diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/GeneratedMakefileBuilder.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/GeneratedMakefileBuilder.java
index 423cd37afff..56263758380 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/GeneratedMakefileBuilder.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/GeneratedMakefileBuilder.java
@@ -673,7 +673,7 @@ public class GeneratedMakefileBuilder extends ACBuilder {
 			if (root == null) {
 				return;
 			}
-			IPath makefile = workingDirectory.addTrailingSeparator().append(generator.getMakefileName());
+			IPath makefile = workingDirectory.append(generator.getMakefileName());
 			if (root.getFileForLocation(makefile) == null) {
 				return; 
 			}
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/ManagedBuildInfo.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/ManagedBuildInfo.java
index 809226de65f..e1514d49798 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/ManagedBuildInfo.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/core/ManagedBuildInfo.java
@@ -431,7 +431,7 @@ public class ManagedBuildInfo implements IManagedBuildInfo, IScannerInfo {
 			location = new Path("."); //$NON-NLS-1$
 		}
 		if (config != null) {
-			IPath root = location.addTrailingSeparator().append(config.getName());
+			IPath root = location.append(config.getName());
 			ITool[] tools = config.getFilteredTools();
 			for (int i = 0; i < tools.length; i++) {
 				ITool tool = tools[i];
@@ -458,7 +458,7 @@ public class ManagedBuildInfo implements IManagedBuildInfo, IScannerInfo {
 									if (userPath.isAbsolute()) {
 										paths.add(userPath.toOSString());
 									} else {
-										IPath absPath = root.addTrailingSeparator().append(userPath);
+										IPath absPath = root.append(userPath);
 										paths.add(absPath.makeAbsolute().toOSString());
 									}
 								}
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedBuilderMakefileGenerator.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedBuilderMakefileGenerator.java
index 4d48db10746..901b08f4f4f 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedBuilderMakefileGenerator.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedBuilderMakefileGenerator.java
@@ -21,6 +21,10 @@ import org.eclipse.core.runtime.MultiStatus;
 
 /**
  * @since 2.0
+ * 
+ * TODO:  isGeneratedResource should take an IPath rather than an IResource, 
+ *        because an output file can be generated outside of the project directory.
+ *        This will require a new interface. 
  */
 public interface IManagedBuilderMakefileGenerator {
 
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedDependencyGenerator.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedDependencyGenerator.java
index 4d32df0c6f2..9a20c92029d 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedDependencyGenerator.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/IManagedDependencyGenerator.java
@@ -1,5 +1,5 @@
 /**********************************************************************
- * Copyright (c) 2004 IBM Corporation and others.
+ * Copyright (c) 2004, 2005 IBM Corporation and others.
  * All rights reserved. This program and the accompanying materials
  * are made available under the terms of the Common Public License v1.0
  * which accompanies this distribution, and is available at
@@ -16,7 +16,13 @@ import org.eclipse.core.resources.IResource;
 
 /**
  * @since 2.0
- */
+ * 
+ * TODO:  These methods should take IPath's rather than IResource's, 
+ *        because an output file from one tool can be used as an
+ *        input file to another, and it can be generated outside of the 
+ *        project directory.
+ *        This will require a new interface. 
+*/
 public interface IManagedDependencyGenerator {
 	public int TYPE_NODEPS = 0;
 	public int TYPE_COMMAND = 1;
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/GnuMakefileGenerator.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/GnuMakefileGenerator.java
index f3f555bba6a..c4d74d09f4a 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/GnuMakefileGenerator.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/GnuMakefileGenerator.java
@@ -453,7 +453,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		checkCancel();
 
 		// Make sure that there is a makefile containing all the folders participating
-		IPath srcsFilePath = topBuildDir.addTrailingSeparator().append(SRCSFILE_NAME);
+		IPath srcsFilePath = topBuildDir.append(SRCSFILE_NAME);
 		IFile srcsFileHandle = createFile(srcsFilePath);
 		buildSrcVars.clear();
 		buildOutVars.clear();
@@ -472,7 +472,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					continue;
 				}
 				// Make sure a fragment makefile exists
-				IPath fragmentPath = getBuildWorkingDir().append(subdirectory.getProjectRelativePath()).addTrailingSeparator().append(MODFILE_NAME);
+				IPath fragmentPath = getBuildWorkingDir().append(subdirectory.getProjectRelativePath()).append(MODFILE_NAME);
 				IFile makeFragment = project.getFile(fragmentPath);
 				if (!makeFragment.exists()) {
 					// If one or both are missing, then add it to the list to be generated
@@ -525,7 +525,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		checkCancel();
 
