diff --git a/builder/vmware/iso/step_create_vmx.go b/builder/vmware/iso/step_create_vmx.go
index 1f4ee812f..62546d212 100644
--- a/builder/vmware/iso/step_create_vmx.go
+++ b/builder/vmware/iso/step_create_vmx.go
@@ -43,6 +43,11 @@ func (s *stepCreateVMX) Run(state multistep.StateBag) multistep.StepAction {
 	isoPath := state.Get("iso_path").(string)
 	ui := state.Get("ui").(packer.Ui)
 
+	// Convert the iso_path into a path relative to the .vmx file if possible
+	if relativeIsoPath,err := filepath.Rel(config.VMXTemplatePath, filepath.FromSlash(isoPath)); err == nil {
+		isoPath = relativeIsoPath
+	}
+
 	ui.Say("Building and writing VMX file")
 
 	vmxTemplate := DefaultVMXTemplate
diff --git a/common/config.go b/common/config.go
index 7bef253ee..7b01191a8 100644
--- a/common/config.go
+++ b/common/config.go
@@ -56,77 +56,109 @@ func DownloadableURL(original string) (string, error) {
 		// for more info about valid windows URIs
 		idx := strings.Index(original, ":")
 		if idx == 1 {
-			original = "file:///" + original
+			original = "file://" + filepath.ToSlash(original)
 		}
 	}
-	u, err := url.Parse(original)
+
+	// XXX: The validation here is later re-parsed in common/download.go and
+	//      thus any modifications here must remain consistent over there too.
+	uri, err := url.Parse(original)
 	if err != nil {
 		return "", err
 	}
 
-	if u.Scheme == "" {
-		u.Scheme = "file"
+	if uri.Scheme == "" {
+		uri.Scheme = "file"
 	}
 
-	if u.Scheme == "file" {
-		// Windows file handling is all sorts of tricky...
+	const UNCPrefix = string(os.PathSeparator)+string(os.PathSeparator)
+	if uri.Scheme == "file" {
+		var ospath string	// os-formatted pathname
 		if runtime.GOOS == "windows" {
-			// If the path is using Windows-style slashes, URL parses
-			// it into the host field.
-			if u.Path == "" && strings.Contains(u.Host, `\`) {
-				u.Path = u.Host
-				u.Host = ""
+			// Move any extra path components that were mis-parsed into the Host
+			// field back into the uri.Path field
+			if len(uri.Host) >= len(UNCPrefix) && uri.Host[:len(UNCPrefix)] == UNCPrefix {
+				idx := strings.Index(uri.Host[len(UNCPrefix):], string(os.PathSeparator))
+				if idx > -1 {
+					uri.Path = filepath.ToSlash(uri.Host[idx+len(UNCPrefix):]) + uri.Path
+					uri.Host = uri.Host[:idx+len(UNCPrefix)]
+				}
 			}
+			// Now all we need to do to convert the uri to a platform-specific path
+			// is to trade it's slashes for some os.PathSeparator ones.
+			ospath = uri.Host + filepath.FromSlash(uri.Path)
+
+		} else {
+			// Since we're already using sane paths on a sane platform, anything in
+			// uri.Host can be assumed that the user is describing a relative uri.
+			// This means that if we concatenate it with uri.Path, the filepath
+			// transform will still open the file correctly.
+			//     i.e. file://localdirectory/filename -> localdirectory/filename
+			ospath = uri.Host + uri.Path
 		}
 		// Only do the filepath transformations if the file appears
-		// to actually exist.
-		if _, err := os.Stat(u.Path); err == nil {
-			u.Path, err = filepath.Abs(u.Path)
+		// to actually exist. We don't do it on windows, because EvalSymlinks
+		// won't understand how to handle UNC paths and other Windows-specific minutae.
+		if _, err := os.Stat(ospath); err == nil && runtime.GOOS != "windows" {
+			ospath, err = filepath.Abs(ospath)
 			if err != nil {
 				return "", err
 			}
 
-			u.Path, err = filepath.EvalSymlinks(u.Path)
+			ospath, err = filepath.EvalSymlinks(ospath)
 			if err != nil {
 				return "", err
 			}
 
-			u.Path = filepath.Clean(u.Path)
+			ospath = filepath.Clean(ospath)
 		}
 
+		// now that ospath was normalized and such..
 		if runtime.GOOS == "windows" {
-			// Also replace all backslashes with forwardslashes since Windows
-			// users are likely to do this but the URL should actually only
-			// contain forward slashes.
-			u.Path = strings.Replace(u.Path, `\`, `/`, -1)
-			// prepend absolute windows paths with "/" so that when we
-			// compose u.String() below the outcome will be correct
-			// file:///c/blah syntax; otherwise u.String() will only add
-			// file:// which is not technically a correct windows URI
-			if filepath.IsAbs(u.Path) && !strings.HasPrefix(u.Path, "/") {
-				u.Path = "/" + u.Path
+			uri.Host = ""
+			// Check to see if our ospath is unc-prefixed, and if it is then split
+			// the UNC host into uri.Host, leaving the rest in ospath.
+			// This way, our UNC-uri is protected from injury in the call to uri.String()
+			if len(ospath) >= len(UNCPrefix) && ospath[:len(UNCPrefix)] == UNCPrefix {
+				idx := strings.Index(ospath[len(UNCPrefix):], string(os.PathSeparator))
+				if idx > -1 {
+					uri.Host = ospath[:len(UNCPrefix)+idx]
+					ospath = ospath[len(UNCPrefix)+idx:]
+				}
 			}
-
+			// Restore the uri by re-transforming our os-formatted path
+			uri.Path = filepath.ToSlash(ospath)
+		} else {
+			uri.Host = ""
+			uri.Path = filepath.ToSlash(ospath)
 		}
 	}
 
