diff --git a/CMakeLists.txt b/CMakeLists.txt
index b4f12825723..ef5bb104cbb 100644
--- a/CMakeLists.txt
+++ b/CMakeLists.txt
@@ -378,6 +378,16 @@ SET (QGIS_DATA_DIR    ${QGIS_DATA_SUBDIR})
 SET (QGIS_PLUGIN_DIR  ${QGIS_PLUGIN_SUBDIR})
 SET (QGIS_INCLUDE_DIR ${QGIS_INCLUDE_SUBDIR})
 
+# set the default locations where the targets (executables, libraries) will land when compiled
+# this is to allow running qgis from the source tree without having to actually do a "make install"
+SET (QGIS_OUTPUT_DIRECTORY ${CMAKE_BINARY_DIR}/output)
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_BIN_SUBDIR})
+SET (CMAKE_LIBRARY_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_LIB_SUBDIR})
+
+# write a marker with source directory path into the output's bin directory
+# if run from the build directory QGIS will detect it and alter the paths
+FILE(WRITE ${QGIS_OUTPUT_DIRECTORY}/${QGIS_BIN_SUBDIR}/source_path.txt "${CMAKE_SOURCE_DIR}")
+
 # manual page - makes sense only on unix systems
 IF (UNIX AND NOT APPLE)
   SET (DEFAULT_MANUAL_SUBDIR  man)
diff --git a/i18n/CMakeLists.txt b/i18n/CMakeLists.txt
index 472aab76d0e..058492e9d81 100644
--- a/i18n/CMakeLists.txt
+++ b/i18n/CMakeLists.txt
@@ -6,7 +6,7 @@ MACRO(ADD_TRANSLATION_FILES _sources )
       GET_FILENAME_COMPONENT(_in ${_current_FILE} ABSOLUTE)
       GET_FILENAME_COMPONENT(_basename ${_current_FILE} NAME_WE)
 
-      SET(_out ${CMAKE_CURRENT_BINARY_DIR}/${_basename}.qm)
+      SET(_out ${QGIS_OUTPUT_DIRECTORY}/i18n/${_basename}.qm)
 
       ADD_CUSTOM_COMMAND(
          OUTPUT ${_out}
@@ -19,6 +19,8 @@ MACRO(ADD_TRANSLATION_FILES _sources )
    ENDFOREACH (_current_FILE)
 ENDMACRO(ADD_TRANSLATION_FILES)
 
+# make sure the output directory exists
+file(MAKE_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/i18n)
 
 FILE (GLOB TS_FILES *.ts)
 
diff --git a/python/CMakeLists.txt b/python/CMakeLists.txt
index 25a5c0ffb34..39ee235ebb0 100644
--- a/python/CMakeLists.txt
+++ b/python/CMakeLists.txt
@@ -1,5 +1,9 @@
 ADD_SUBDIRECTORY(plugins)
 
+
+SET (PYTHON_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/python)
+SET (QGIS_PYTHON_OUTPUT_DIRECTORY ${PYTHON_OUTPUT_DIRECTORY}/qgis)
+
 IF (WITH_INTERNAL_SPATIALITE)
   ADD_SUBDIRECTORY(pyspatialite)
 
@@ -9,6 +13,12 @@ IF (WITH_INTERNAL_SPATIALITE)
   )
 ENDIF (WITH_INTERNAL_SPATIALITE)
 
+
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_PYTHON_OUTPUT_DIRECTORY})
+SET (CMAKE_LIBRARY_OUTPUT_DIRECTORY ${QGIS_PYTHON_OUTPUT_DIRECTORY})
+file(COPY __init__.py utils.py console.py DESTINATION ${QGIS_PYTHON_OUTPUT_DIRECTORY})
+
+
 INCLUDE_DIRECTORIES(
     ${PYTHON_INCLUDE_PATH}
     ${SIP_INCLUDE_DIR}
@@ -49,6 +59,7 @@ IF(NOT PYQT4_VERSION_NUM LESS 264194)	# 0x040802
   SET(SIP_DISABLE_FEATURES ${SIP_DISABLE_FEATURES} QSETTYPE_CONVERSION)
 ENDIF(NOT PYQT4_VERSION_NUM LESS 264194)
 