 		// Re-create the top-level makefile
-		IPath makefilePath = topBuildDir.addTrailingSeparator().append(MAKEFILE_NAME);
+		IPath makefilePath = topBuildDir.append(MAKEFILE_NAME);
 		IFile makefileHandle = createFile(makefilePath);
 		populateTopMakefile(makefileHandle, false);
 		checkCancel();
@@ -660,7 +660,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		checkCancel();
 		
 		// Get the list of subdirectories
-		IPath srcsFilePath = topBuildDir.addTrailingSeparator().append(SRCSFILE_NAME);
+		IPath srcsFilePath = topBuildDir.append(SRCSFILE_NAME);
 		IFile srcsFileHandle = createFile(srcsFilePath);
 		buildSrcVars.clear();
 		buildOutVars.clear();
@@ -687,13 +687,13 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		checkCancel();
 
 		// Create the top-level makefile
-		IPath makefilePath = topBuildDir.addTrailingSeparator().append(MAKEFILE_NAME);
+		IPath makefilePath = topBuildDir.append(MAKEFILE_NAME);
 		IFile makefileHandle = createFile(makefilePath);
 		populateTopMakefile(makefileHandle, true);
 		checkCancel();
 		
 		// Now finish up by adding all the object files
-		IPath objFilePath = topBuildDir.addTrailingSeparator().append(OBJECTS_MAKFILE);
+		IPath objFilePath = topBuildDir.append(OBJECTS_MAKFILE);
 		IFile objsFileHandle = createFile(objFilePath);
 		populateObjectsMakefile(objsFileHandle);
 		checkCancel();
@@ -908,7 +908,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		IPath moduleOutputDir = createDirectory(moduleOutputPath.toString());
 		
 		// Create a module makefile
-		IFile modMakefile = createFile(moduleOutputDir.addTrailingSeparator().append(MODFILE_NAME));
+		IFile modMakefile = createFile(moduleOutputDir.append(MODFILE_NAME));
 		StringBuffer makeBuf = new StringBuffer();
 		makeBuf.append(addFragmentMakefileHeader());
 		makeBuf.append(addSources(module));
@@ -1791,7 +1791,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		while (iterator.hasNext()) {
 			Map.Entry entry = (Map.Entry)iterator.next();
 			String macroName = (String)entry.getKey();
-			addMacroAdditionPrefix(buildVarToRuleStringMap, macroName, "./" + relativePath, true);	  //$NON-NLS-1$
+			addMacroAdditionPrefix(buildVarToRuleStringMap, macroName, "./" + relativePath, false);	  //$NON-NLS-1$
 		}
 		// Create an entry for the DEPS macro
 		addMacroAdditionPrefix(buildVarToRuleStringMap, DEPS_MACRO, "./" + relativePath, true);	  //$NON-NLS-1$
@@ -1814,7 +1814,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 				if( (resConfig != null) && (resConfig.isExcluded()) )
 					continue;
 				addFragmentMakefileEntriesForSource(buildVarToRuleStringMap, ruleBuffer, 
-						folder, relativePath, resource, null, false);
+						folder, relativePath, resource, resource.getLocation(), null, false);
 			}
 		}
 							
