diff --git a/jps/jps-plugin/jps-plugin.iml b/jps/jps-plugin/jps-plugin.iml
index 1b4d326d32d..a7f222b8c6d 100644
--- a/jps/jps-plugin/jps-plugin.iml
+++ b/jps/jps-plugin/jps-plugin.iml
@@ -15,8 +15,8 @@
     <orderEntry type="library" scope="TEST" name="jps-test" level="project" />
     <orderEntry type="library" scope="TEST" name="idea-full" level="project" />
     <orderEntry type="module" module-name="backend" scope="TEST" />
-    <orderEntry type="module" module-name="descriptors" scope="TEST" />
-    <orderEntry type="module" module-name="frontend.java" scope="TEST" />
+    <orderEntry type="module" module-name="descriptors" />
+    <orderEntry type="module" module-name="frontend.java" />
     <orderEntry type="module" module-name="descriptor.loader.java" scope="TEST" />
     <orderEntry type="module" module-name="serialization.java" scope="TEST" />
     <orderEntry type="module" module-name="serialization" scope="TEST" />
diff --git a/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilder.java b/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilder.java
index b0410f9e7e0..801220bb004 100644
--- a/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilder.java
+++ b/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilder.java
@@ -37,6 +37,7 @@ import org.jetbrains.jet.compiler.runner.OutputItemsCollectorImpl;
 import org.jetbrains.jet.compiler.runner.SimpleOutputItem;
 import org.jetbrains.jet.config.IncrementalCompilation;
 import org.jetbrains.jet.jps.JpsKotlinCompilerSettings;
+import org.jetbrains.jet.lang.resolve.kotlin.incremental.IncrementalCache;
 import org.jetbrains.jet.utils.PathUtil;
 import org.jetbrains.jps.ModuleChunk;
 import org.jetbrains.jps.builders.BuildTarget;
@@ -194,38 +195,47 @@ public class KotlinBuilder extends ModuleLevelBuilder {
             }
         }
 
-        for (SimpleOutputItem outputItem : outputItemCollector.getOutputs()) {
-            if (IncrementalCompilation.ENABLED) {
-                // TODO this is a hack: we don't remove
-                if (outputItem.getOutputFile().getName().endsWith("Package.class")) {
-                    continue;
+        IncrementalCache cache = new IncrementalCache(KotlinBuilderModuleScriptGenerator.getIncrementalCacheDir(context));
+
+        try {
+            for (SimpleOutputItem outputItem : outputItemCollector.getOutputs()) {
+                BuildTarget<?> target = null;
+                Collection<File> sourceFiles = outputItem.getSourceFiles();
+                if (sourceFiles != null && !sourceFiles.isEmpty()) {
+                    target = sourceToTarget.get(sourceFiles.iterator().next());
                 }
+                else {
+                    messageCollector.report(EXCEPTION, "KotlinBuilder: outputItem.sourceFiles is null or empty, outputItem = " + outputItem, NO_LOCATION);
+                }
+
+                if (target == null) {
+                    target = representativeTarget;
+                }
+
+                File outputFile = outputItem.getOutputFile();
+
+                if (IncrementalCompilation.ENABLED) {
+                    cache.saveFileToCache(target.getId(), outputFile);
+                }
+
+                outputConsumer.registerOutputFile(target, outputFile, paths(sourceFiles));
             }
-            BuildTarget<?> target = null;
-            Collection<File> sourceFiles = outputItem.getSourceFiles();
-            if (sourceFiles != null && !sourceFiles.isEmpty()) {
-                target = sourceToTarget.get(sourceFiles.iterator().next());
+
+            if (IncrementalCompilation.ENABLED) {
+                // TODO should mark dependencies as dirty, as well
+                FSOperations.markDirty(context, chunk, new FileFilter() {
+                    @Override
+                    public boolean accept(@NotNull File file) {
+                        return !allCompiledFiles.contains(file);
+                    }
+                });
+                return ExitCode.ADDITIONAL_PASS_REQUIRED;
             }
             else {
-                messageCollector.report(EXCEPTION, "KotlinBuilder: outputItem.sourceFiles is null or empty, outputItem = " + outputItem, NO_LOCATION);
+                return ExitCode.OK;
             }
-
-            outputConsumer.registerOutputFile(target != null ? target : representativeTarget, outputItem.getOutputFile(),
-                                              paths(sourceFiles));
-        }
-
-        if (IncrementalCompilation.ENABLED) {
-            // TODO should mark dependencies as dirty, as well
-            FSOperations.markDirty(context, chunk, new FileFilter() {
-                @Override
-                public boolean accept(@NotNull File file) {
-                    return !allCompiledFiles.contains(file);
-                }
-            });
-            return ExitCode.ADDITIONAL_PASS_REQUIRED;
-        }
-        else {
-            return ExitCode.OK;
+        } finally {
+            cache.close();
         }
     }
 
diff --git a/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java b/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java
index 0ae30acd43f..0adc2694d14 100644
--- a/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java
+++ b/jps/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java
@@ -90,6 +90,7 @@ public class KotlinBuilderModuleScriptGenerator {
             builder.addModule(
                     target.getId(),
                     outputDir.getAbsolutePath(),
+                    getIncrementalCacheDir(context).getAbsolutePath(),
                     getKotlinModuleDependencies(context, target),
                     sourceFiles,
                     target.isTests(),
@@ -109,6 +110,10 @@ public class KotlinBuilderModuleScriptGenerator {
         return scriptFile;
     }
 
+    public static File getIncrementalCacheDir(CompileContext context) {
+        return new File(context.getProjectDescriptor().dataManager.getDataPaths().getDataStorageRoot(), "kotlin");
+    }
+
     @NotNull
     private static File getOutputDir(@NotNull ModuleBuildTarget target) {
         File outputDir = target.getOutputDir();
diff --git a/jps/jps-plugin/testData/incremental/topLevelMembersInTwoPackages/build.log b/jps/jps-plugin/testData/incremental/topLevelMembersInTwoPackages/build.log
index 37736142dc4..08cb50b84f3 100644
--- a/jps/jps-plugin/testData/incremental/topLevelMembersInTwoPackages/build.log
+++ b/jps/jps-plugin/testData/incremental/topLevelMembersInTwoPackages/build.log
@@ -1,11 +1,13 @@
 Cleaning output files:
 out/production/module/test/TestPackage-a-*.class
+out/production/module/test/TestPackage.class
 End of files
 Compiling files:
 src/a.kt
 End of files
 Cleaning output files:
 out/production/module/test/TestPackage-b-*.class
+out/production/module/test/TestPackage.class
 End of files
 Compiling files:
 src/b.kt