+
 # core module
 FILE(GLOB sip_files_core core/*.sip)
 SET(SIP_EXTRA_FILES_DEPEND ${sip_files_core})
diff --git a/python/core/qgsapplication.sip b/python/core/qgsapplication.sip
index 786af63fad0..4bb950390f6 100644
--- a/python/core/qgsapplication.sip
+++ b/python/core/qgsapplication.sip
@@ -243,5 +243,22 @@ static void qtgui_UpdatePyArgv(PyObject *argvlist, int argc, char **argv)
      */
     static void registerOgrDrivers();
 
+    /**Converts absolute path to path relative to target
+      @note: this method was added in version 1.6*/
+    static QString absolutePathToRelativePath( QString apath, QString targetPath );
+    /**Converts path relative to target to an absolute path
+      @note: this method was added in version 1.6*/
+    static QString relativePathToAbsolutePath( QString rpath, QString targetPath );
+
+    /** Indicates whether running from build directory (not installed)
+       @note added in 2.0 */
+    static bool isRunningFromBuildDir();
+    /** Returns path to the source directory. Valid only when running from build directory
+        @note added in 2.0 */
+    static QString buildSourcePath();
+    /** Returns path to the build output directory. Valid only when running from build directory
+        @note added in 2.0 */
+    static QString buildOutputPath();
+
 };
 
diff --git a/python/pyspatialite/CMakeLists.txt b/python/pyspatialite/CMakeLists.txt
index 6f4e7b180a2..e34a112ee13 100644
--- a/python/pyspatialite/CMakeLists.txt
+++ b/python/pyspatialite/CMakeLists.txt
@@ -1,3 +1,14 @@
+
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${PYTHON_OUTPUT_DIRECTORY}/pyspatialite)
+SET (CMAKE_LIBRARY_OUTPUT_DIRECTORY ${PYTHON_OUTPUT_DIRECTORY}/pyspatialite)
+file(COPY
+  lib/__init__.py
+  lib/dbapi2.py
+  lib/dump.py
+  DESTINATION
+  ${PYTHON_OUTPUT_DIRECTORY}/pyspatialite)
+
+
 INCLUDE_DIRECTORIES(
   ../../src/core/spatialite/headers
   ../../src/core/spatialite/headers/spatialite
diff --git a/src/core/qgsapplication.cpp b/src/core/qgsapplication.cpp
index ad62326c960..4c8115e1c08 100644
--- a/src/core/qgsapplication.cpp
+++ b/src/core/qgsapplication.cpp
@@ -40,9 +40,14 @@ QStringList QgsApplication::mFileOpenEventList;
 QString QgsApplication::mPrefixPath;
 QString QgsApplication::mPluginPath;
 QString QgsApplication::mPkgDataPath;
+QString QgsApplication::mLibraryPath;
+QString QgsApplication::mLibexecPath;
 QString QgsApplication::mThemeName;
 QStringList QgsApplication::mDefaultSvgPaths;
 QString QgsApplication::mConfigPath = QDir::homePath() + QString( "/.qgis/" );
+bool QgsApplication::mRunningFromBuildDir = false;
+QString QgsApplication::mBuildSourcePath;
+QString QgsApplication::mBuildOutputPath;
 