@@ -1830,14 +1830,16 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 	 * @param ruleBuffer  buffer to add generated nmakefile text to
 	 * @param folder  the top level build output directory
 	 * @param relativePath  build output directory relative path of the current output directory
-	 * @param resource  the source file for this invocation of the tool
+	 * @param resource  the source file for this invocation of the tool - this may be null for a generated output
+	 * @param sourceLocation  the full path of the source
 	 * @param varName  the build variable to add this invocation's outputs to
 	 *                   if <code>null</code>, use the file extension to find the name
+	 * @param generatedSource  if <code>true</code>, this file was generated by another tool in the tool-chain
 	 */
 	protected void addFragmentMakefileEntriesForSource (LinkedHashMap buildVarToRuleStringMap, StringBuffer ruleBuffer, 
-			IFolder folder, String relativePath, IResource resource, String varName, boolean generatedSource) {
+			IFolder folder, String relativePath, IResource resource, IPath sourceLocation, String varName, boolean generatedSource) {
 		//  Determine which tool, if any, builds files with this extension
-		String ext = resource.getFileExtension();
+		String ext = sourceLocation.getFileExtension();
 		boolean toolFound = false;
 		for (int j=0; j<buildTools.length; j++) {
 			if (buildTools[j].buildsFileType(ext)) {
@@ -1851,14 +1853,14 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					List varList = (List)buildSrcVars.get(varName);
 					//  Since we don't know how these files will be used, we store them using a "location"
 					//  path rather than a relative path
-					varList.add(resource.getLocation());
+					varList.add(sourceLocation);
 				} else {
 					//  Add the resource to the list of all resources associated with a variable.
 					List varList = (List)buildOutVars.get(varName);
 					if (varList != null) {
 						//  Since we don't know how these files will be used, we store them using a "location"
 						//  path rather than a relative path
-						varList.add(resource.getLocation());
+						varList.add(sourceLocation);
 					}
 				}
 				if (!buildVarToRuleStringMap.containsKey(varName)) {
@@ -1866,7 +1868,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					continue;
 				}
 				//  Add the resource name to the makefile line that adds resources to the build variable
-				addMacroAdditionFile(buildVarToRuleStringMap, varName, relativePath, resource, generatedSource); 
+				addMacroAdditionFile(buildVarToRuleStringMap, varName, relativePath, sourceLocation, generatedSource); 
 				
 				//  Generate the rule to build this source file
 				IInputType primaryInputType = tool.getPrimaryInputType();
@@ -1877,7 +1879,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					// Try to add the rule for the file
 					StringBuffer generatedDepFile = new StringBuffer();
 					Vector generatedOutputs = new Vector();
-					addRuleForSource(relativePath, ruleBuffer, resource, generatedSource, generatedDepFile, generatedOutputs);
+					addRuleForSource(relativePath, ruleBuffer, resource, sourceLocation, generatedSource, generatedDepFile, generatedOutputs);
 					
 					// If the rule generates a dependency file, add the file to the DEPS variable
 					if (generatedDepFile.length() > 0) {
@@ -1898,12 +1900,18 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					}
 					
 					for (int k=0; k<generatedOutputs.size(); k++) {
-						//  TODO - this will only work for outputs generated below the build output directory?
-						//         try an option that generates an output outside of the project
-						IPath generatedOutput = getBuildWorkingDir().addTrailingSeparator().append(relativePath).addTrailingSeparator().append((IPath)generatedOutputs.get(k));
+						IPath generatedOutput;
+						if (((IPath)generatedOutputs.get(k)).isAbsolute()) {
+							// TODO:  Should we use relative paths when possible (e.g., see MbsMacroSupplier.calculateRelPath)
+							generatedOutput = (IPath)generatedOutputs.get(k);
+						} else {
+							generatedOutput = project.getLocation().append(getBuildWorkingDir()).append((IPath)generatedOutputs.get(k));
+						}
+						//  If this file has an absolute path, then the generateOutputResource will not be correct
+						//  because the file is not under the project.  We use this resource in the calls to the dependency generator
 						IResource generateOutputResource = project.getFile(generatedOutput);
 						addFragmentMakefileEntriesForSource(buildVarToRuleStringMap, ruleBuffer, 
-								folder, relativePath, generateOutputResource, buildVariable, true);
+								folder, relativePath, generateOutputResource, generatedOutput, buildVariable, true);
 					}						
 				}
 			}
@@ -1914,7 +1922,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 				IOutputType[] secondaryOutputs = config.getToolChain().getSecondaryOutputs();
 				if (secondaryOutputs.length > 0) {
 					if (isSecondaryOutputVar(secondaryOutputs, varName)) {
-						addMacroAdditionFile(buildVarToRuleStringMap, varName, relativePath, resource, generatedSource); 
+						addMacroAdditionFile(buildVarToRuleStringMap, varName, relativePath, sourceLocation, generatedSource); 
 					}
 				}
 			}
@@ -1958,15 +1966,17 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 	 * @param enumeratedOutputs  vector of the filenames that are the output of this rule
 	 */
 	protected void addRuleForSource(String relativePath, StringBuffer buffer, IResource resource, 
-			boolean generatedSource, StringBuffer generatedDepFile, Vector enumeratedOutputs) {
+			IPath sourceLocation, boolean generatedSource, StringBuffer generatedDepFile, Vector enumeratedOutputs) {
 		
