diff --git a/jps-plugin/jps-tests/test/org/jetbrains/kotlin/jps/build/KotlinJpsBuildTest.kt b/jps-plugin/jps-tests/test/org/jetbrains/kotlin/jps/build/KotlinJpsBuildTest.kt
index 6e371f6e4de..944ed4380cd 100644
--- a/jps-plugin/jps-tests/test/org/jetbrains/kotlin/jps/build/KotlinJpsBuildTest.kt
+++ b/jps-plugin/jps-tests/test/org/jetbrains/kotlin/jps/build/KotlinJpsBuildTest.kt
@@ -915,6 +915,20 @@ class KotlinJpsBuildTest : AbstractKotlinJpsBuildTestCase() {
         buildAllModules().assertSuccessful()
     }
 
+    fun testCustomDestination() {
+        loadProject(workDir.absolutePath + File.separator + PROJECT_NAME + ".ipr")
+        addKotlinRuntimeDependency()
+        buildAllModules().apply {
+            assertSuccessful()
+
+            val aClass = File(workDir, "customOut/A.class")
+            assert(aClass.exists()) { "$aClass does not exist!" }
+
+            val warnings = getMessages(BuildMessage.Kind.WARNING)
+            assert(warnings.isEmpty()) { "Unexpected warnings: \n${warnings.joinToString("\n")}" }
+        }
+    }
+
     private fun BuildResult.checkErrors() {
         val actualErrors = getMessages(BuildMessage.Kind.ERROR)
                 .map { it as CompilerMessage }
diff --git a/jps-plugin/src/org/jetbrains/kotlin/compilerRunner/JpsKotlinCompilerRunner.kt b/jps-plugin/src/org/jetbrains/kotlin/compilerRunner/JpsKotlinCompilerRunner.kt
index a5f50fcdab2..ae6a95339fc 100644
--- a/jps-plugin/src/org/jetbrains/kotlin/compilerRunner/JpsKotlinCompilerRunner.kt
+++ b/jps-plugin/src/org/jetbrains/kotlin/compilerRunner/JpsKotlinCompilerRunner.kt
@@ -198,6 +198,7 @@ class JpsKotlinCompilerRunner : KotlinCompilerRunner<JpsCompilerEnvironment>() {
     private fun setupK2JvmArguments(moduleFile: File, settings: K2JVMCompilerArguments) {
         with(settings) {
             module = moduleFile.absolutePath
+            destination = null
             noStdlib = true
             noReflect = true
             noJdk = true
diff --git a/jps-plugin/testData/general/CustomDestination/kotlinProject.iml b/jps-plugin/testData/general/CustomDestination/kotlinProject.iml
new file mode 100644
index 00000000000..6d20898bff3
--- /dev/null
+++ b/jps-plugin/testData/general/CustomDestination/kotlinProject.iml
@@ -0,0 +1,24 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<module type="JAVA_MODULE" version="4">
+  <component name="FacetManager">
+    <facet type="kotlin-language" name="Kotlin">
+      <configuration version="3" platform="JVM 1.8" useProjectSettings="false">
+        <compilerSettings />
+        <compilerArguments>
+          <option name="destination" value="$MODULE_DIR$/customOut/" />
+        </compilerArguments>
+      </configuration>
+    </facet>
+  </component>
+  <component name="NewModuleRootManager">
+    <output url="$MODULE_DIR$/customOut/"/>
+
+    <exclude-output />
+    <content url="file://$MODULE_DIR$">
+      <sourceFolder url="file://$MODULE_DIR$/src" isTestSource="false" />
+    </content>
+    <orderEntry type="jdk" jdkName="IDEA_JDK" jdkType="JavaSDK" />
+    <orderEntry type="sourceFolder" forTests="false" />
+    <orderEntry type="module" module-name="kotlinProject" />
+  </component>
+</module>
\ No newline at end of file
diff --git a/jps-plugin/testData/general/CustomDestination/kotlinProject.ipr b/jps-plugin/testData/general/CustomDestination/kotlinProject.ipr
new file mode 100644
index 00000000000..90747786771
--- /dev/null
+++ b/jps-plugin/testData/general/CustomDestination/kotlinProject.ipr
@@ -0,0 +1,14 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<project version="4">
+  <component name="CompilerConfiguration">
+    <option name="DEFAULT_COMPILER" value="Javac" />
+  </component>
+  <component name="ProjectModuleManager">
+    <modules>
+      <module fileurl="file://$PROJECT_DIR$/kotlinProject.iml" filepath="$PROJECT_DIR$/kotlinProject.iml" />
+    </modules>
+  </component>
+  <component name="ProjectRootManager" version="2" languageLevel="JDK_1_6" assert-keyword="true" jdk-15="true" project-jdk-name="IDEA_JDK" project-jdk-type="JavaSDK">
+    <output url="file://$PROJECT_DIR$/out" />
+  </component>
+</project>
\ No newline at end of file
diff --git a/jps-plugin/testData/general/CustomDestination/src/A.kt b/jps-plugin/testData/general/CustomDestination/src/A.kt
new file mode 100644
index 00000000000..fb7337ede5b
--- /dev/null
+++ b/jps-plugin/testData/general/CustomDestination/src/A.kt
@@ -0,0 +1 @@
+class A
\ No newline at end of file