     #    alias platform-sources : a.cpp : <os>NT ;
@@ -866,7 +869,7 @@ rule basic-target ( name : project
         local used-sources ;
         for local r in $(result)
         {
-            used-sources += [ virtual-target.traverse $(r) : include-roots : 1 ] ; #: includes-sources ] ;
+            used-sources += [ virtual-target.traverse $(r) : include-roots : 1 ] ;
         }
                
         local group ;
@@ -878,6 +881,7 @@ rule basic-target ( name : project
             }
             else
             {
+                
                 # We've collected a group of targets that originates from single
                 # dependency main target, and must check that at least one of them
                 # is used. If no targets were created for dependency, it's OK.                
diff --git a/v2/test/searched_lib.py b/v2/test/searched_lib.py
index f8e9a0b16..51d00cd57 100644
--- a/v2/test/searched_lib.py
+++ b/v2/test/searched_lib.py
@@ -30,6 +30,19 @@ else:
     t.copy("lib/bin/$toolset/debug/test_lib.dll", "lib/libtest_lib.dll")
 
 
+# Test that the simplest usage of searched library works.
+t.write('project-root.jam', '')
+t.write('Jamfile', """
+exe main : main.cpp test_lib ;
+lib test_lib : : <name>test_lib <search>lib ;
+""")
+t.write("main.cpp", """
+void foo();
+int main() { foo(); return 0; }
+""")
+t.run_build_system()
+t.expect_addition("bin/$toolset/debug/main-target-main/main.exe")
+t.rm("bin/$toolset/debug/main-target-main/main.exe")
 
 # A regression test: <library>property referring to
 # searched-lib was mishandled. As the result, we were
@@ -41,13 +54,7 @@ else:
 # This problem shows up when searched libs are in usage
 # requirements.
 
-t.write('project-root.jam', 'import gcc ;')
 t.write('Jamfile', 'exe main : main.cpp d/d2/a ;')
-t.write("main.cpp", """
-void foo();
-int main() { foo(); return 0; }
-""")
-
 t.write('d/d2/Jamfile', """
 lib test_lib : : <name>test_lib <search>../../lib ;
 lib a : a.cpp : : : <library>test_lib ;
diff --git a/v2/test/unused/project-root.jam b/v2/test/unused/project-root.jam
index 148715306..8994c99d2 100644
--- a/v2/test/unused/project-root.jam
+++ b/v2/test/unused/project-root.jam
@@ -16,10 +16,10 @@ rule test-target-class ( name : project )
     
     rule construct ( source-targets * : property-set )
     {
-	if [ modules.peek : GENERATE_NOTHING ]
-	{
-	    return ;
-	}
+	    if [ modules.peek : GENERATE_NOTHING ]
+	    {
+	        return ;
+	    }
         else if [ modules.peek : GENERATE_ONLY_UNUSABLE ] 
         {
             return [ virtual-target.from-file b.x : $(self.project) ] 
@@ -28,14 +28,14 @@ rule test-target-class ( name : project )
         else
         {            
             return [ virtual-target.from-file b.x : $(self.project) ] 
-                   [ virtual-target.from-file b.cpp : $(self.project) ] 
-              ; 
+              [ virtual-target.from-file b.cpp : $(self.project) ] 
+                ; 
         }        
     }
     
     rule compute-usage-requirements ( rproperties )
     {
-	return [ property-set.create <define>FOO ] ;
+	    return [ property-set.create <define>FOO ] ;
     }
 }
 class test-target-class : basic-target ;
diff --git a/v2/tools/builtin.jam b/v2/tools/builtin.jam
index bd2c0ad6f..41a92f497 100644
--- a/v2/tools/builtin.jam
+++ b/v2/tools/builtin.jam
@@ -377,15 +377,16 @@ type.set-scanner CPP : c-scanner ;
 type.register H : h hpp ;
 type.register C : c ;
 
-# Generator for 'lib' target, which relays to generators for either
-# "STATIC_LIB" or "SHARED_LIB", depending on the value of 
-# "shared" feature.
-rule lib-generator ( ) 
-{
-    generator.__init__ lib-generator true : : LIB : <main-target-type>LIB ;
+rule lib-target-class ( name : project 
+    : sources * : requirements * : default-build * : usage-requirements * )
+{    
+    basic-target.__init__ $(name) : $(project) 
+      : $(sources) : $(requirements) : $(default-build) : $(usage-requirements) ;
     
-    rule run ( project name ? : property-set : sources * )
-    {
+    IMPORT builtin : generators.construct : $(__name__) : generators.construct ;
+            
+    rule construct ( source-targets * : property-set )
+    {        
         local properties = [ $(property-set).raw ] ;
         # Determine the needed target type
         local actual-type ;
@@ -401,15 +402,43 @@ rule lib-generator ( )
         {
             actual-type = STATIC_LIB ;
         }
+        property-set = [ $(property-set).add-raw <main-target-type>LIB ] ;
         # Construct the target.
-        return [ generators.construct $(project) $(name) : $(actual-type) 
-                : $(property-set) : $(sources) ] ;
+        return [ generators.construct $(self.project) $(self.name) : $(actual-type) 
+                : $(property-set) : $(source-targets) : return-all ] ;        
+    }            
+    
+    rule compute-usage-requirements ( rproperties )
+    {
+        local result = [ basic-target.compute-usage-requirements $(rproperties) ] ;
+        local search = [ $(rproperties).get <search> ] ;
+        if $(search)
+        {
+            result = [ $(result).add [ 
+              property-set.create $(search:G=<library-path>) ] ] ;            
+        }
+        return $(result) ;
     }
+    
 }
+class lib-target-class : basic-target ;
 
-class lib-generator : generator ;
-
-generators.register [ new lib-generator ] ;
+rule lib ( name : sources * : requirements * : default-build * 
+    : usage-requirements * )
+{
+    local project = [ CALLER_MODULE ] ;
+        
+    # This is a circular module dependency, so it must be imported here
+    import targets ;
+    targets.main-target-alternative
+      [ new lib-target-class $(name) : $(project) 
+        : $(sources)
+        : [ targets.main-target-requirements $(requirements) : $(project) ] 
+        : [ targets.main-target-default-build $(default-build) : $(project) ]
+        : [ targets.main-target-usage-requirements $(usage-requirements) : $(project) ]
+      ] ;
+}
+IMPORT $(__name__) : lib : : lib ;
 
 rule searched-lib-generator ( )
 {
@@ -555,7 +584,6 @@ rule link-action ( targets + : sources * : action-name : properties * )
             if [ class.is-a $(s) : searched-lib-target ]
             {
                 local name = [ $(s).real-name ] ;
-                local search = [ $(s).search ] ;                
                 if [ $(s).shared ] 
                 {                    
                     properties2 += <find-shared-library>$(name) ;
@@ -568,7 +596,6 @@ rule link-action ( targets + : sources * : action-name : properties * )
                 {
                     properties2 += <find-static-library>$(name) ;
                 }         
-                properties2 += <library-path>$(search) ;
             } 
             else 
             {
@@ -585,7 +612,7 @@ rule link-action ( targets + : sources * : action-name : properties * )
         {                    
             rpaths = [ sequence.unique $(rpaths) ] ;
             properties2 += <dll-path>$(rpaths) ;            
-        }                        
+        }       
         return $(properties2) ;        
     }