diff --git a/buildSrc/src/main/kotlin/tasks.kt b/buildSrc/src/main/kotlin/tasks.kt
index a2dce631600..cb516a7813b 100644
--- a/buildSrc/src/main/kotlin/tasks.kt
+++ b/buildSrc/src/main/kotlin/tasks.kt
@@ -33,7 +33,6 @@ fun Project.projectTest(taskName: String = "test", body: Test.() -> Unit = {}):
     maxHeapSize = "1100m"
     systemProperty("idea.is.unit.test", "true")
     environment("NO_FS_ROOTS_ACCESS_CHECK", "true")
-    environment("KOTLIN_HOME", rootProject.extra["distKotlinHomeDir"])
     environment("PROJECT_CLASSES_DIRS", the<JavaPluginConvention>().sourceSets.getByName("test").output.classesDirs.asPath)
     environment("PROJECT_BUILD_DIR", buildDir)
     systemProperty("jps.kotlin.home", rootProject.extra["distKotlinHomeDir"])
diff --git a/compiler/util/src/org/jetbrains/kotlin/utils/PathUtil.kt b/compiler/util/src/org/jetbrains/kotlin/utils/PathUtil.kt
index 3a26e53a32d..d017a631349 100644
--- a/compiler/util/src/org/jetbrains/kotlin/utils/PathUtil.kt
+++ b/compiler/util/src/org/jetbrains/kotlin/utils/PathUtil.kt
@@ -43,7 +43,8 @@ object PathUtil {
     const val KOTLIN_JAVA_STDLIB_SRC_JAR_OLD = "kotlin-runtime-sources.jar"
     const val KOTLIN_REFLECT_SRC_JAR = "kotlin-reflect-sources.jar"
     const val KOTLIN_TEST_SRC_JAR = "kotlin-test-sources.jar"
-    const val KOTLIN_COMPILER_JAR = "kotlin-compiler.jar"
+    const val KOTLIN_COMPILER = "kotlin-compiler"
+    const val KOTLIN_COMPILER_JAR = "$KOTLIN_COMPILER.jar"
 
     @JvmField
     val KOTLIN_RUNTIME_JAR_PATTERN: Pattern = Pattern.compile("kotlin-(stdlib|runtime)(-\\d[\\d.]+(-.+)?)?\\.jar")
@@ -63,8 +64,9 @@ object PathUtil {
 
     @JvmStatic
     val kotlinPathsForCompiler: KotlinPaths
-        get() = if (!pathUtilJar.isFile) {
-            // Not running from a jar, i.e. it is it must be a unit test
+        get() = if (!pathUtilJar.isFile || !pathUtilJar.name.startsWith(KOTLIN_COMPILER)) {
+            // PathUtil.class is located not in the kotlin-compiler*.jar, so it must be a test and we'll take KotlinPaths from "dist/"
+            // (when running tests, PathUtil.class is in its containing module's artifact, i.e. util-{version}.jar)
             kotlinPathsForDistDirectory
         }
         else KotlinPathsFromHomeDir(compilerPathForCompilerJar)