-		String resourceName = getFileName(resource);
-		String inputExtension = resource.getFileExtension();
+		String fileName = sourceLocation.removeFileExtension().lastSegment();
+		String inputExtension = sourceLocation.getFileExtension();
 		String outputExtension = info.getOutputExtension(inputExtension);
 
 		//	We need to check whether we have any resource specific build information.
 		IResourceConfiguration resConfig = null;
-		if( config != null ) resConfig = config.getResourceConfiguration(resource.getFullPath().toString());
+		if( !generatedSource && config != null ) {
+			resConfig = config.getResourceConfiguration(resource.getFullPath().toString());
+		}
 
 		ITool tool;
 		if( resConfig != null) {
@@ -1982,9 +1992,9 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 
 		// If the tool creates a dependency file, add it to the list
 		if (doDepGen) {
-			String depFile =  relativePath + resourceName + DOT + DEP_EXT;
+			String depFile =  relativePath + fileName + DOT + DEP_EXT;
 			getDependencyMakefiles().add(depFile);
-			generatedDepFile.append(resourceName + DOT + DEP_EXT);
+			generatedDepFile.append(fileName + DOT + DEP_EXT);
 		}
 		
 		// Figure out the output paths		
@@ -1995,14 +2005,14 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		Vector ruleOutputs = new Vector();
 		Vector enumeratedPrimaryOutputs = new Vector();
 		Vector enumeratedSecondaryOutputs = new Vector();
-		calculateOutputsForSource(tool, relativePath, resource, ruleOutputs, enumeratedPrimaryOutputs, enumeratedSecondaryOutputs);
+		calculateOutputsForSource(tool, relativePath, resource, sourceLocation, ruleOutputs, enumeratedPrimaryOutputs, enumeratedSecondaryOutputs);
 		enumeratedOutputs.addAll(enumeratedPrimaryOutputs);
 		enumeratedOutputs.addAll(enumeratedSecondaryOutputs);
 		String primaryOutputName = null;
 		if (enumeratedPrimaryOutputs.size() > 0) {
 			primaryOutputName = ((IPath)enumeratedPrimaryOutputs.get(0)).toString();
 		} else {
-			primaryOutputName = relativePath + resourceName + OptDotExt;
+			primaryOutputName = relativePath + fileName + OptDotExt;
 		}
 		String otherPrimaryOutputs = EMPTY_STRING;
 		for (int i=1; i<enumeratedPrimaryOutputs.size(); i++) {		// Starting a 1 is intentional
@@ -2017,16 +2027,19 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		 * then we must get the actual location of the resource, rather
 		 * than the relative path.
 		 */
-		IPath resourceLocation = resource.getLocation();
 		String projectLocation = project.getLocation().toString();
 
 		// Optput file location needed for the file-specific build macros
-		// TODO:  Is primaryOutputName always build directory relative?
-		IPath outputLocation = project.getLocation().append(getBuildWorkingDir()).append(primaryOutputName);
+		IPath outputLocation = Path.fromOSString(primaryOutputName);
+		if (!outputLocation.isAbsolute()) {
+			outputLocation = project.getLocation().append(getBuildWorkingDir()).append(primaryOutputName);
+		}
+		
 		// A separate rule is needed for the resource in case the explicit file-specific macros
 		// are referenced
 		boolean fileExplicitMacrosReferenced = MacroResolver.getReferencedExplitFileMacros(tool).length > 0 ||
-			MacroResolver.getReferencedExplitFileMacros(tool.getToolCommand(),IBuildMacroProvider.CONTEXT_FILE, new FileContextData(resourceLocation,outputLocation,null,config.getToolChain())).length > 0;
+			MacroResolver.getReferencedExplitFileMacros(tool.getToolCommand(),IBuildMacroProvider.CONTEXT_FILE, 
+					new FileContextData(sourceLocation, outputLocation, null, config.getToolChain())).length > 0;
 		//get and resolve command
 		String cmd = tool.getToolCommand();
 		try{
@@ -2034,7 +2047,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					EMPTY_STRING,
 					WHITESPACE,
 					IBuildMacroProvider.CONTEXT_FILE,
-					new FileContextData(resourceLocation,outputLocation,null,info.getDefaultConfiguration().getToolChain()));
+					new FileContextData(sourceLocation, outputLocation, null, info.getDefaultConfiguration().getToolChain()));
 			if((resolvedCommand = resolvedCommand.trim()).length() > 0)
 				cmd = resolvedCommand;
 				
