diff --git a/jps/jps-common/src/org/jetbrains/kotlin/config/facetSerialization.kt b/jps/jps-common/src/org/jetbrains/kotlin/config/facetSerialization.kt
new file mode 100644
index 00000000000..c696d3bd62c
--- /dev/null
+++ b/jps/jps-common/src/org/jetbrains/kotlin/config/facetSerialization.kt
@@ -0,0 +1,130 @@
+/*
+ * Copyright 2010-2017 JetBrains s.r.o.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+package org.jetbrains.kotlin.config
+
+import com.intellij.util.xmlb.SkipDefaultsSerializationFilter
+import com.intellij.util.xmlb.XmlSerializer
+import org.jdom.DataConversionException
+import org.jdom.Element
+import org.jetbrains.kotlin.cli.common.arguments.K2JSCompilerArguments
+import org.jetbrains.kotlin.cli.common.arguments.K2JVMCompilerArguments
+
+private fun Element.getOption(name: String) = getChildren("option").firstOrNull { it.getAttribute("name").value == name }
+
+private fun Element.getOptionValue(name: String) = getOption(name)?.getAttribute("value")?.value
+
+private fun Element.getOptionBody(name: String) = getOption(name)?.children?.firstOrNull()
+
+private fun readV1Config(element: Element): KotlinFacetSettings {
+    return KotlinFacetSettings().apply {
+        val useProjectSettings = element.getOptionValue("useProjectSettings")?.toBoolean()
+
+        val targetPlatformName = element.getOptionBody("versionInfo")?.getOptionValue("targetPlatformName")
+        val targetPlatform = TargetPlatformKind.ALL_PLATFORMS.firstOrNull { it.description == targetPlatformName }
+                             ?: TargetPlatformKind.Jvm[JvmTarget.DEFAULT]
+
+        val compilerInfoElement = element.getOptionBody("compilerInfo")
+
+        val compilerSettings = CompilerSettings().apply {
+            compilerInfoElement?.getOptionBody("compilerSettings")?.let { compilerSettingsElement ->
+                XmlSerializer.deserializeInto(this, compilerSettingsElement)
+            }
+        }
+
+        val commonArgumentsElement = compilerInfoElement?.getOptionBody("_commonCompilerArguments")
+        val jvmArgumentsElement = compilerInfoElement?.getOptionBody("k2jvmCompilerArguments")
+        val jsArgumentsElement = compilerInfoElement?.getOptionBody("k2jsCompilerArguments")
+
+        val compilerArguments = targetPlatform.createCompilerArguments()
+
+        commonArgumentsElement?.let { XmlSerializer.deserializeInto(compilerArguments, it) }
+        when (compilerArguments) {
+            is K2JVMCompilerArguments -> jvmArgumentsElement?.let { XmlSerializer.deserializeInto(compilerArguments, it) }
+            is K2JSCompilerArguments -> jsArgumentsElement?.let { XmlSerializer.deserializeInto(compilerArguments, it) }
+        }
+
+        if (useProjectSettings != null) {
+            this.useProjectSettings = useProjectSettings
+        }
+        else {
+            // Migration problem workaround for pre-1.1-beta releases (mainly 1.0.6) -> 1.1-rc+
+            // Problematic cases: 1.1-beta/1.1-beta2 -> 1.1-rc+ (useProjectSettings gets reset to false)
+            // This heuristic detects old enough configurations:
+            if (jvmArgumentsElement == null) {
+                this.useProjectSettings = false
+            }
+        }
+
+        this.compilerSettings = compilerSettings
+        this.compilerArguments = compilerArguments
+    }
+}
+
+private fun readV2Config(element: Element): KotlinFacetSettings {
+    return KotlinFacetSettings().apply {
+        element.getAttributeValue("useProjectSettings")?.let { useProjectSettings = it.toBoolean() }
+        val platformName = element.getAttributeValue("platform")
+        val platformKind = TargetPlatformKind.ALL_PLATFORMS.firstOrNull { it.description == platformName } ?: TargetPlatformKind.DEFAULT_PLATFORM
+        element.getChild("compilerSettings")?.let {
+            compilerSettings = CompilerSettings()
+            XmlSerializer.deserializeInto(compilerSettings!!, it)
+        }
+        element.getChild("compilerArguments")?.let {
+            compilerArguments = platformKind.createCompilerArguments()
+            XmlSerializer.deserializeInto(compilerArguments!!, it)
+        }
+    }
+}
+
+fun deserializeFacetSettings(element: Element): KotlinFacetSettings {
+    val version =
+            try {
+                element.getAttribute("version")?.intValue
+            }
+            catch(e: DataConversionException) {
+                null
+            } ?: KotlinFacetSettings.DEFAULT_VERSION
+    return when (version) {
+        1 -> readV1Config(element)
+        2 -> readV2Config(element)
+        else -> KotlinFacetSettings() // Reset facet configuration if versions don't match
+    }
+}
+
+fun KotlinFacetSettings.serializeFacetSettings(element: Element) {
+    val filter = SkipDefaultsSerializationFilter()
+
+    element.setAttribute("version", KotlinFacetSettings.CURRENT_VERSION.toString())
+    targetPlatformKind?.let {
+        element.setAttribute("platform", it.description)
+    }
+    if (!useProjectSettings) {
+        element.setAttribute("useProjectSettings", useProjectSettings.toString())
+    }
+    compilerSettings?.let {
+        Element("compilerSettings").apply {
+            XmlSerializer.serializeInto(it, this, filter)
+            element.addContent(this)
+        }
+    }
+    compilerArguments?.let {
+        Element("compilerArguments").apply {
+            XmlSerializer.serializeInto(it, this, filter)
+            element.addContent(this)
+        }
+    }
+}
diff --git a/jps/jps-plugin/src/org/jetbrains/kotlin/jps/model/JpsKotlinFacetConfigurationSerializer.kt b/jps/jps-plugin/src/org/jetbrains/kotlin/jps/model/JpsKotlinFacetConfigurationSerializer.kt
index 9bf0e88d700..202b7389d4a 100644
--- a/jps/jps-plugin/src/org/jetbrains/kotlin/jps/model/JpsKotlinFacetConfigurationSerializer.kt
+++ b/jps/jps-plugin/src/org/jetbrains/kotlin/jps/model/JpsKotlinFacetConfigurationSerializer.kt
@@ -16,12 +16,12 @@
 