 	// Make sure it is lowercased
-	u.Scheme = strings.ToLower(u.Scheme)
+	uri.Scheme = strings.ToLower(uri.Scheme)
 
 	// Verify that the scheme is something we support in our common downloader.
 	supported := []string{"file", "http", "https"}
 	found := false
 	for _, s := range supported {
-		if u.Scheme == s {
+		if uri.Scheme == s {
 			found = true
 			break
 		}
 	}
 
 	if !found {
-		return "", fmt.Errorf("Unsupported URL scheme: %s", u.Scheme)
+		return "", fmt.Errorf("Unsupported URL scheme: %s", uri.Scheme)
 	}
-	return u.String(), nil
+
+	// explicit check to see if we need to manually replace the uri host with a UNC one
+	if runtime.GOOS == "windows" && uri.Scheme == "file" {
+		if len(uri.Host) >= len(UNCPrefix) && uri.Host[:len(UNCPrefix)] == UNCPrefix {
+			escapedHost := url.QueryEscape(uri.Host)
+			return strings.Replace(uri.String(), escapedHost, uri.Host, 1), nil
+		}
+	}
+	return uri.String(), nil
 }
 
 // FileExistsLocally takes the URL output from DownloadableURL, and determines
diff --git a/common/download.go b/common/download.go
index ada4c9756..5f9940056 100644
--- a/common/download.go
+++ b/common/download.go
@@ -16,6 +16,9 @@ import (
 	"net/url"
 	"os"
 	"runtime"
+	"path"
+	"path/filepath"
+	"strings"
 )
 
 // DownloadConfig is the configuration given to instantiate a new
@@ -130,9 +133,49 @@ func (d *DownloadClient) Get() (string, error) {
 		// locally and we don't make a copy. Normally we would copy or download.
 		log.Printf("[DEBUG] Using local file: %s", finalPath)
 
-		// Remove forward slash on absolute Windows file URLs before processing
-		if runtime.GOOS == "windows" && len(finalPath) > 0 && finalPath[0] == '/' {
-			finalPath = finalPath[1:]
+		// FIXME:
+		//	cwd should point to the path relative to client.json, but
+		//	since this isn't exposed to us anywhere, we use os.Getwd()
+		//	to figure it out.
+		cwd,err := os.Getwd()
+		if err != nil {
+			return "", fmt.Errorf("Unable to get working directory")
+		}
+
+		// convert the actual file uri to a windowsy path
+		// (this logic must correspond to the same logic in common/config.go)
+		if runtime.GOOS == "windows" {
+			const UNCPrefix = string(os.PathSeparator)+string(os.PathSeparator)
+
+			// move any extra path components that were parsed into Host due
+			// to UNC into the url.Path field so that it's PathSeparators get
+			// normalized
+			if len(url.Host) >= len(UNCPrefix) && url.Host[:len(UNCPrefix)] == UNCPrefix {
+				idx := strings.Index(url.Host[len(UNCPrefix):], string(os.PathSeparator))
+				if idx > -1 {
+					url.Path = filepath.ToSlash(url.Host[idx+len(UNCPrefix):]) + url.Path
+					url.Host = url.Host[:idx+len(UNCPrefix)]
+				}
+			}
+
+			// clean up backward-slashes since they only matter when part of a unc path
+			urlPath := filepath.ToSlash(url.Path)
+
+			// semi-absolute path (current drive letter) -- file:///absolute/path
+			if url.Host == "" && len(urlPath) > 0 && urlPath[0] == '/' {
+				finalPath = path.Join(filepath.VolumeName(cwd), urlPath)
+
+			// relative path -- file://./relative/path
+			//					file://relative/path
+			} else if url.Host == "" || (len(url.Host) > 0 && url.Host[0] == '.') {
+				finalPath = path.Join(filepath.ToSlash(cwd), urlPath)
+
+			// absolute path
+			} else {
+				// UNC -- file://\\host/share/whatever
+				// drive -- file://c:/absolute/path
+				finalPath = path.Join(url.Host, urlPath)
+			}
 		}
 
 		// Keep track of the source so we can make sure not to delete this later
diff --git a/packer/core.go b/packer/core.go
index 7da3e4510..c8ac2cfb7 100644
--- a/packer/core.go
+++ b/packer/core.go
@@ -67,7 +67,7 @@ func NewCore(c *CoreConfig) (*Core, error) {
 		return nil, err
 	}
 
-	// Go through and interpolate all the build names. We shuld be able
+	// Go through and interpolate all the build names. We should be able
 	// to do this at this point with the variables.
 	result.builds = make(map[string]*template.Builder)
 	for _, b := range c.Template.Builders {