diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/buildmodel/IBuildDescription.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/buildmodel/IBuildDescription.java
index e43a9f3f897..72272144d20 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/buildmodel/IBuildDescription.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/buildmodel/IBuildDescription.java
@@ -1,5 +1,5 @@
 /*******************************************************************************
- * Copyright (c) 2006 Intel Corporation and others.
+ * Copyright (c) 2006, 2007 Intel Corporation and others.
  * All rights reserved. This program and the accompanying materials
  * are made available under the terms of the Eclipse Public License v1.0
  * which accompanies this distribution, and is available at
@@ -81,4 +81,6 @@ public interface IBuildDescription {
 	 * @return IPath
 	 */
 	IPath getDefaultBuildDirLocation();
+
+	IPath getDefaultBuildDirFullPath();
 }
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/BuildDescription.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/BuildDescription.java
index 1475e2f626f..9eb68a737b3 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/BuildDescription.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/BuildDescription.java
@@ -2106,7 +2106,11 @@ public class BuildDescription implements IBuildDescription {
 	public IPath getDefaultBuildDirLocation() {
 		return getTopBuildDirLocation();
 	}
-	
+
+	public IPath getDefaultBuildDirFullPath() {
+		return getTopBuildDirFullPath();
+	}
+
 	protected void resourceAddedToType(BuildIOType type, BuildResource rc){
 		if(!type.isInput()){
 			String var = type.getLinkId();
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/GenDirInfo.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/GenDirInfo.java
index cc6f7768976..4afd2cb4288 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/GenDirInfo.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/GenDirInfo.java
@@ -1,5 +1,5 @@
 /*******************************************************************************
- * Copyright (c) 2006 Intel Corporation and others.
+ * Copyright (c) 2006, 2007 Intel Corporation and others.
  * All rights reserved. This program and the accompanying materials
  * are made available under the terms of the Eclipse Public License v1.0
  * which accompanies this distribution, and is available at
@@ -50,7 +50,12 @@ public class GenDirInfo {
 			createDir(path, monitor);
 		}
 	}
-	
+
+	public void createIfProjectDir(IPath fullPath, IProgressMonitor monitor){
+		if(fullPath.segmentCount() > fProjPath.segmentCount() && fProjPath.isPrefixOf(fullPath))
+			createDir(fullPath.removeFirstSegments(fProjPath.segmentCount()), monitor);
+	}
+
 	protected void createDir(IPath path, IProgressMonitor monitor){
 		if(path.segmentCount() > 0 && fDirPathSet.add(path)){
 			IFolder folder = fProject.getFolder(path);
diff --git a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/StepBuilder.java b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/StepBuilder.java
index 60e6189e9ef..6f1c40fedc6 100644
--- a/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/StepBuilder.java
+++ b/build/org.eclipse.cdt.managedbuilder.core/src/org/eclipse/cdt/managedbuilder/internal/buildmodel/StepBuilder.java
@@ -14,9 +14,12 @@ import java.io.OutputStream;
 
 import org.eclipse.cdt.managedbuilder.buildmodel.BuildDescriptionManager;
 import org.eclipse.cdt.managedbuilder.buildmodel.IBuildCommand;
+import org.eclipse.cdt.managedbuilder.buildmodel.IBuildDescription;
 import org.eclipse.cdt.managedbuilder.buildmodel.IBuildResource;
 import org.eclipse.cdt.managedbuilder.buildmodel.IBuildStep;
+import org.eclipse.cdt.managedbuilder.core.IConfiguration;
 import org.eclipse.core.resources.IFile;
+import org.eclipse.core.resources.IProject;
 import org.eclipse.core.resources.IResource;
 import org.eclipse.core.resources.IWorkspaceRoot;
 import org.eclipse.core.resources.ResourcesPlugin;
@@ -188,6 +191,14 @@ public class StepBuilder implements IBuildModelBuilder {
 	}
 	
 	protected void createOutDirs(IProgressMonitor monitor){
+		IBuildDescription des = fStep.getBuildDescription();
+		if(des != null && des.getInputStep() == fStep){
+			IPath path = des.getDefaultBuildDirFullPath();
+			if(path != null){
+				fDirs.createIfProjectDir(path, monitor);
+			}
+		}
+
 		IBuildResource rcs[] = fStep.getOutputResources();
 		
 		for(int i = 0; i < rcs.length; i++){