 /*!
   \class QgsApplication
@@ -60,14 +65,46 @@ QString QgsApplication::mConfigPath = QDir::homePath() + QString( "/.qgis/" );
 QgsApplication::QgsApplication( int & argc, char ** argv, bool GUIenabled, QString customConfigPath )
     : QApplication( argc, argv, GUIenabled )
 {
+  // check if QGIS is run from build directory (not the install directory)
+  QDir appDir( applicationDirPath() );
+  if ( appDir.exists( "source_path.txt" ) )
+  {
+    QFile f( applicationDirPath() + "/source_path.txt" );
+    if ( f.open( QIODevice::ReadOnly ) )
+    {
+      mRunningFromBuildDir = true;
+      mBuildSourcePath = f.readAll();
 #if defined(Q_WS_MACX) || defined(Q_WS_WIN32) || defined(WIN32)
-  setPrefixPath( applicationDirPath(), true );
+      mBuildOutputPath = applicationDirPath();
 #else
-  QDir myDir( applicationDirPath() );
-  myDir.cdUp();
-  QString myPrefix = myDir.absolutePath();
-  setPrefixPath( myPrefix, true );
+      mBuildOutputPath = applicationDirPath() + "/.."; // on linux
 #endif
+      qDebug( "Running from build directory!" );
+      qDebug( "- source directory: %s", mBuildSourcePath.toAscii().data() );
+      qDebug( "- output directory of the build: %s", mBuildOutputPath.toAscii().data() );
+    }
+  }
+
+  if ( mRunningFromBuildDir )
+  {
+    // we run from source directory - not installed to destination (specified prefix)
+    mPrefixPath = QString(); // set invalid path
+    setPluginPath( mBuildOutputPath + "/" + QString( QGIS_PLUGIN_SUBDIR ) );
+    setPkgDataPath( mBuildSourcePath ); // directly source path - used for: doc, resources, svg
+    mLibraryPath = mBuildOutputPath + "/" + QGIS_LIB_SUBDIR + "/";
+    mLibexecPath = mBuildOutputPath + "/" + QGIS_LIBEXEC_SUBDIR + "/";
+  }
+  else
+  {
+#if defined(Q_WS_MACX) || defined(Q_WS_WIN32) || defined(WIN32)
+    setPrefixPath( applicationDirPath(), true );
+#else
+    QDir myDir( applicationDirPath() );
+    myDir.cdUp();
+    QString myPrefix = myDir.absolutePath();
+    setPrefixPath( myPrefix, true );
+#endif
+  }
 
   if ( !customConfigPath.isEmpty() )
   {
@@ -170,6 +207,8 @@ void QgsApplication::setPrefixPath( const QString thePrefixPath, bool useDefault
     setPluginPath( mPrefixPath + "/" + QString( QGIS_PLUGIN_SUBDIR ) );
     setPkgDataPath( mPrefixPath + "/" + QString( QGIS_DATA_SUBDIR ) );
   }
+  mLibraryPath = mPrefixPath + "/" + QGIS_LIB_SUBDIR + "/";
+  mLibexecPath = mPrefixPath + "/" + QGIS_LIBEXEC_SUBDIR + "/";
 }
 
 void QgsApplication::setPluginPath( const QString thePluginPath )
@@ -180,10 +219,10 @@ void QgsApplication::setPluginPath( const QString thePluginPath )
 void QgsApplication::setPkgDataPath( const QString thePkgDataPath )
 {
   mPkgDataPath = thePkgDataPath;
-  QString svgPath = mPkgDataPath + QString( "/svg/" );
+  QString mySvgPath = svgPath();
   // avoid duplicate entries
-  if ( !mDefaultSvgPaths.contains( svgPath ) )
-    mDefaultSvgPaths << svgPath;
+  if ( !mDefaultSvgPaths.contains( mySvgPath ) )
+    mDefaultSvgPaths << mySvgPath;
 }
 
 void QgsApplication::setDefaultSvgPaths( const QStringList& pathList )
@@ -193,6 +232,11 @@ void QgsApplication::setDefaultSvgPaths( const QStringList& pathList )
 
 const QString QgsApplication::prefixPath()
 {
+  if ( mRunningFromBuildDir )
+  {
+    qWarning( "!!! prefix path was requested, but it is not valid - we do not run from installed path !!!" );
+  }
+
   return mPrefixPath;
 }
 const QString QgsApplication::pluginPath()
@@ -285,12 +329,10 @@ const QString QgsApplication::translatorsFilePath()
 {
   return mPkgDataPath + QString( "/doc/TRANSLATORS" );
 }
-/*!
-  Returns the path to the developer image directory.
-*/
+
 const QString QgsApplication::developerPath()
 {
-  return mPkgDataPath + QString( "/images/developers/" );
+  return QString(); // developer images are no longer shipped!
 }
 
 /*!
@@ -302,7 +344,7 @@ const QString QgsApplication::helpAppPath()
 #ifdef Q_OS_MACX
   helpAppPath = applicationDirPath() + "/bin/qgis_help.app/Contents/MacOS";
 #else
-  helpAppPath = prefixPath() + "/" QGIS_LIBEXEC_SUBDIR;
+  helpAppPath = libexecPath();
 #endif
   helpAppPath += "/qgis_help";
   return helpAppPath;
@@ -312,7 +354,10 @@ const QString QgsApplication::helpAppPath()
 */
 const QString QgsApplication::i18nPath()
 {
-  return mPkgDataPath + QString( "/i18n/" );
+  if ( mRunningFromBuildDir )
+    return mBuildOutputPath + QString( "/i18n" );
+  else
+    return mPkgDataPath + QString( "/i18n/" );
 }
 
