diff --git a/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleDescription.java b/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleDescription.java
index f28bd6ac662..f92dce5b5ab 100644
--- a/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleDescription.java
+++ b/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleDescription.java
@@ -29,6 +29,9 @@ public interface ModuleDescription {
     @NotNull
     String getModuleName();
 
+    @NotNull
+    String getOutputDir();
+
     @NotNull
     List<String> getSourceFiles();
 
@@ -41,6 +44,7 @@ public interface ModuleDescription {
     class Impl implements ModuleDescription {
 
         private String name;
+        private String outputDir;
         private final List<String> sources = new SmartList<String>();
         private final List<String> classpath = new SmartList<String>();
         private final List<String> annotations = new SmartList<String>();
@@ -49,6 +53,10 @@ public interface ModuleDescription {
             this.name = name;
         }
 
+        public void setOutputDir(String outputDir) {
+            this.outputDir = outputDir;
+        }
+
         public void addSourcePath(String path) {
             sources.add(path);
         }
@@ -67,6 +75,12 @@ public interface ModuleDescription {
             return name;
         }
 
+        @NotNull
+        @Override
+        public String getOutputDir() {
+            return outputDir;
+        }
+
         @NotNull
         @Override
         public List<String> getSourceFiles() {
@@ -87,7 +101,11 @@ public interface ModuleDescription {
 
         @Override
         public String toString() {
-            return name + "\n\tsources=" + sources + "\n\tclasspath=" + classpath + "\n\tannotations=" + annotations;
+            return name +
+                   "\n\toutputDir=" + outputDir +
+                   "\n\tsources=" + sources +
+                   "\n\tclasspath=" + classpath +
+                   "\n\tannotations=" + annotations;
         }
     }
 }
diff --git a/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleXmlParser.java b/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleXmlParser.java
index 0ce0e521768..adfa1a0fbd8 100644
--- a/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleXmlParser.java
+++ b/compiler/cli/cli-common/src/org/jetbrains/jet/cli/common/modules/ModuleXmlParser.java
@@ -39,6 +39,7 @@ public class ModuleXmlParser {
     public static final String MODULES = "modules";
     public static final String MODULE = "module";
     public static final String NAME = "name";
+    public static final String OUTPUT_DIR = "outputDir";
     public static final String SOURCES = "sources";
     public static final String PATH = "path";
     public static final String CLASSPATH = "classpath";
@@ -116,7 +117,7 @@ public class ModuleXmlParser {
                 throw createError(qName);
             }
 
-            setCurrentState(new InsideModule(getAttribute(attributes, NAME, qName)));
+            setCurrentState(new InsideModule(getAttribute(attributes, NAME, qName), getAttribute(attributes, OUTPUT_DIR, qName)));
         }
 
         @Override
@@ -130,9 +131,10 @@ public class ModuleXmlParser {
     private class InsideModule extends DefaultHandler {
 
         private final ModuleDescription.Impl moduleDescription;
-        private InsideModule(String name) {
+        private InsideModule(String name, String outputDir) {
             this.moduleDescription = new ModuleDescription.Impl();
             this.moduleDescription.setName(name);
+            this.moduleDescription.setOutputDir(outputDir);
             result.add(moduleDescription);
         }
 
diff --git a/compiler/cli/src/org/jetbrains/jet/cli/jvm/compiler/CompileEnvironmentUtil.java b/compiler/cli/src/org/jetbrains/jet/cli/jvm/compiler/CompileEnvironmentUtil.java
index 64636be3c0d..68d0c4339b2 100644
--- a/compiler/cli/src/org/jetbrains/jet/cli/jvm/compiler/CompileEnvironmentUtil.java
+++ b/compiler/cli/src/org/jetbrains/jet/cli/jvm/compiler/CompileEnvironmentUtil.java
@@ -267,6 +267,11 @@ public class CompileEnvironmentUtil {
             return description.getModuleName();
         }
 
