diff --git a/v2/build/targets.jam b/v2/build/targets.jam
index 86b6e73f8..ad039d7cf 100644
--- a/v2/build/targets.jam
+++ b/v2/build/targets.jam
@@ -582,7 +582,6 @@ rule find ( id : project )
     local target-part = $(split[2]) ;
     if ! $(split)
     {
-        project-part = . ;
         target-part = $(id) ;
     }
         
@@ -591,7 +590,18 @@ rule find ( id : project )
     
     # The project used for finding main targets and for providing base directory
     # for file paths.
-    local base-project = [ project.find $(project-part) : $(current-location) ] ;
+    local base-project ;
+    if $(project-part) 
+    {
+        base-project = [ project.find $(project-part) : $(current-location) ] ;
+    }
+    else
+    {
+        # No project part in id. Resolve references relatively to the referring
+        # project.
+        base-project = $(project) ;
+    }
+    
     
     # Interpret target-part as project-id
     if ! $(have-project-reference)
diff --git a/v2/test/standalone.py b/v2/test/standalone.py
new file mode 100644
index 000000000..94e62593a
--- /dev/null
+++ b/v2/test/standalone.py
@@ -0,0 +1,48 @@
+#!/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
+
+t = Tester()
+
+# Regression tests: standalone project were not able to refer to targets
+# declared in themselfs!
+
+t.write("a.cpp", """ 
+int main()
+{
+    return 0;
+}
+
+""")
+
+t.write("project-root.jam", """ 
+import standalone ; 
+""")
+
+t.write("standalone.jam", """ 
+import project ;
+
+project.initialize $(__name__) ;
+project standalone ;
+
+local pwd = [ PWD ] ;
+
+alias x : $(pwd)/../a.cpp ;
+alias runtime : x ;
+
+""")
+
+t.write("sub/Jamfile", """ 
+stage bin : /standalone//runtime ; 
+""")
+
+t.run_build_system(subdir="sub")
+t.expect_addition("sub/bin/a.cpp")
+t.cleanup()
+
diff --git a/v2/test/test_all.py b/v2/test/test_all.py
index 7a69c7720..d09985a81 100644
--- a/v2/test/test_all.py
+++ b/v2/test/test_all.py
@@ -113,6 +113,7 @@ tests = [ "project_test1",
           "composite",
           "library_chain",
           "unit_test",
+          "standalone",
           ]
 
 if os.name == 'posix':