 /*!
@@ -386,7 +431,8 @@ const QStringList QgsApplication::svgPaths()
 */
 const QString QgsApplication::svgPath()
 {
-  return mPkgDataPath + QString( "/svg/" );
+  QString svgSubDir( mRunningFromBuildDir ? "/images/svg/" : "/svg/" );
+  return mPkgDataPath + svgSubDir;
 }
 
 const QString QgsApplication::userStyleV2Path()
@@ -401,12 +447,12 @@ const QString QgsApplication::defaultStyleV2Path()
 
 const QString QgsApplication::libraryPath()
 {
-  return QgsApplication::prefixPath() + "/" + QGIS_LIB_SUBDIR + "/";
+  return mLibraryPath;
 }
 
 const QString QgsApplication::libexecPath()
 {
-  return QgsApplication::prefixPath() + "/" QGIS_LIBEXEC_SUBDIR + "/";
+  return mLibexecPath;
 }
 
 QgsApplication::endian_t QgsApplication::endian()
diff --git a/src/core/qgsapplication.h b/src/core/qgsapplication.h
index 7bdb30f931a..9279294aeaf 100644
--- a/src/core/qgsapplication.h
+++ b/src/core/qgsapplication.h
@@ -84,6 +84,7 @@ class CORE_EXPORT QgsApplication: public QApplication
     static const QString translatorsFilePath();
 
     //! Returns the path to the developer image directory.
+    //! @deprecated images are not provided anymore :-P
     static const QString developerPath();
 
     //! Returns the path to the help application.
@@ -208,6 +209,16 @@ class CORE_EXPORT QgsApplication: public QApplication
       @note: this method was added in version 1.6*/
     static QString relativePathToAbsolutePath( QString rpath, QString targetPath );
 
+    /** Indicates whether running from build directory (not installed)
+       @note added in 2.0 */
+    static bool isRunningFromBuildDir() { return mRunningFromBuildDir; }
+    /** Returns path to the source directory. Valid only when running from build directory
+        @note added in 2.0 */
+    static QString buildSourcePath() { return mBuildSourcePath; }
+    /** Returns path to the build output directory. Valid only when running from build directory
+        @note added in 2.0 */
+    static QString buildOutputPath() { return mBuildOutputPath; }
+
   signals:
     void preNotify( QObject * receiver, QEvent * event, bool * done );
 
@@ -218,10 +229,19 @@ class CORE_EXPORT QgsApplication: public QApplication
     static QString mPrefixPath;
     static QString mPluginPath;
     static QString mPkgDataPath;
+    static QString mLibraryPath;
+    static QString mLibexecPath;
     static QString mThemeName;
     static QStringList mDefaultSvgPaths;
 
     static QString mConfigPath;
+
+    /** true when running from build directory, i.e. without 'make install' */
+    static bool mRunningFromBuildDir;
+    /** path to the source directory. valid only when running from build directory. */
+    static QString mBuildSourcePath;
+    /** path to the output directory of the build. valid only when running from build directory */
+    static QString mBuildOutputPath;
 };
 
 #endif
diff --git a/src/crssync/CMakeLists.txt b/src/crssync/CMakeLists.txt
index 168be7af814..f40ad2320d4 100644
--- a/src/crssync/CMakeLists.txt
+++ b/src/crssync/CMakeLists.txt
@@ -1,3 +1,6 @@
+# override default path where built files are put to allow running qgis without installing
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_LIBEXEC_SUBDIR})
+
 ADD_EXECUTABLE(crssync main.cpp)
 INCLUDE_DIRECTORIES(
   ../core
diff --git a/src/helpviewer/CMakeLists.txt b/src/helpviewer/CMakeLists.txt
index 8f7179fcbdb..8937f9fe2e0 100644
--- a/src/helpviewer/CMakeLists.txt
+++ b/src/helpviewer/CMakeLists.txt
@@ -1,3 +1,5 @@
+# override default path where built files are put to allow running qgis without installing
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_LIBEXEC_SUBDIR})
 
