diff --git a/modules/angular2/router.js b/modules/angular2/router.js
index a311805b7c..48b92a2271 100644
--- a/modules/angular2/router.js
+++ b/modules/angular2/router.js
@@ -13,6 +13,7 @@ export {RouteParams} from './src/router/instruction';
 export * from './src/router/route_config_annotation';
 export * from './src/router/route_config_decorator';
 
+import {BrowserLocation} from './src/router/browser_location';
 import {Router, RootRouter} from './src/router/router';
 import {RouteRegistry} from './src/router/route_registry';
 import {Pipeline} from './src/router/pipeline';
@@ -23,6 +24,7 @@ import {bind} from './di';
 export var routerInjectables:List = [
   RouteRegistry,
   Pipeline,
+  BrowserLocation,
   Location,
   bind(Router).toFactory((registry, pipeline, location, meta) => {
     return new RootRouter(registry, pipeline, location, meta.type);
diff --git a/modules/angular2/src/router/browser_location.js b/modules/angular2/src/router/browser_location.js
new file mode 100644
index 0000000000..b9b37dcf20
--- /dev/null
+++ b/modules/angular2/src/router/browser_location.js
@@ -0,0 +1,36 @@
+import {DOM} from 'angular2/src/dom/dom_adapter';
+
+export class BrowserLocation {
+  _location;
+  _history;
+  _baseHref:string;
+  constructor() {
+    this._location = DOM.getLocation();
+    this._history = DOM.getHistory();
+    this._baseHref = DOM.getBaseHref();
+  }
+
+  onPopState(fn) {
+    DOM.getGlobalEventTarget('window').addEventListener('popstate', fn, false);
+  }
+
+  getBaseHref() {
+    return this._baseHref;
+  }
+
+  path() {
+    return this._location.pathname;
+  }
+
+  pushState(state:any, title:string, url:string) {
+    this._history.pushState(state, title, url);
+  }
+
+  forward() {
+    this._history.forward();
+  }
+
+  back() {
+    this._history.back();
+  }
+}
diff --git a/modules/angular2/src/router/location.js b/modules/angular2/src/router/location.js
index 1d903619d1..6f9328e5cb 100644
--- a/modules/angular2/src/router/location.js
+++ b/modules/angular2/src/router/location.js
@@ -1,40 +1,63 @@
-import {DOM} from 'angular2/src/dom/dom_adapter';
+import {BrowserLocation} from './browser_location';
+import {StringWrapper} from 'angular2/src/facade/lang';
 import {EventEmitter, ObservableWrapper} from 'angular2/src/facade/async';
 
 export class Location {
-  _location;
   _subject:EventEmitter;
-  _history;
-  constructor() {
+  _browserLocation:BrowserLocation;
+  _baseHref:string;
+  constructor(browserLocation:BrowserLocation) {
     this._subject = new EventEmitter();
-    this._location = DOM.getLocation();
-    this._history = DOM.getHistory();
-    DOM.getGlobalEventTarget('window').addEventListener('popstate', (_) => this._onPopState(_), false);
+    this._browserLocation = browserLocation;
+    this._baseHref = stripIndexHtml(this._browserLocation.getBaseHref());
+    this._browserLocation.onPopState((_) => this._onPopState(_));
   }
 
   _onPopState(_) {
     ObservableWrapper.callNext(this._subject, {
-      'url': this._location.pathname
+      'url': this.path()
     });
   }
 
   path() {
-    return this._location.pathname;
+    return this.normalize(this._browserLocation.path());
+  }
+
+  normalize(url) {
+    return this._stripBaseHref(stripIndexHtml(url));
+  }
+
+  _stripBaseHref(url) {
+    if (this._baseHref.length > 0 && StringWrapper.startsWith(url, this._baseHref)) {
+      return StringWrapper.substring(url, this._baseHref.length);
+    }
+    return url;
   }
 
   go(url:string) {
-    this._history.pushState(null, null, url);
+    url = this._stripBaseHref(url);
+    this._browserLocation.pushState(null, null, url);
   }
 
   forward() {
-    this._history.forward();
+    this._browserLocation.forward();
   }
 
   back() {
-    this._history.back()
+    this._browserLocation.back();
   }
 
   subscribe(onNext, onThrow = null, onReturn = null) {
     ObservableWrapper.subscribe(this._subject, onNext, onThrow, onReturn);
   }
 }
+
+
+
+function stripIndexHtml(url) {
+  // '/index.html'.length == 11
+  if (url.length > 10 && StringWrapper.substring(url, url.length - 11) == '/index.html') {
+    return StringWrapper.substring(url, 0, url.length - 11);
+  }
+  return url;
+}
diff --git a/modules/angular2/test/router/location_spec.js b/modules/angular2/test/router/location_spec.js
new file mode 100644
index 0000000000..e0cd179245
--- /dev/null
+++ b/modules/angular2/test/router/location_spec.js
@@ -0,0 +1,85 @@
+import {
+  AsyncTestCompleter,
+  describe,
+  proxy,
+  it, iit,
+  ddescribe, expect,
+  inject, beforeEach, beforeEachBindings,
+  SpyObject} from 'angular2/test_lib';
+import {IMPLEMENTS} from 'angular2/src/facade/lang';
+import {EventEmitter, ObservableWrapper} from 'angular2/src/facade/async';
+
+import {BrowserLocation} from 'angular2/src/router/browser_location';
+import {Location} from 'angular2/src/router/location';
+
+export function main() {
+
+  describe('Location', () => {
+
+    var browserLocation, location;
+
+    beforeEach(() => {
+      browserLocation = new DummyBrowserLocation();
+      browserLocation.spy('pushState');
+      browserLocation.baseHref = '/my/app';
+      location = new Location(browserLocation);
+    });
+
+    it('should normalize urls on navigate', () => {
+      location.go('/my/app/user/btford');
+      expect(browserLocation.spy('pushState')).toHaveBeenCalledWith(null, null, '/user/btford');
+    });
+
+    it('should remove index.html from base href', () => {
+      browserLocation.baseHref = '/my/app/index.html';
+      location = new Location(browserLocation);
+      location.go('/my/app/user/btford');
+      expect(browserLocation.spy('pushState')).toHaveBeenCalledWith(null, null, '/user/btford');
+    });
+
+    it('should normalize urls on popstate', inject([AsyncTestCompleter], (async) => {
+      browserLocation.simulatePopState('/my/app/user/btford');
+      location.subscribe((ev) => {
+        expect(ev['url']).toEqual('/user/btford');
+        async.done();
+      })
+    }));
+
+    it('should normalize location path', () => {
+      browserLocation.internalPath = '/my/app/user/btford';
+      expect(location.path()).toEqual('/user/btford');
+    });
+  });
+}
+
+@proxy
+@IMPLEMENTS(BrowserLocation)
+class DummyBrowserLocation extends SpyObject {
+  baseHref;
+  internalPath;
+  _subject:EventEmitter;
+  constructor() {
+    super();
+    this.internalPath = '/';
+    this._subject = new EventEmitter();
+  }
+
+  simulatePopState(url) {
+    this.internalPath = url;
+    ObservableWrapper.callNext(this._subject, null);
+  }
+
+  path() {
+    return this.internalPath;
+  }
+
+  onPopState(fn) {
+    ObservableWrapper.subscribe(this._subject, fn);
+  }
+
+  getBaseHref() {
+    return this.baseHref;
+  }
+
+  noSuchMethod(m){return super.noSuchMethod(m);}
+}