+        @Override
+        public String getOutputDirectory() {
+            return description.getOutputDir();
+        }
+
         @Override
         public List<String> getSourceFiles() {
             return description.getSourceFiles();
diff --git a/compiler/testData/compiler/smoke/Smoke.kts b/compiler/testData/compiler/smoke/Smoke.kts
index 179d700646e..bf9aea6b44c 100644
--- a/compiler/testData/compiler/smoke/Smoke.kts
+++ b/compiler/testData/compiler/smoke/Smoke.kts
@@ -1,7 +1,7 @@
 import kotlin.modules.*
 
 fun project() {
-    module("smoke") {
+    module("smoke", ".") {
         sources += "Smoke.kt"
     }
 }
diff --git a/compiler/testData/modules.xml/allOnce.txt b/compiler/testData/modules.xml/allOnce.txt
index eff45bdf1a6..231963fc373 100644
--- a/compiler/testData/modules.xml/allOnce.txt
+++ b/compiler/testData/modules.xml/allOnce.txt
@@ -1,4 +1,5 @@
 name
+	outputDir=out
 	sources=[foo]
 	classpath=[bar]
 	annotations=[baz]
diff --git a/compiler/testData/modules.xml/allOnce.xml b/compiler/testData/modules.xml/allOnce.xml
index c6aa8435b6b..b6a96ba2299 100644
--- a/compiler/testData/modules.xml/allOnce.xml
+++ b/compiler/testData/modules.xml/allOnce.xml
@@ -1,5 +1,5 @@
 <modules>
-  <module name="name">
+  <module name="name" outputDir="out">
     <sources path="foo"/>
     <classpath path="bar"/>
     <externalAnnotations path="baz"/>
diff --git a/compiler/testData/modules.xml/comments.txt b/compiler/testData/modules.xml/comments.txt
index c787f635a11..f4b4c196ffd 100644
--- a/compiler/testData/modules.xml/comments.txt
+++ b/compiler/testData/modules.xml/comments.txt
@@ -1,4 +1,5 @@
 name
+	outputDir=out
 	sources=[foo, foo1, foo2]
 	classpath=[bar1, bar2]
 	annotations=[baz, baz1, baz2]
diff --git a/compiler/testData/modules.xml/comments.xml b/compiler/testData/modules.xml/comments.xml
index 3d40d4ebd58..22fb6f6fe59 100644
--- a/compiler/testData/modules.xml/comments.xml
+++ b/compiler/testData/modules.xml/comments.xml
@@ -1,5 +1,5 @@
 <modules>
-  <module name="name">
+  <module name="name" outputDir="out">
     <sources path="foo"/>
     <sources path="foo1"/>
     <sources path="foo2"/>
diff --git a/compiler/testData/modules.xml/emptyModule.txt b/compiler/testData/modules.xml/emptyModule.txt
index d8a25da9ed9..b4f8d590376 100644
--- a/compiler/testData/modules.xml/emptyModule.txt
+++ b/compiler/testData/modules.xml/emptyModule.txt
@@ -1,4 +1,5 @@
 name
+	outputDir=out
 	sources=[]
 	classpath=[]
 	annotations=[]
diff --git a/compiler/testData/modules.xml/emptyModule.xml b/compiler/testData/modules.xml/emptyModule.xml
index a6f8c3f8f61..b51b8c22e89 100644
--- a/compiler/testData/modules.xml/emptyModule.xml
+++ b/compiler/testData/modules.xml/emptyModule.xml
@@ -1,3 +1,3 @@
 <modules>
-  <module name="name"/>
+  <module name="name" outputDir="out"/>
 </modules>
\ No newline at end of file
diff --git a/compiler/testData/modules.xml/manyTimes.txt b/compiler/testData/modules.xml/manyTimes.txt
index 095cbf36f71..1ef4faf3440 100644
--- a/compiler/testData/modules.xml/manyTimes.txt
+++ b/compiler/testData/modules.xml/manyTimes.txt
@@ -1,4 +1,5 @@
 name
+	outputDir=out
 	sources=[foo, foo1, foo2]
 	classpath=[bar, bar1, bar2]
 	annotations=[baz, baz1, baz2]
diff --git a/compiler/testData/modules.xml/manyTimes.xml b/compiler/testData/modules.xml/manyTimes.xml
index 551691dad0b..833c18fb775 100644
--- a/compiler/testData/modules.xml/manyTimes.xml
+++ b/compiler/testData/modules.xml/manyTimes.xml
@@ -1,5 +1,5 @@
 <modules>
-  <module name="name">
+  <module name="name" outputDir="out">
     <sources path="foo"/>
     <sources path="foo1"/>
     <sources path="foo2"/>
diff --git a/compiler/testData/modules.xml/onlySources.txt b/compiler/testData/modules.xml/onlySources.txt
index 14fe55ba9c6..f1d54734816 100644
--- a/compiler/testData/modules.xml/onlySources.txt
+++ b/compiler/testData/modules.xml/onlySources.txt
@@ -1,4 +1,5 @@
 name
+	outputDir=out
 	sources=[foo]
 	classpath=[]
 	annotations=[]
diff --git a/compiler/testData/modules.xml/onlySources.xml b/compiler/testData/modules.xml/onlySources.xml
index 7b205f3bfa7..4ebe1df47c8 100644
--- a/compiler/testData/modules.xml/onlySources.xml
+++ b/compiler/testData/modules.xml/onlySources.xml
@@ -1,5 +1,5 @@
 <modules>
-  <module name="name">
+  <module name="name" outputDir="out">
     <sources path="foo"/>
   </module>
 </modules>
\ No newline at end of file
diff --git a/compiler/testData/modules.xml/twoModules.txt b/compiler/testData/modules.xml/twoModules.txt
index 01635bfa581..0fa9e2cfff3 100644
--- a/compiler/testData/modules.xml/twoModules.txt
+++ b/compiler/testData/modules.xml/twoModules.txt
@@ -1,8 +1,10 @@
 name
+	outputDir=out
 	sources=[foo, foo1, foo2]
 	classpath=[bar, bar1, bar2]
 	annotations=[baz, baz1, baz2]
 name2
+	outputDir=out2
 	sources=[2foo, 2foo1, 2foo2]
 	classpath=[2bar, 2bar1, 2bar2]
 	annotations=[2baz, 2baz1, 2baz2]
diff --git a/compiler/testData/modules.xml/twoModules.xml b/compiler/testData/modules.xml/twoModules.xml
index 1e905696ccd..9b23938c5f4 100644
--- a/compiler/testData/modules.xml/twoModules.xml
+++ b/compiler/testData/modules.xml/twoModules.xml
@@ -1,5 +1,5 @@
 <modules>
-  <module name="name">
+  <module name="name" outputDir="out">
     <sources path="foo"/>
     <sources path="foo1"/>
     <sources path="foo2"/>
@@ -10,7 +10,7 @@
     <externalAnnotations path="baz1"/>
     <externalAnnotations path="baz2"/>
   </module>
-  <module name="name2">
+  <module name="name2" outputDir="out2">
     <sources path="2foo"/>
     <sources path="2foo1"/>
     <sources path="2foo2"/>
diff --git a/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleDescriptionGenerator.java b/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleDescriptionGenerator.java
index f50b50a13a6..7119ce9a452 100644
--- a/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleDescriptionGenerator.java
+++ b/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleDescriptionGenerator.java
@@ -26,6 +26,7 @@ import java.util.Set;
 public interface KotlinModuleDescriptionGenerator {
     CharSequence generateModuleScript(
             String moduleName,
+            String outputDir,
             DependencyProvider dependencyProvider,
             List<File> sourceFiles,
             boolean tests,
diff --git a/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleScriptGenerator.java b/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleScriptGenerator.java
index 0af46da7aa1..be7fcfec1ef 100644
--- a/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleScriptGenerator.java
+++ b/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleScriptGenerator.java
@@ -34,7 +34,7 @@ public class KotlinModuleScriptGenerator implements KotlinModuleDescriptionGener
     @Override
     public CharSequence generateModuleScript(
             String moduleName,
-            DependencyProvider dependencyProvider,
+            String outputDir, DependencyProvider dependencyProvider,
             List<File> sourceFiles,
             boolean tests,
             final Set<File> directoriesToFilterOut
@@ -50,7 +50,7 @@ public class KotlinModuleScriptGenerator implements KotlinModuleDescriptionGener
 
