diff --git a/source/qb64pe.bas b/source/qb64pe.bas
index 8847727e9..544b346a6 100644
--- a/source/qb64pe.bas
+++ b/source/qb64pe.bas
@@ -4472,7 +4472,11 @@ DO
                                         GOTO GotHeader
                                     END IF
                                     ' a740g: Fallback to source path
-                                    libpath$ = FixDirectoryName(idepath$) + og_libpath$
+                                    IF inclevel > 0 THEN
+                                        libpath$ = getfilepath(incname(inclevel)) + og_libpath$
+                                    ELSE
+                                        libpath$ = FixDirectoryName(idepath$) + og_libpath$
+                                    END IF
                                     libpath_inline$ = GetEscapedPath(libpath$)
                                     IF _FILEEXISTS(libpath$ + x$ + ".h") THEN
                                         headername$ = libpath_inline$ + x$ + ".h"
@@ -4539,7 +4543,11 @@ DO
                                         GOTO GotHeader
                                     END IF
                                     ' a740g: Fallback to source path
-                                    libpath$ = FixDirectoryName(idepath$) + og_libpath$
+                                    IF inclevel > 0 THEN
+                                        libpath$ = getfilepath(incname(inclevel)) + og_libpath$
+                                    ELSE
+                                        libpath$ = FixDirectoryName(idepath$) + og_libpath$
+                                    END IF
                                     libpath_inline$ = GetEscapedPath(libpath$)
                                     IF _FILEEXISTS(libpath$ + x$ + ".h") THEN
                                         headername$ = libpath_inline$ + x$ + ".h"
diff --git a/source/utilities/file.bas b/source/utilities/file.bas
index 9f7ce5e8a..cb5df849a 100644
--- a/source/utilities/file.bas
+++ b/source/utilities/file.bas
@@ -113,7 +113,7 @@ FUNCTION GetEscapedPath$ (path_name AS STRING)
     GetEscapedPath = buf
 END FUNCTION
 
-' Adds a trailing \ or / if to the name if needed
+' Adds a trailing \ or / to a directory name if needed
 FUNCTION FixDirectoryName$ (dir_name AS STRING)
     IF LEN(dir_name) > 0 AND RIGHT$(dir_name, 1) <> pathsep$ THEN
         FixDirectoryName = dir_name + pathsep$