diff --git a/src/harness/harness.ts b/src/harness/harness.ts
index ba84a3c9ffd..ecae4ee47a4 100644
--- a/src/harness/harness.ts
+++ b/src/harness/harness.ts
@@ -810,7 +810,9 @@ module Harness {
         export function createCompilerHost(inputFiles: { unitName: string; content: string; }[],
             writeFile: (fn: string, contents: string, writeByteOrderMark: boolean) => void,
             scriptTarget: ts.ScriptTarget,
-            useCaseSensitiveFileNames: boolean): ts.CompilerHost {
+            useCaseSensitiveFileNames: boolean,
+            // the currentDirectory is needed for rwcRunner to passed in specified current directory to compiler host
+            currentDirectory?: string): ts.CompilerHost {
 
             // Local get canonical file name function, that depends on passed in parameter for useCaseSensitiveFileNames
             function getCanonicalFileName(fileName: string): string {
@@ -818,6 +820,8 @@ module Harness {
             }
 
             var filemap: { [filename: string]: ts.SourceFile; } = {};
+            var getCurrentDirectory = currentDirectory === undefined ? ts.sys.getCurrentDirectory : () => currentDirectory;
+
             // Register input files
             function register(file: { unitName: string; content: string; }) {
                 if (file.content !== undefined) {
@@ -828,11 +832,15 @@ module Harness {
             inputFiles.forEach(register);
 
             return {
-                getCurrentDirectory: ts.sys.getCurrentDirectory,
+                getCurrentDirectory,
                 getSourceFile: (fn, languageVersion) => {
                     if (Object.prototype.hasOwnProperty.call(filemap, getCanonicalFileName(fn))) {
                         return filemap[getCanonicalFileName(fn)];
                     }
+                    else if (currentDirectory) {
+                        var canonicalAbsolutePath = getCanonicalFileName(ts.getNormalizedAbsolutePath(fn, currentDirectory));
+                        return Object.prototype.hasOwnProperty.call(filemap, getCanonicalFileName(canonicalAbsolutePath)) ? filemap[canonicalAbsolutePath] : undefined;
+                    }
                     else if (fn === fourslashFilename) {
                         var tsFn = 'tests/cases/fourslash/' + fourslashFilename;
                         fourslashSourceFile = fourslashSourceFile || ts.createSourceFile(tsFn, Harness.IO.readFile(tsFn), scriptTarget);
@@ -909,7 +917,9 @@ module Harness {
                 otherFiles: { unitName: string; content: string }[],
                 onComplete: (result: CompilerResult, program: ts.Program) => void,
                 settingsCallback?: (settings: ts.CompilerOptions) => void,
-                options?: ts.CompilerOptions) {
+                options?: ts.CompilerOptions,
+                // Current directory is needed for rwcRunner to be able to use currentDirectory defined in json file
+                currentDirectory?: string) {
 
                 options = options || { noResolve: false };
                 options.target = options.target || ts.ScriptTarget.ES3;
@@ -1063,8 +1073,7 @@ module Harness {
                 var programFiles = inputFiles.map(file => file.unitName);
                 var program = ts.createProgram(programFiles, options, createCompilerHost(inputFiles.concat(otherFiles),
                     (fn, contents, writeByteOrderMark) => fileOutputs.push({ fileName: fn, code: contents, writeByteOrderMark: writeByteOrderMark }),
-                    options.target,
-                    useCaseSensitiveFileNames));
+                    options.target, useCaseSensitiveFileNames, currentDirectory));
 
                 var checker = program.getTypeChecker(/*produceDiagnostics*/ true);
 