         script.append("import kotlin.modules.*\n");
         script.append("fun project() {\n");
-        script.append("    module(\"" + moduleName + "\") {\n");
+        script.append("    module(\"" + moduleName + "\", outputDir = \"" + toSystemIndependentName(outputDir) + "\") {\n");
 
         for (File sourceFile : sourceFiles) {
             script.append("        sources += \"" + toSystemIndependentName(sourceFile.getPath()) + "\"\n");
diff --git a/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleXmlGenerator.java b/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleXmlGenerator.java
index 35515414340..5f9dec940f7 100644
--- a/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleXmlGenerator.java
+++ b/ide-compiler-runner/src/org/jetbrains/jet/compiler/runner/KotlinModuleXmlGenerator.java
@@ -37,7 +37,7 @@ public class KotlinModuleXmlGenerator implements KotlinModuleDescriptionGenerato
     @Override
     public CharSequence generateModuleScript(
             String moduleName,
-            DependencyProvider dependencyProvider,
+            String outputDir, DependencyProvider dependencyProvider,
             List<File> sourceFiles,
             boolean tests,
             final Set<File> directoriesToFilterOut
@@ -54,7 +54,9 @@ public class KotlinModuleXmlGenerator implements KotlinModuleDescriptionGenerato
             p.println("<!-- Module script for production -->");
         }
 