 ########################################################
 # Files
diff --git a/src/plugins/CMakeLists.txt b/src/plugins/CMakeLists.txt
index ed96352143a..4d031a16400 100644
--- a/src/plugins/CMakeLists.txt
+++ b/src/plugins/CMakeLists.txt
@@ -1,3 +1,7 @@
+# override default path where built files are put to allow running qgis without installing
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_PLUGIN_SUBDIR})
+SET (CMAKE_LIBRARY_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_PLUGIN_SUBDIR})
+
 ADD_SUBDIRECTORY(copyright_label)
 ADD_SUBDIRECTORY(delimited_text)
 ADD_SUBDIRECTORY(diagram_overlay)
diff --git a/src/plugins/grass/CMakeLists.txt b/src/plugins/grass/CMakeLists.txt
index bafa26e6ff1..a02f0ffe71a 100644
--- a/src/plugins/grass/CMakeLists.txt
+++ b/src/plugins/grass/CMakeLists.txt
@@ -158,6 +158,10 @@ TARGET_LINK_LIBRARIES(grassplugin
   ${OPENPTY_LIBRARY}
 )
 
+# override default path where built files are put to allow running qgis without installing
+# the binary goes under libexec subdir
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_LIBEXEC_SUBDIR}/grass/bin)
+
 ADD_EXECUTABLE(qgis.g.browser ${GRASS_BROWSER_SRCS})
 
 TARGET_LINK_LIBRARIES (qgis.g.browser
diff --git a/src/providers/CMakeLists.txt b/src/providers/CMakeLists.txt
index eae6ee1a574..e373d075bc0 100644
--- a/src/providers/CMakeLists.txt
+++ b/src/providers/CMakeLists.txt
@@ -1,3 +1,7 @@
+# override default path where built files are put to allow running qgis without installing
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_PLUGIN_SUBDIR})
+SET (CMAKE_LIBRARY_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_PLUGIN_SUBDIR})
+
 ADD_SUBDIRECTORY(memory)
 ADD_SUBDIRECTORY(ogr)
 ADD_SUBDIRECTORY(wms)
diff --git a/src/providers/grass/CMakeLists.txt b/src/providers/grass/CMakeLists.txt
index 3cfc58ed72e..5058e501394 100644
--- a/src/providers/grass/CMakeLists.txt
+++ b/src/providers/grass/CMakeLists.txt
@@ -60,6 +60,10 @@ ADD_LIBRARY(grassrasterprovider MODULE qgsgrassrasterprovider.cpp ${GRASS_RASTER
 SET_TARGET_PROPERTIES(grassrasterprovider PROPERTIES COMPILE_FLAGS "\"-DGRASS_EXPORT=${DLLEXPORT}\" \"-DGRASS_LIB_EXPORT=${DLLIMPORT}\"" )
 TARGET_LINK_LIBRARIES(grassrasterprovider qgisgrass qgis_core)
 
+# override default path where built files are put to allow running qgis without installing
+# the modules go under libexec subdir
+SET (CMAKE_RUNTIME_OUTPUT_DIRECTORY ${QGIS_OUTPUT_DIRECTORY}/${QGIS_LIBEXEC_SUBDIR}/grass/modules)
+
 #
 # grass raster display module
 #
diff --git a/src/python/qgspythonutilsimpl.cpp b/src/python/qgspythonutilsimpl.cpp
index 646e6753356..0c69ea6b4e5 100644
--- a/src/python/qgspythonutilsimpl.cpp
+++ b/src/python/qgspythonutilsimpl.cpp
@@ -412,15 +412,20 @@ bool QgsPythonUtilsImpl::evalString( const QString& command, QString& result )
   return success;
 }
 
-
 QString QgsPythonUtilsImpl::pythonPath()
 {
-  return QgsApplication::pkgDataPath() + "/python";
+  if ( QgsApplication::isRunningFromBuildDir() )
+    return QgsApplication::buildOutputPath() + "/python";
+  else
+    return QgsApplication::pkgDataPath() + "/python";
 }
 
 QString QgsPythonUtilsImpl::pluginsPath()
 {
-  return pythonPath() + "/plugins";
+  if ( QgsApplication::isRunningFromBuildDir() )
+    return QString(); // plugins not used
+  else
+    return pythonPath() + "/plugins";
 }
 
 QString QgsPythonUtilsImpl::homePythonPath()