 package org.jetbrains.kotlin.jps.model
 
-import com.intellij.util.xmlb.XmlSerializer
 import org.jdom.Element
 import org.jetbrains.jps.model.JpsElement
 import org.jetbrains.jps.model.module.JpsModule
 import org.jetbrains.jps.model.serialization.facet.JpsFacetConfigurationSerializer
-import org.jetbrains.kotlin.config.KotlinFacetSettings
+import org.jetbrains.kotlin.config.deserializeFacetSettings
+import org.jetbrains.kotlin.config.serializeFacetSettings
 
 object JpsKotlinFacetConfigurationSerializer : JpsFacetConfigurationSerializer<JpsKotlinFacetModuleExtension>(
         JpsKotlinFacetModuleExtension.KIND,
@@ -34,7 +34,7 @@ object JpsKotlinFacetConfigurationSerializer : JpsFacetConfigurationSerializer<J
             parent: JpsElement?,
             module: JpsModule
     ): JpsKotlinFacetModuleExtension {
-        return JpsKotlinFacetModuleExtension(XmlSerializer.deserialize(facetConfigurationElement, KotlinFacetSettings::class.java)!!)
+        return JpsKotlinFacetModuleExtension(deserializeFacetSettings(facetConfigurationElement))
     }
 
     override fun saveExtension(
@@ -42,6 +42,6 @@ object JpsKotlinFacetConfigurationSerializer : JpsFacetConfigurationSerializer<J
             facetConfigurationTag: Element,
             module: JpsModule
     ) {
-        XmlSerializer.serializeInto((extension as JpsKotlinFacetModuleExtension).settings, facetConfigurationTag)
+        (extension as JpsKotlinFacetModuleExtension).settings.serializeFacetSettings(facetConfigurationTag)
     }
 }
\ No newline at end of file