-        p.println("<", MODULE, " ", NAME, "=\"", escapeXml(moduleName), "\">");
+        p.println("<", MODULE, " ",
+                       NAME, "=\"", escapeXml(moduleName), "\" ",
+                       OUTPUT_DIR, "=\"", getEscapedPath(new File(outputDir)), "\">");
         p.pushIndent();
 
         for (File sourceFile : sourceFiles) {
diff --git a/idea/src/org/jetbrains/jet/plugin/compiler/JetCompiler.java b/idea/src/org/jetbrains/jet/plugin/compiler/JetCompiler.java
index 9bf2dbc44ee..a4e0d3f049d 100644
--- a/idea/src/org/jetbrains/jet/plugin/compiler/JetCompiler.java
+++ b/idea/src/org/jetbrains/jet/plugin/compiler/JetCompiler.java
@@ -159,6 +159,7 @@ public class JetCompiler implements TranslatingCompiler {
         }
         CharSequence script = KotlinModuleScriptGenerator.INSTANCE.generateModuleScript(
                 moduleName,
+                moduleOutputDirectory.getAbsolutePath(),
                 getDependencyProvider(chunk, tests, mainOutput),
                 sourceFiles,
                 tests,
diff --git a/idea/testData/modules.xml/basic.xml b/idea/testData/modules.xml/basic.xml
index b44ef43d69f..340cb84d589 100644
--- a/idea/testData/modules.xml/basic.xml
+++ b/idea/testData/modules.xml/basic.xml
@@ -1,6 +1,6 @@
 <modules>
     <!-- Module script for production -->
-    <module name="name">
+    <module name="name" outputDir="output">
         <sources path="s1"/>
         <sources path="s2"/>
         <!-- External annotations -->
diff --git a/idea/testData/modules.xml/filtered.xml b/idea/testData/modules.xml/filtered.xml
index 9c16c84f538..e7ed7eb1982 100644
--- a/idea/testData/modules.xml/filtered.xml
+++ b/idea/testData/modules.xml/filtered.xml
@@ -1,6 +1,6 @@
 <modules>
     <!-- Module script for production -->
-    <module name="name">
+    <module name="name" outputDir="output">
         <sources path="s1"/>
         <sources path="s2"/>
         <!-- External annotations -->
diff --git a/idea/tests/org/jetbrains/jet/modules/xml/KotlinModuleXmlGeneratorTest.java b/idea/tests/org/jetbrains/jet/modules/xml/KotlinModuleXmlGeneratorTest.java
index 03f528a2bb3..d6c9d76d871 100644
--- a/idea/tests/org/jetbrains/jet/modules/xml/KotlinModuleXmlGeneratorTest.java
+++ b/idea/tests/org/jetbrains/jet/modules/xml/KotlinModuleXmlGeneratorTest.java
@@ -31,6 +31,7 @@ public class KotlinModuleXmlGeneratorTest extends TestCase {
     public void testBasic() throws Exception {
         String actual = KotlinModuleXmlGenerator.INSTANCE.generateModuleScript(
                 "name",
+                "output",
                 new KotlinModuleDescriptionGenerator.DependencyProvider() {
                     @Override
                     public void processClassPath(@NotNull KotlinModuleDescriptionGenerator.DependencyProcessor processor) {
@@ -40,8 +41,7 @@ public class KotlinModuleXmlGeneratorTest extends TestCase {
                 },
                 Arrays.asList(new File("s1"), new File("s2")),
                 false,
-                Collections.<File>emptySet()
-        ).toString();
+                Collections.<File>emptySet()).toString();
         String expected = FileUtil.loadFile(new File("idea/testData/modules.xml/basic.xml"));
         UsefulTestCase.assertSameLines(expected, actual);
     }
@@ -49,6 +49,7 @@ public class KotlinModuleXmlGeneratorTest extends TestCase {
     public void testFiltered() throws Exception {
         String actual = KotlinModuleXmlGenerator.INSTANCE.generateModuleScript(
                 "name",
+                "output",
                 new KotlinModuleDescriptionGenerator.DependencyProvider() {
                     @Override
                     public void processClassPath(@NotNull KotlinModuleDescriptionGenerator.DependencyProcessor processor) {
@@ -58,8 +59,7 @@ public class KotlinModuleXmlGeneratorTest extends TestCase {
                 },
                 Arrays.asList(new File("s1"), new File("s2")),
                 false,
-                Collections.singleton(new File("cp1"))
-        ).toString();
+                Collections.singleton(new File("cp1"))).toString();
         String expected = FileUtil.loadFile(new File("idea/testData/modules.xml/filtered.xml"));
         UsefulTestCase.assertSameLines(expected, actual);
     }
diff --git a/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java b/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java
index f5da7b33997..810fbe7633b 100644
--- a/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java
+++ b/jps-plugin/src/org/jetbrains/jet/jps/build/KotlinBuilderModuleScriptGenerator.java
@@ -52,16 +52,22 @@ public class KotlinBuilderModuleScriptGenerator {
     public static File generateModuleDescription(CompileContext context, ModuleBuildTarget target, List<File> sourceFiles)
             throws IOException
     {
+        File outputDir = target.getOutputDir();
+        if (outputDir == null) {
+            throw new IllegalStateException("No output directory found for " + target);
+
+        }
         CharSequence moduleScriptText = GENERATOR.generateModuleScript(
                 target.getId(),
+                outputDir.getAbsolutePath(),
                 getKotlinModuleDependencies(context, target),
                 sourceFiles,
                 target.isTests(),
                 // this excludes the output directory from the class path, to be removed for true incremental compilation
-                Collections.singleton(target.getOutputDir())
+                Collections.singleton(outputDir)
         );
 
