diff --git a/eeschema/sch_legacy_plugin.cpp b/eeschema/sch_legacy_plugin.cpp
index 2bc406deec..69a3a55dea 100644
--- a/eeschema/sch_legacy_plugin.cpp
+++ b/eeschema/sch_legacy_plugin.cpp
@@ -598,7 +598,22 @@ SCH_SHEET* SCH_LEGACY_PLUGIN::Load( const wxString& aFileName, KIWAY* aKiway,
     // always be an absolute path so the project path can be used for load child sheet files.
     wxASSERT( fn.IsAbsolute() );
 
-    m_path = fn.GetPath();
+    if( aAppendToMe )
+    {
+        wxLogDebug( "Append \"%s\" to sheet \"%s\".", aFileName, aAppendToMe->GetFileName() );
+
+        wxFileName normedFn = aAppendToMe->GetFileName();
+
+        if( !normedFn.IsAbsolute() )
+        {
+            if( aFileName.Right( normedFn.GetFullPath().Length() ) == normedFn.GetFullPath() )
+                m_path = aFileName.Left( aFileName.Length() - normedFn.GetFullPath().Length() );
+        }
+    }
+    else
+    {
+        m_path = aKiway->Prj().GetProjectPath();
+    }
 
     init( aKiway, aProperties );
 
@@ -641,6 +656,13 @@ void SCH_LEGACY_PLUGIN::loadHierarchy( SCH_SHEET* aSheet )
         if( !fileName.IsAbsolute() )
             fileName.MakeAbsolute( m_path );
 
+        // Save the current path so that it gets restored when decending and ascending the
+        // sheet hierarchy which allows for sheet schematic files to be nested in folders
+        // relative to the last path a schematic was loaded from.
+        m_path = fileName.GetPath();
+
+        wxLogDebug( "Saving last path \"%s\"", m_path );
+
         m_rootSheet->SearchHierarchy( fileName.GetFullPath(), &screen );
 
         if( screen )
@@ -693,6 +715,9 @@ void SCH_LEGACY_PLUGIN::loadHierarchy( SCH_SHEET* aSheet )
                 m_error += ioe.What();
             }
         }
+
+        wxLogDebug( "Restoring last path \"%s\"", fileName.GetPath() );
+        m_path = fileName.GetPath();
     }
 }
 
diff --git a/eeschema/sheet.cpp b/eeschema/sheet.cpp
index 99823ba123..c134daa60b 100644
--- a/eeschema/sheet.cpp
+++ b/eeschema/sheet.cpp
@@ -100,20 +100,32 @@ bool SCH_EDIT_FRAME::EditSheet( SCH_SHEET* aSheet, SCH_SHEET_PATH* aHierarchy )
     bool loadFromFile = false;
     SCH_SCREEN* useScreen = NULL;
 
+    // Relative file names are relative to the path of the current sheet.  This allows for
+    // nesting of schematic files in subfolders.
+    if( !fileName.IsAbsolute() )
+    {
+        const SCH_SCREEN* currentScreen = aHierarchy->LastScreen();
+
+        wxCHECK_MSG( currentScreen, false, "Invalid sheet path object." );
+
+        wxFileName currentSheetFileName = currentScreen->GetFileName();
+
+        wxCHECK_MSG( fileName.Normalize( wxPATH_NORM_ALL, currentSheetFileName.GetPath() ), false,
+                     "Cannot normalize new sheet schematic file path." );
+    }
+
     wxString newFilename = fileName.GetFullPath();
 
     // Search for a schematic file having the same filename
     // already in use in the hierarchy or on disk, in order to reuse it.
-    if( !g_RootSheet->SearchHierarchy( fileName.GetFullName(), &useScreen ) )
+    if( !g_RootSheet->SearchHierarchy( newFilename, &useScreen ) )
     {
-        // if user entered a relative path, allow that to stay, but do the
-        // file existence test with an absolute (full) path.  This transformation
-        // is local to this scope, but is the same one used at load time later.
-        newFilename  = Prj().AbsolutePath( newFilename );
-
         loadFromFile = wxFileExists( newFilename );
     }
 
+    wxLogDebug( "Sheet requested file \"%s\", %s", newFilename,
+                (loadFromFile) ? "found" : "not found" );
+
     // Inside Eeschema, filenames are stored using unix notation
     newFilename.Replace( wxT( "\\" ), wxT( "/" ) );
 
@@ -236,7 +248,8 @@ bool SCH_EDIT_FRAME::EditSheet( SCH_SHEET* aSheet, SCH_SHEET_PATH* aHierarchy )
         }
     }
 
-    aSheet->SetFileName( fileName.GetFullPath( wxPATH_UNIX ) );
+    wxFileName userFileName = dlg.GetFileName();
+    aSheet->SetFileName( userFileName.GetFullPath( wxPATH_UNIX ) );
 
     if( useScreen )
     {