diff --git a/hadoop-common-project/hadoop-common/CHANGES.txt b/hadoop-common-project/hadoop-common/CHANGES.txt
index e60f05b0fe1..4ca2ce31ee7 100644
--- a/hadoop-common-project/hadoop-common/CHANGES.txt
+++ b/hadoop-common-project/hadoop-common/CHANGES.txt
@@ -473,6 +473,9 @@ Branch-2 ( Unreleased changes )
     HADOOP-8766. FileContextMainOperationsBaseTest should randomize the root
     dir. (Colin Patrick McCabe via atm)
 
+    HADOOP-8749. HADOOP-8031 changed the way in which relative xincludes are handled in 
+    Configuration. (ahmed via tucu)
+
   BREAKDOWN OF HDFS-3042 SUBTASKS
 
     HADOOP-8220. ZKFailoverController doesn't handle failure to become active
diff --git a/hadoop-common-project/hadoop-common/src/main/java/org/apache/hadoop/conf/Configuration.java b/hadoop-common-project/hadoop-common/src/main/java/org/apache/hadoop/conf/Configuration.java
index 55d53da13af..1605501ca71 100644
--- a/hadoop-common-project/hadoop-common/src/main/java/org/apache/hadoop/conf/Configuration.java
+++ b/hadoop-common-project/hadoop-common/src/main/java/org/apache/hadoop/conf/Configuration.java
@@ -1871,11 +1871,11 @@ public class Configuration implements Iterable<Map.Entry<String,String>>,
     if (url == null) {
       return null;
     }
-    return parse(builder, url.openStream());
+    return parse(builder, url.openStream(), url.toString());
   }
 
-  private Document parse(DocumentBuilder builder, InputStream is)
-      throws IOException, SAXException {
+  private Document parse(DocumentBuilder builder, InputStream is,
+      String systemId) throws IOException, SAXException {
     if (!quietmode) {
       LOG.info("parsing input stream " + is);
     }
@@ -1883,7 +1883,8 @@ public class Configuration implements Iterable<Map.Entry<String,String>>,
       return null;
     }
     try {
-      return builder.parse(is);
+      return (systemId == null) ? builder.parse(is) : builder.parse(is,
+          systemId);
     } finally {
       is.close();
     }
@@ -1951,10 +1952,11 @@ public class Configuration implements Iterable<Map.Entry<String,String>>,
           if (!quiet) {
             LOG.info("parsing File " + file);
           }
-          doc = parse(builder, new BufferedInputStream(new FileInputStream(file)));
+          doc = parse(builder, new BufferedInputStream(
+              new FileInputStream(file)), ((Path)resource).toString());
         }
       } else if (resource instanceof InputStream) {
-        doc = parse(builder, (InputStream) resource);
+        doc = parse(builder, (InputStream) resource, null);
         returnCachedProperties = true;
       } else if (resource instanceof Properties) {
         overlay(properties, (Properties)resource);
diff --git a/hadoop-common-project/hadoop-common/src/test/java/org/apache/hadoop/conf/TestConfiguration.java b/hadoop-common-project/hadoop-common/src/test/java/org/apache/hadoop/conf/TestConfiguration.java
index 27842be427b..8f5963c22cb 100644
--- a/hadoop-common-project/hadoop-common/src/test/java/org/apache/hadoop/conf/TestConfiguration.java
+++ b/hadoop-common-project/hadoop-common/src/test/java/org/apache/hadoop/conf/TestConfiguration.java
@@ -358,6 +358,36 @@ public class TestConfiguration extends TestCase {
     tearDown();
   }
 
+  public void testRelativeIncludes() throws Exception {
+    tearDown();
+    String relConfig = new File("./tmp/test-config.xml").getAbsolutePath();
+    String relConfig2 = new File("./tmp/test-config2.xml").getAbsolutePath();
+
+    new File(new File(relConfig).getParent()).mkdirs();
+    out = new BufferedWriter(new FileWriter(relConfig2));
+    startConfig();
+    appendProperty("a", "b");
+    endConfig();
+
+    out = new BufferedWriter(new FileWriter(relConfig));
+    startConfig();
+    // Add the relative path instead of the absolute one.
+    addInclude(new File(relConfig2).getName());
+    appendProperty("c", "d");
+    endConfig();
+
+    // verify that the includes file contains all properties
+    Path fileResource = new Path(relConfig);
+    conf.addResource(fileResource);
+    assertEquals(conf.get("a"), "b");
+    assertEquals(conf.get("c"), "d");
+
+    // Cleanup
+    new File(relConfig).delete();
+    new File(relConfig2).delete();
+    new File(new File(relConfig).getParent()).delete();
+  }
+
   BufferedWriter out;
 	
   public void testIntegerRanges() {