-        File scriptFile = new File(target.getOutputDir(), "script." + GENERATOR.getFileExtension());
+        File scriptFile = new File(outputDir, "script." + GENERATOR.getFileExtension());
 
         writeScriptToFile(context, moduleScriptText, scriptFile);
 
diff --git a/libraries/stdlib/src/kotlin/modules/ModuleBuilder.kt b/libraries/stdlib/src/kotlin/modules/ModuleBuilder.kt
index 7c3032251d2..53c3021718d 100644
--- a/libraries/stdlib/src/kotlin/modules/ModuleBuilder.kt
+++ b/libraries/stdlib/src/kotlin/modules/ModuleBuilder.kt
@@ -3,8 +3,8 @@ package kotlin.modules
 import java.util.*
 import jet.modules.*
 
-public fun module(name: String, callback:  ModuleBuilder.() -> Unit) {
-    val builder = ModuleBuilder(name)
+public fun module(name: String, outputDir: String, callback:  ModuleBuilder.() -> Unit) {
+    val builder = ModuleBuilder(name, outputDir)
     builder.callback()
     AllModules.modules.get()?.add(builder)
 }
@@ -27,7 +27,7 @@ class AnnotationsPathBuilder(val parent: ModuleBuilder) {
     }
 }
 
-open class ModuleBuilder(val name: String): Module {
+open class ModuleBuilder(val name: String, val outputDir: String): Module {
     // http://youtrack.jetbrains.net/issue/KT-904
     private val sourceFiles0 = ArrayList<String>()
     private val classpathRoots0 = ArrayList<String>()
@@ -54,6 +54,7 @@ open class ModuleBuilder(val name: String): Module {
         annotationsRoots0.add(name)
     }
 
+    public override fun getOutputDirectory(): String = outputDir
     public override fun getSourceFiles(): List<String> = sourceFiles0
     public override fun getClasspathRoots(): List<String> = classpathRoots0
     public override fun getAnnotationsRoots(): List<String> = annotationsRoots0
diff --git a/runtime/src/jet/modules/Module.java b/runtime/src/jet/modules/Module.java
index 96ab0cf85a0..257888f3a40 100644
--- a/runtime/src/jet/modules/Module.java
+++ b/runtime/src/jet/modules/Module.java
@@ -24,6 +24,9 @@ public interface Module {
     @KotlinSignature("fun getModuleName(): String")
     String getModuleName();
 
+    @KotlinSignature("fun getOutputDirectory(): String")
+    String getOutputDirectory();
+
     @KotlinSignature("fun getSourceFiles(): List<String>")
     List<String> getSourceFiles();