diff --git a/src/core/qgsproject.cpp b/src/core/qgsproject.cpp
index abecfba53c2..16041ccdad9 100644
--- a/src/core/qgsproject.cpp
+++ b/src/core/qgsproject.cpp
@@ -1477,7 +1477,12 @@ QString QgsProject::readPath( QString src ) const
   QString vsiPrefix = qgsVsiPrefix( src );
   if ( ! vsiPrefix.isEmpty() )
   {
-    src.remove( 0, vsiPrefix.size() );
+    // unfortunately qgsVsiPrefix returns prefix also for files like "/x/y/z.gz"
+    // so we need to check if we really have the prefix
+    if ( src.startsWith( "/vsi", Qt::CaseInsensitive ) )
+      src.remove( 0, vsiPrefix.size() );
+    else
+      vsiPrefix.clear();
   }
 
   // relative path should always start with ./ or ../
diff --git a/tests/src/core/CMakeLists.txt b/tests/src/core/CMakeLists.txt
index 1baf66e9d46..872dc3fed39 100644
--- a/tests/src/core/CMakeLists.txt
+++ b/tests/src/core/CMakeLists.txt
@@ -83,6 +83,7 @@ ADD_QGIS_TEST(diagramtest testqgsdiagram.cpp)
 ADD_QGIS_TEST(diagramexpressiontest testqgsdiagramexpression.cpp)
 ADD_QGIS_TEST(expressiontest testqgsexpression.cpp)
 ADD_QGIS_TEST(filewritertest testqgsvectorfilewriter.cpp)
+ADD_QGIS_TEST(projecttest testqgsproject.cpp)
 ADD_QGIS_TEST(regression992 regression992.cpp)
 ADD_QGIS_TEST(regression1141 regression1141.cpp)
 ADD_QGIS_TEST(rasterlayertest testqgsrasterlayer.cpp)
diff --git a/tests/src/core/testqgsproject.cpp b/tests/src/core/testqgsproject.cpp
new file mode 100644
index 00000000000..c4caeeb7e68
--- /dev/null
+++ b/tests/src/core/testqgsproject.cpp
@@ -0,0 +1,77 @@
+/***************************************************************************
+     testqgsproject.cpp
+     --------------------------------------
+    Date                 : June 2014
+    Copyright            : (C) 2014 by Martin Dobias
+    Email                : wonder.sk at gmail dot com
+ ***************************************************************************
+ *                                                                         *
+ *   This program is free software; you can redistribute it and/or modify  *
+ *   it under the terms of the GNU General Public License as published by  *
+ *   the Free Software Foundation; either version 2 of the License, or     *
+ *   (at your option) any later version.                                   *
+ *                                                                         *
+ ***************************************************************************/
+#include <QtTest>
+#include <QObject>
+
+#include <qgsapplication.h>
+#include <qgsproject.h>
+
+
+class TestQgsProject : public QObject
+{
+    Q_OBJECT
+  private slots:
+    void initTestCase();// will be called before the first testfunction is executed.
+    void cleanupTestCase();// will be called after the last testfunction was executed.
+    void init();// will be called before each testfunction is executed.
+    void cleanup();// will be called after every testfunction.
+
+    void testReadPath();
+};
+
+void TestQgsProject::init()
+{
+}
+
+void TestQgsProject::cleanup()
+{
+  // will be called after every testfunction.
+}
+
+void TestQgsProject::initTestCase()
+{
+  // Runs once before any tests are run
+}
+
+
+void TestQgsProject::cleanupTestCase()
+{
+  // Runs once after all tests are run
+}
+
+void TestQgsProject::testReadPath()
+{
+  QgsProject* prj = QgsProject::instance();
+  // this is a bit hacky as we do not really load such project
+  prj->setFileName( "/home/qgis/a-project-file.qgs" ); // not expected to exist
+  // make sure we work with relative paths!
+  prj->writeEntry( "Paths", "Absolute", false );
+
+  QCOMPARE( prj->readPath( "./x.shp" ), QString( "/home/qgis/x.shp" ) );
+  QCOMPARE( prj->readPath( "../x.shp" ), QString( "/home/x.shp" ) );
+
+  // TODO: old style (seems QGIS < 1.3) - needs existing project file and existing file
+  // QCOMPARE( prj->readPath( "x.shp" ), QString( "/home/qgis/x.shp" ) );
+
+  // VSI: /vsizip, /vsitar, /vsigzip, *.zip, *.gz, *.tgz, ...
+
+  QCOMPARE( prj->readPath( "./x.gz" ), QString( "/home/qgis/x.gz" ) );
+  QCOMPARE( prj->readPath( "/vsigzip/./x.gz" ), QString( "/vsigzip//home/qgis/x.gz" ) ); // not sure how useful this really is...
+
+}
+
+
+QTEST_MAIN( TestQgsProject )
+#include "moc_testqgsproject.cxx"