@@ -2048,13 +2061,13 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 		boolean patternRule = true;
 		//boolean isItLinked = false;
 		//if (resource.isLinked()) {   NOTE: we don't use this since children of linked resources return false
-		if(!resourceLocation.toString().startsWith(projectLocation)) {
+		if(!sourceLocation.toString().startsWith(projectLocation)) {
 			// it IS linked, so use the actual location
 			//isItLinked = true;
-			resourcePath = resourceLocation.toString();
+			resourcePath = sourceLocation.toString();
 			// Need a hardcoded rule, not a pattern rule, as a linked file
 			// can reside in any path
-			defaultOutputName = relativePath + resourceName + OptDotExt;
+			defaultOutputName = relativePath + fileName + OptDotExt;
 			primaryDependencyName = resourcePath;
 			patternRule = false;
 		} else {
@@ -2063,8 +2076,8 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 			// The rule and command to add to the makefile
 			if( resConfig != null || fileExplicitMacrosReferenced) {
 				// Need a hardcoded rule, not a pattern rule
-				defaultOutputName = resourcePath + resourceName + OptDotExt;
-				primaryDependencyName = home + SEPARATOR + resourcePath + resourceName + DOT + inputExtension;
+				defaultOutputName = resourcePath + fileName + OptDotExt;
+				primaryDependencyName = home + SEPARATOR + resourcePath + fileName + DOT + inputExtension;
 				patternRule = false;
 			} else {
 				defaultOutputName = relativePath + WILDCARD + OptDotExt;
@@ -2085,7 +2098,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 			}
 			if (!patternRule) {
 				//  Need to reset the primary dependency to be a filename rather than a pattern
-				primaryDependencyName = home + SEPARATOR + resourcePath + resourceName + DOT + inputExtension;
+				primaryDependencyName = home + SEPARATOR + resourcePath + fileName + DOT + inputExtension;
 			}
 		}
 
@@ -2147,7 +2160,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 			outputPrefix = tool.getOutputPrefix();
 			String[] flags = null;
 			try { 
-				flags = tool.getToolCommandFlags(resourceLocation,outputLocation);
+				flags = tool.getToolCommandFlags(sourceLocation, outputLocation);
 			} catch( BuildException ex ) {
 				// TODO add some routines to catch this
 				flags = EMPTY_STRING_ARRAY;
@@ -2170,7 +2183,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 			buffer.append(TAB + AT + ECHO + WHITESPACE + SINGLE_QUOTE + tool.getAnnouncement() + SINGLE_QUOTE + NEWLINE);
 			String buildFlags = EMPTY_STRING;
 			try {
-				buildFlags = tool.getToolCommandFlagsString(resourceLocation,outputLocation);
+				buildFlags = tool.getToolCommandFlagsString(sourceLocation, outputLocation);
 			} catch (BuildException e) {
 			}
 			outflag = info.getOutputFlag(outputExtension);
@@ -2184,7 +2197,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 			}
 			// Call the command line generator
 			cmdLInfo = info.generateToolCommandLineInfo( inputExtension, flags, outflag, outputPrefix, 
-					OUT_MACRO + otherPrimaryOutputs, (String[])inputs.toArray(new String[inputs.size()]), resourceLocation, outputLocation );
+					OUT_MACRO + otherPrimaryOutputs, (String[])inputs.toArray(new String[inputs.size()]), sourceLocation, outputLocation );
 			// The command to build
 			String buildCmd = null;
 			if( cmdLInfo == null ) buildCmd = cmd + WHITESPACE + buildFlags + WHITESPACE + 
@@ -2256,8 +2269,8 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 	 *                            that are relative to the build directory 
 	 */  
 	protected void calculateOutputsForSource(ITool tool, String relativePath, IResource resource, 
-			Vector ruleOutputs, Vector enumeratedPrimaryOutputs, Vector enumeratedSecondaryOutputs) {
-		String inExt = resource.getFileExtension();
+			IPath sourceLocation, Vector ruleOutputs, Vector enumeratedPrimaryOutputs, Vector enumeratedSecondaryOutputs) {
+		String inExt = sourceLocation.getFileExtension();
 		String outExt = tool.getOutputExtension(inExt);
 		
