diff --git a/src/bin/cargo-build.rs b/src/bin/cargo-build.rs
old mode 100644
new mode 100755
index c3d3c96fe..f88cf5405
--- a/src/bin/cargo-build.rs
+++ b/src/bin/cargo-build.rs
@@ -16,7 +16,7 @@ use cargo::{execute_main_without_stdin};
 use cargo::ops;
 use cargo::core::MultiShell;
 use cargo::util::{CliResult, CliError};
-use cargo::util::important_paths::find_project;
+use cargo::util::important_paths::find_project_manifest;
 
 #[deriving(PartialEq,Clone,Decodable,Encodable)]
 pub struct Options {
@@ -37,8 +37,7 @@ fn execute(options: Options, shell: &mut MultiShell) -> CliResult<Option<()>> {
 
     let root = match options.manifest_path {
         Some(path) => Path::new(path),
-        None => try!(find_project(os::getcwd(), "Cargo.toml")
-                    .map(|path| path.join("Cargo.toml"))
+        None => try!(find_project_manifest(&os::getcwd(), "Cargo.toml")
                     .map_err(|_| {
                         CliError::new("Could not find Cargo.toml in this \
                                        directory or any parent directory",
diff --git a/src/bin/cargo-test.rs b/src/bin/cargo-test.rs
old mode 100644
new mode 100755
index 8849b2d72..5adb71120
--- a/src/bin/cargo-test.rs
+++ b/src/bin/cargo-test.rs
@@ -16,7 +16,7 @@ use cargo::{execute_main_without_stdin};
 use cargo::core::{MultiShell};
 use cargo::util;
 use cargo::util::{CliResult, CliError};
-use cargo::util::important_paths::find_project;
+use cargo::util::important_paths::find_project_manifest;
 
 #[deriving(PartialEq,Clone,Decodable)]
 struct Options {
@@ -33,8 +33,7 @@ fn main() {
 fn execute(options: Options, shell: &mut MultiShell) -> CliResult<Option<()>> {
     let root = match options.manifest_path {
         Some(path) => Path::new(path),
-        None => try!(find_project(os::getcwd(), "Cargo.toml")
-                    .map(|path| path.join("Cargo.toml"))
+        None => try!(find_project_manifest(&os::getcwd(), "Cargo.toml")
                     .map_err(|_| {
                         CliError::new("Could not find Cargo.toml in this \
                                        directory or any parent directory",
diff --git a/src/bin/cargo.rs b/src/bin/cargo.rs
old mode 100644
new mode 100755
index 454e84e6b..ed3a12d32
--- a/src/bin/cargo.rs
+++ b/src/bin/cargo.rs
@@ -142,7 +142,7 @@ fn config_list(args: ConfigListFlags, _: &mut MultiShell) -> CliResult<Option<Co
 }
 
 fn locate_project(_: NoFlags, _: &mut MultiShell) -> CliResult<Option<ProjectLocation>> {
-    let root = try!(find_project(os::getcwd(), "Cargo.toml").map_err(|e| {
+    let root = try!(find_project(&os::getcwd(), "Cargo.toml").map_err(|e| {
         CliError::from_boxed(e, 1)
     }));
 
diff --git a/src/cargo/ops/cargo_read_manifest.rs b/src/cargo/ops/cargo_read_manifest.rs
index 324085734..262e502af 100644
--- a/src/cargo/ops/cargo_read_manifest.rs
+++ b/src/cargo/ops/cargo_read_manifest.rs
@@ -1,7 +1,7 @@
 use std::io::File;
 use util;
 use core::{Package,Manifest,SourceId};
-use util::{CargoResult, human};
+use util::{CargoResult, human, important_paths};
 
 pub fn read_manifest(contents: &[u8], source_id: &SourceId)
     -> CargoResult<(Manifest, Vec<Path>)>
@@ -24,7 +24,8 @@ pub fn read_package(path: &Path, source_id: &SourceId)
 pub fn read_packages(path: &Path, source_id: &SourceId)
     -> CargoResult<Vec<Package>>
 {
-    let (pkg, nested) = try!(read_package(&path.join("Cargo.toml"), source_id));
+    let manifest = try!(important_paths::find_project_manifest_exact(path, "Cargo.toml"));
+    let (pkg, nested) = try!(read_package(&manifest, source_id));
     let mut ret = vec!(pkg);
 
     for p in nested.iter() {
diff --git a/src/cargo/util/important_paths.rs b/src/cargo/util/important_paths.rs
index 7bcc9a551..df7a6bd7a 100644
--- a/src/cargo/util/important_paths.rs
+++ b/src/cargo/util/important_paths.rs
@@ -1,15 +1,42 @@
 use util::{CargoResult, human};
 
-pub fn find_project(pwd: Path, file: &str) -> CargoResult<Path> {
+/// Iteratively search for `file` in `pwd` and its parents, returning
+/// the path of the directory.
+pub fn find_project(pwd: &Path, file: &str) -> CargoResult<Path> {
+    find_project_manifest(pwd, file)
+        .map(|mut p| {
+            // remove the file, leaving just the directory
+            p.pop();
+            p
+        })
+}
+
+/// Iteratively search for `file` in `pwd` and its parents, returning
+/// the path to the file.
+pub fn find_project_manifest(pwd: &Path, file: &str) -> CargoResult<Path> {
     let mut current = pwd.clone();
 
     loop {
-        if current.join(file.clone()).exists() {
-            return Ok(current)
+        let manifest = current.join(file);
+        if manifest.exists() {
+            return Ok(manifest)
         }
 
         if !current.pop() { break; }
     }
 
-    Err(human(format!("no manifest found in `{}`", pwd.display())))
+    Err(human(format!("Could not find `{}` in `{}` or any parent directory",
+                      file, pwd.display())))
+}
+
+/// Return the path to the `file` in `pwd`, if it exists.
+pub fn find_project_manifest_exact(pwd: &Path, file: &str) -> CargoResult<Path> {
+    let manifest = pwd.join(file);
+
+    if manifest.exists() {
+        Ok(manifest)
+    } else {
+        Err(human(format!("Could not find `{}` in `{}`",
+                          file, pwd.display())))
+    }
 }
diff --git a/tests/test_cargo_compile_path_deps.rs b/tests/test_cargo_compile_path_deps.rs
index f01a18549..7b4406eb9 100644
--- a/tests/test_cargo_compile_path_deps.rs
+++ b/tests/test_cargo_compile_path_deps.rs
@@ -354,3 +354,26 @@ test!(nested_deps_recompile {
                                             FRESH, bar.display(),
                                             COMPILING, p.root().display())));
 })
+
+test!(error_message_for_missing_manifest {
+    let p = project("foo")
+        .file("Cargo.toml", r#"
+            [project]
+
+            name = "foo"
+            version = "0.5.0"
+            authors = ["wycats@example.com"]
+
+            [dependencies.bar]
+
+            path = "src/bar"
+        "#)
+       .file("src/bar/not-a-manifest", "");
+
+    assert_that(p.cargo_process("cargo-build"),
+                execs()
+                .with_status(101)
+                .with_stderr(format!("Could not find `Cargo.toml` in `{}`\n",
+                                     p.root().join_many(&["src", "bar"]).display())));
+
+})