diff --git a/prepare/compiler-embeddable/build.gradle.kts b/prepare/compiler-embeddable/build.gradle.kts
index f456447ce39..986d64b7369 100644
--- a/prepare/compiler-embeddable/build.gradle.kts
+++ b/prepare/compiler-embeddable/build.gradle.kts
@@ -2,15 +2,25 @@
 description = "Kotlin Compiler (embeddable)"
 
 plugins {
-    `java`
+    kotlin("jvm")
 }
 
+val testCompilationClasspath by configurations.creating
+
 dependencies {
     runtime(kotlinStdlib())
     runtime(project(":kotlin-script-runtime"))
     runtime(project(":kotlin-reflect"))
     runtime(project(":kotlin-daemon-embeddable"))
     runtime(commonDep("org.jetbrains.intellij.deps", "trove4j"))
+    testCompile(commonDep("junit:junit"))
+    testCompile(project(":kotlin-test:kotlin-test-junit"))
+    testCompilationClasspath(kotlinStdlib())
+}
+
+sourceSets {
+    "main" {}
+    "test" { projectDefault() }
 }
 
 publish()
@@ -22,7 +32,7 @@ compilerDummyJar(compilerDummyForDependenciesRewriting("compilerDummy") {
     classifier = "dummy"
 })
 
-runtimeJar(embeddableCompiler()) {
+val runtimeJar = runtimeJar(embeddableCompiler()) {
     exclude("com/sun/jna/**")
     exclude("org/jetbrains/annotations/**")
     mergeServiceFiles()
@@ -31,3 +41,14 @@ runtimeJar(embeddableCompiler()) {
 sourcesJar()
 javadocJar()
 
+projectTest {
+    dependsOn(runtimeJar)
+    doFirst {
+        val runtimeJarConfig = configurations["runtimeJar"]
+        val runtimeConfig = configurations["runtime"]
+        systemProperty("compilerClasspath", "${runtimeJarConfig.allArtifacts.files.files.first().path}${File.pathSeparator}${runtimeConfig.asPath}")
+        systemProperty("compilationClasspath", testCompilationClasspath.asPath)
+    }
+}
+
+
diff --git a/libraries/tools/kotlin-compiler-embeddable/test/resources/projects/smoke/Smoke.kt b/prepare/compiler-embeddable/testData/projects/smoke/Smoke.kt
similarity index 100%
rename from libraries/tools/kotlin-compiler-embeddable/test/resources/projects/smoke/Smoke.kt
rename to prepare/compiler-embeddable/testData/projects/smoke/Smoke.kt
diff --git a/libraries/tools/kotlin-compiler-embeddable/test/kotlin/org/jetbrains/kotlin/compiler/embeddable/CompilerEmbeddableSmokeTests.kt b/prepare/compiler-embeddable/tests/kotlin/org/jetbrains/kotlin/compiler/embeddable/CompilerEmbeddableSmokeTests.kt
similarity index 68%
rename from libraries/tools/kotlin-compiler-embeddable/test/kotlin/org/jetbrains/kotlin/compiler/embeddable/CompilerEmbeddableSmokeTests.kt
rename to prepare/compiler-embeddable/tests/kotlin/org/jetbrains/kotlin/compiler/embeddable/CompilerEmbeddableSmokeTests.kt
index d9b9bb3dc2a..81f59075c0c 100644
--- a/libraries/tools/kotlin-compiler-embeddable/test/kotlin/org/jetbrains/kotlin/compiler/embeddable/CompilerEmbeddableSmokeTests.kt
+++ b/prepare/compiler-embeddable/tests/kotlin/org/jetbrains/kotlin/compiler/embeddable/CompilerEmbeddableSmokeTests.kt
@@ -36,16 +36,23 @@ public class CompilerSmokeTest {
 
     private val javaExecutable = File( File(System.getProperty("java.home"), "bin"), "java")
 
-    private val embeddableJar: File by lazy {
-        val f = File(System.getProperty("compilerJar") ?: "kotlin-compiler-embeddable.jar")
-        if (!f.exists())
-            throw FileNotFoundException("cannot find kotlin-compiler-embeddable.jar ($f)")
-        f
+    private val compilerClasspath: List<File> by lazy {
+        filesFromProp("compilerClasspath", "kotlin-compiler-embeddable.jar")
     }
 
+    private val compilationClasspath: List<File> by lazy {
+        filesFromProp("compilationClasspath", "kotlin-stdlib.jar", "kotlin-script-runtime.jar")
+    }
+
+    private fun filesFromProp(propName: String, vararg defaultPaths: String): List<File> =
+        (System.getProperty(propName)?.split(File.pathSeparator) ?: defaultPaths.asList()).map {
+            File(it).takeIf(File::exists)
+                ?: throw FileNotFoundException("cannot find ($it)")
+        }
+
     @Test
     fun testSmoke() {
-        val (out, code) = runCompiler(File("../test/resources/projects/smoke/Smoke.kt").absolutePath)
+        val (out, code) = runCompiler(File("testData/projects/smoke/Smoke.kt").absolutePath)
         assertEquals(0, code, "compilation failed:\n" + out)
     }
 
@@ -58,12 +65,15 @@ public class CompilerSmokeTest {
     }
 
     private fun runCompiler(vararg arguments: String): Pair<String, Int> {
-        val cmd = listOf(javaExecutable.absolutePath,
-                "-Djava.awt.headless=true",
-                "-cp",
-                embeddableJar.absolutePath,
-                COMPILER_CLASS_FQN) +
-                arguments
+        val cmd = listOf(
+            javaExecutable.absolutePath,
+            "-Djava.awt.headless=true",
+            "-cp",
+            compilerClasspath.joinToString(File.pathSeparator),
+            COMPILER_CLASS_FQN,
+            "-cp",
+            compilationClasspath.joinToString(File.pathSeparator)
+        ) + arguments
         val proc = createProcess(cmd, _workingDir.root)
         return readOutput(proc)
     }