 		IOutputType[] outTypes = tool.getOutputTypes();
@@ -2303,10 +2316,10 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 							}
 							if (primaryOutput) {
 								ruleOutputs.add(j, outPath);
-								enumeratedPrimaryOutputs.add(j, resolvePercent(outPath, resource));
+								enumeratedPrimaryOutputs.add(j, resolvePercent(outPath, sourceLocation));
 							} else {
 								ruleOutputs.add(outPath);
-								enumeratedSecondaryOutputs.add(resolvePercent(outPath, resource));
+								enumeratedSecondaryOutputs.add(resolvePercent(outPath, sourceLocation));
 							}
 						}
 					} catch( BuildException ex ) {}
@@ -2314,7 +2327,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 				//  3.  If a nameProvider is specified, call it
 				if (nameProvider != null) {
 					IPath[] inPaths = new IPath[1];
-					inPaths[0] = resource.getFullPath();
+					inPaths[0] = sourceLocation;
 					IPath[] outPaths = nameProvider.getOutputNames(tool, inPaths);
 					for (int j=0; j<outPaths.length; j++) {
 						IPath outPath = outPaths[j];
@@ -2324,10 +2337,10 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 						}
 						if (primaryOutput) {
 							ruleOutputs.add(j, outPath);
-							enumeratedPrimaryOutputs.add(j, resolvePercent(outPath, resource));
+							enumeratedPrimaryOutputs.add(j, resolvePercent(outPath, sourceLocation));
 						} else {
 							ruleOutputs.add(outPath);
-							enumeratedSecondaryOutputs.add(resolvePercent(outPath, resource));
+							enumeratedSecondaryOutputs.add(resolvePercent(outPath, sourceLocation));
 						}
 					}
 				} else
@@ -2341,10 +2354,10 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 						}
 						if (primaryOutput) {
 							ruleOutputs.add(j, outPath);
-							enumeratedPrimaryOutputs.add(j, resolvePercent(outPath, resource));
+							enumeratedPrimaryOutputs.add(j, resolvePercent(outPath, sourceLocation));
 						} else {
 							ruleOutputs.add(outPath);
-							enumeratedSecondaryOutputs.add(resolvePercent(outPath, resource));
+							enumeratedSecondaryOutputs.add(resolvePercent(outPath, sourceLocation));
 						}
 					}
 				} else {
@@ -2377,10 +2390,10 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 					
 						if (primaryOutput) {
 							ruleOutputs.add(0, namePatternPath);
-							enumeratedPrimaryOutputs.add(0, resolvePercent(namePatternPath, resource));
+							enumeratedPrimaryOutputs.add(0, resolvePercent(namePatternPath, sourceLocation));
 						} else {
 							ruleOutputs.add(namePatternPath);
-							enumeratedSecondaryOutputs.add(resolvePercent(namePatternPath, resource));
+							enumeratedSecondaryOutputs.add(resolvePercent(namePatternPath, sourceLocation));
 						}
 					}
 				}					
@@ -2398,7 +2411,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 				IPath outPath = Path.fromOSString(relativePath + outPrefix + WILDCARD);
 				outPath = outPath.addFileExtension(outExt);
 				ruleOutputs.add(0, outPath);
-				enumeratedPrimaryOutputs.add(0, resolvePercent(outPath, resource));
+				enumeratedPrimaryOutputs.add(0, resolvePercent(outPath, sourceLocation));
 			//}
 		}
 	}
@@ -2407,9 +2420,9 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 	 * If the path contains a %, returns the path resolved using the resource name 
 	 *
 	 */
-	protected IPath resolvePercent(IPath outPath, IResource resource) {
+	protected IPath resolvePercent(IPath outPath, IPath sourceLocation) {
 		//  Get the input file name
-		String fileName = resource.getFullPath().removeFileExtension().lastSegment();
+		String fileName = sourceLocation.removeFileExtension().lastSegment();
 		//  Replace the % with the file name
 		String outName = outPath.toOSString().replaceAll("%", fileName); //$NON-NLS-1$ 