@@ -1095,7 +1104,9 @@ module Harness {
                 otherFiles: { unitName: string; content: string; }[],
                 result: CompilerResult,
                 settingsCallback?: (settings: ts.CompilerOptions) => void,
-                options?: ts.CompilerOptions) {
+                options?: ts.CompilerOptions,
+                // Current directory is needed for rwcRunner to be able to use currentDirectory defined in json file
+                currentDirectory?: string) {
                 if (options.declaration && result.errors.length === 0 && result.declFilesCode.length !== result.files.length) {
                     throw new Error('There were no errors and declFiles generated did not match number of js files generated');
                 }
@@ -1108,9 +1119,8 @@ module Harness {
 
                     ts.forEach(inputFiles, file => addDtsFile(file, declInputFiles));
                     ts.forEach(otherFiles, file => addDtsFile(file, declOtherFiles));
-                    this.compileFiles(declInputFiles, declOtherFiles, function (compileResult) {
-                        declResult = compileResult;
-                    }, settingsCallback, options);
+                    this.compileFiles(declInputFiles, declOtherFiles, function (compileResult) { declResult = compileResult; },
+                        settingsCallback, options, currentDirectory);
 
                     return { declInputFiles, declOtherFiles, declResult };
                 }
diff --git a/src/harness/rwcRunner.ts b/src/harness/rwcRunner.ts
index 085f66f1a3e..b506cdd66b6 100644
--- a/src/harness/rwcRunner.ts
+++ b/src/harness/rwcRunner.ts
@@ -28,6 +28,7 @@ module RWC {
             var compilerOptions: ts.CompilerOptions;
             var baselineOpts: Harness.Baseline.BaselineOptions = { Subfolder: 'rwc' };
             var baseName = /(.*)\/(.*).json/.exec(ts.normalizeSlashes(jsonPath))[2];
+            var currentDirectory: string;
 
             after(() => {
                 // Mocha holds onto the closure environment of the describe callback even after the test is done.
@@ -38,6 +39,7 @@ module RWC {
                 compilerOptions = undefined;
                 baselineOpts = undefined;
                 baseName = undefined;
+                currentDirectory = undefined;
             });
 
             it('can compile', () => {
@@ -45,6 +47,7 @@ module RWC {
                 var opts: ts.ParsedCommandLine;
 
                 var ioLog: IOLog = JSON.parse(Harness.IO.readFile(jsonPath));
+                currentDirectory = ioLog.currentDirectory;
                 runWithIOLog(ioLog, () => {
                     opts = ts.parseCommandLine(ioLog.arguments);
                     assert.equal(opts.errors.length, 0);
@@ -52,7 +55,6 @@ module RWC {
 
                 runWithIOLog(ioLog, () => {
                     harnessCompiler.reset();
-
                     // Load the files
                     ts.forEach(opts.filenames, fileName => {
                         inputFiles.push(getHarnessCompilerInputUnit(fileName));
@@ -81,7 +83,11 @@ module RWC {
                     // Emit the results
                     compilerOptions = harnessCompiler.compileFiles(inputFiles, otherFiles, compileResult => {
                         compilerResult = compileResult;
-                    }, /*settingsCallback*/ undefined, opts.options);
+                        },
+                        /*settingsCallback*/ undefined, opts.options,
+                        // Since all Rwc json file specified current directory in its json file, we need to pass this information to compilerHost
+                        // so that when the host is asked for current directory, it should give the value from json rather than from process
+                        currentDirectory);
                 });
 
                 function getHarnessCompilerInputUnit(fileName: string) {
@@ -145,7 +151,8 @@ module RWC {
             it('has the expected errors in generated declaration files', () => {
                 if (compilerOptions.declaration && !compilerResult.errors.length) {
                     Harness.Baseline.runBaseline('has the expected errors in generated declaration files', baseName + '.dts.errors.txt', () => {
-                        var declFileCompilationResult = Harness.Compiler.getCompiler().compileDeclarationFiles(inputFiles, otherFiles, compilerResult, /*settingscallback*/ undefined, compilerOptions);
+                        var declFileCompilationResult = Harness.Compiler.getCompiler().compileDeclarationFiles(inputFiles, otherFiles, compilerResult,
+                            /*settingscallback*/ undefined, compilerOptions, currentDirectory);
                         if (declFileCompilationResult.declResult.errors.length === 0) {
                             return null;
                         }