diff --git a/v2/build-system.jam b/v2/build-system.jam
index 67def964d..a555b610d 100644
--- a/v2/build-system.jam
+++ b/v2/build-system.jam
@@ -215,9 +215,9 @@ local rule find-target ( target-id )
 
 # Initializes a new configuration module.
 #
-local rule initialize-config-module ( module-name )
+local rule initialize-config-module ( module-name : location ? )
 {
-    project.initialize $(module-name) ;
+    project.initialize $(module-name) : $(location) ;
     if USER_MODULE in [ RULENAMES ]
     {
         USER_MODULE $(module-name) ;
@@ -419,7 +419,7 @@ local rule load-configuration-files
     }
     if $(file)
     {
-        initialize-config-module project-config ;
+        initialize-config-module project-config : $(file:D) ;
         load-config project-config : project-config.jam : $(file:D) ;        
     }   
 }
diff --git a/v2/build_system.py b/v2/build_system.py
index 6e33bee77..55d8b806c 100644
--- a/v2/build_system.py
+++ b/v2/build_system.py
@@ -172,9 +172,9 @@ def find_target(target_id):
 
     return result
 
-def initialize_config_module(module_name):
+def initialize_config_module(module_name, location=None):
 
-    get_manager().projects().initialize(module_name)
+    get_manager().projects().initialize(module_name, location)
 
 # Helper rule used to load configuration files. Loads the first configuration
 # file with the given 'filename' at 'path' into module with name 'module-name'.
@@ -335,7 +335,7 @@ def load_configuration_files():
         file = b2.util.path.glob_in_parents(".", ["project-config.jam"])
 
     if file:
-        initialize_config_module('project-config')
+        initialize_config_module('project-config', os.path.dirname(file[0]))
         load_config('project-config', "project-config.jam", [os.path.dirname(file[0])], True)