 		return Path.fromOSString(outName);
@@ -2583,19 +2596,27 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 	 * 	example.c, \
 	 */
 	protected void addMacroAdditionFile(HashMap map, String macroName, 
-			String relativePath, IResource resource, boolean generatedSource) {
-		//  Add the resource name to the makefile line that adds resources to the build variable
+			String relativePath, IPath sourceLocation, boolean generatedSource) {
+		//  Add the source file path to the makefile line that adds source files to the build variable
 		String srcName;
-		if (generatedSource) { 
-			srcName = resource.getName();
-		} else {
-			String resourceLocation = resource.getLocation().toString();
-			String projectLocation = project.getLocation().toString();
-			//if (resource.isLinked()) {   NOTE: we don't use this since children of linked resources return false
-			if(!resourceLocation.startsWith(projectLocation)) {
-				srcName = resourceLocation;
+		IPath projectLocation = project.getLocation();
+		IPath dirLocation = projectLocation;
+		if (generatedSource) {
+			dirLocation = dirLocation.append(getBuildWorkingDir());
+		}
+		if (dirLocation.isPrefixOf(sourceLocation)) {
+			IPath srcPath = sourceLocation.removeFirstSegments(dirLocation.segmentCount()).setDevice(null);
+			if (generatedSource) {
+				srcName = "./" + srcPath.toString();     //$NON-NLS-1$
 			} else {
-				srcName = "$(ROOT)/" + relativePath + resource.getName();     //$NON-NLS-1$
+				srcName = "$(ROOT)/" + srcPath.toString();     //$NON-NLS-1$
+			}
+		} else {
+			if (generatedSource && !sourceLocation.isAbsolute()) {
+				srcName = "./" + relativePath + sourceLocation.lastSegment().toString();	// $NON-NLS-1$
+			} else {
+				// TODO:  Should we use relative paths when possible (e.g., see MbsMacroSupplier.calculateRelPath)
+				srcName = sourceLocation.toString();
 			}
 		}
 		addMacroAdditionFile(map, macroName, srcName); 
@@ -2848,7 +2869,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 				IPath path = (IPath)list.get(i);
 				if (locationType != ABSOLUTE) {
 					if (dirLocation.isPrefixOf(path)) {
-						path = path.removeFirstSegments(dirLocation.matchingFirstSegments(path));
+						path = path.removeFirstSegments(dirLocation.segmentCount()).setDevice(null);
 					}
 				}
 				fileList.add(path.toString());
@@ -2932,7 +2953,7 @@ public class GnuMakefileGenerator implements IManagedBuilderMakefileGenerator {
 	 * deleted. As a result, the directories that are generated for the output 
 	 * should be removed as well.
 	 * 
-	 * @param resource
+	 * @param container
 	 */
 	protected void appendDeletedSubdirectory(IContainer container) {
 		// No point in adding a folder if the parent is already there
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/ManagedBuildGnuToolInfo.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/ManagedBuildGnuToolInfo.java
index 7e6b406a311..bc75cfad967 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/ManagedBuildGnuToolInfo.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/makegen/gnu/ManagedBuildGnuToolInfo.java
@@ -247,7 +247,7 @@ public class ManagedBuildGnuToolInfo implements IManagedBuildGnuToolInfo {
 													IPath resPath = projResources[j].getLocation();
 													IPath bldLocation = project.getLocation().append(makeGen.getBuildWorkingDir());
 													if (bldLocation.isPrefixOf(resPath)) {
-														resPath = resPath.removeFirstSegments(bldLocation.matchingFirstSegments(resPath));
+														resPath = resPath.removeFirstSegments(bldLocation.segmentCount()).setDevice(null);
 													}
 													myEnumeratedInputs.add(resPath.toString());
 												}