diff --git a/Makefile.am b/Makefile.am
index 3a7d3373..ab4308fc 100644
--- a/Makefile.am
+++ b/Makefile.am
@@ -2,7 +2,20 @@ if BUILD_WCAP_TOOLS
 wcap_subdir = wcap
 endif
 
-SUBDIRS = shared src clients data protocol tests $(wcap_subdir) man
+if ENABLE_XWAYLAND
+xwayland_subdir = xwayland
+endif
+
+SUBDIRS =					\
+	shared					\
+	src					\
+	$(xwayland_subdir)			\
+	clients					\
+	data					\
+	protocol				\
+	tests					\
+	$(wcap_subdir)				\
+	man
 
 DISTCHECK_CONFIGURE_FLAGS = --disable-setuid-install
 
diff --git a/configure.ac b/configure.ac
index 6c1035a1..fd7dc1f1 100644
--- a/configure.ac
+++ b/configure.ac
@@ -490,7 +490,7 @@ AM_CONDITIONAL([HAVE_XMLLINT], [test "x$XMLLINT" != "x" -a "x$dtddir" != "x"])
 AC_CONFIG_FILES([Makefile
 		 shared/Makefile
 		 src/Makefile
-		 src/xwayland/Makefile
+		 xwayland/Makefile
 		 src/version.h
 		 src/weston.pc
 		 clients/Makefile
diff --git a/src/Makefile.am b/src/Makefile.am
index f61e4bde..77df381f 100644
--- a/src/Makefile.am
+++ b/src/Makefile.am
@@ -75,13 +75,6 @@ git-version.h : .FORCE
 
 .FORCE :
 
-if ENABLE_XWAYLAND
-SUBDIRS = xwayland
-endif
-
-DIST_SUBDIRS = xwayland
-
-
 if BUILD_WESTON_LAUNCH
 weston_launch = weston-launch
 weston_launch_SOURCES = weston-launch.c weston-launch.h
diff --git a/src/xwayland/Makefile.am b/xwayland/Makefile.am
similarity index 94%
rename from src/xwayland/Makefile.am
rename to xwayland/Makefile.am
index cab59c70..434234aa 100644
--- a/src/xwayland/Makefile.am
+++ b/xwayland/Makefile.am
@@ -1,6 +1,8 @@
 AM_CPPFLAGS =					\
 	-I$(top_srcdir)/shared			\
+	-I$(top_srcdir)/src			\
 	-I$(top_builddir)/src			\
+	-I$(top_builddir)/xwayland		\
 	-DDATADIR='"$(datadir)"'		\
 	-DMODULEDIR='"$(moduledir)"'		\
 	-DLIBEXECDIR='"$(libexecdir)"'		\
diff --git a/src/xwayland/dnd.c b/xwayland/dnd.c
similarity index 99%
rename from src/xwayland/dnd.c
rename to xwayland/dnd.c
index 1fea3efc..daeb08de 100644
--- a/src/xwayland/dnd.c
+++ b/xwayland/dnd.c
@@ -35,8 +35,8 @@
 
 #include "xwayland.h"
 
-#include "../../shared/cairo-util.h"
-#include "../compositor.h"
+#include "cairo-util.h"
+#include "compositor.h"
 #include "xserver-server-protocol.h"
 #include "hash.h"
 
diff --git a/src/xwayland/hash.c b/xwayland/hash.c
similarity index 100%
rename from src/xwayland/hash.c
rename to xwayland/hash.c
diff --git a/src/xwayland/hash.h b/xwayland/hash.h
similarity index 100%
rename from src/xwayland/hash.h
rename to xwayland/hash.h
diff --git a/src/xwayland/launcher.c b/xwayland/launcher.c
similarity index 100%
rename from src/xwayland/launcher.c
rename to xwayland/launcher.c
diff --git a/src/xwayland/selection.c b/xwayland/selection.c
similarity index 100%
rename from src/xwayland/selection.c
rename to xwayland/selection.c
diff --git a/src/xwayland/window-manager.c b/xwayland/window-manager.c
similarity index 99%
rename from src/xwayland/window-manager.c
rename to xwayland/window-manager.c
index eea03496..4bce02dd 100644
--- a/src/xwayland/window-manager.c
+++ b/xwayland/window-manager.c
@@ -36,8 +36,8 @@
 
 #include "xwayland.h"
 
-#include "../../shared/cairo-util.h"
-#include "../compositor.h"
+#include "cairo-util.h"
+#include "compositor.h"
 #include "xserver-server-protocol.h"
 #include "hash.h"
 
diff --git a/src/xwayland/xwayland.h b/xwayland/xwayland.h
similarity index 99%
rename from src/xwayland/xwayland.h
rename to xwayland/xwayland.h
index 77262e8f..c684cc51 100644
--- a/src/xwayland/xwayland.h
+++ b/xwayland/xwayland.h
@@ -26,7 +26,7 @@
 #include <xcb/composite.h>
 #include <cairo/cairo-xcb.h>
 
-#include "../compositor.h"
+#include "compositor.h"
 
 #define SEND_EVENT_MASK (0x80)
 #define EVENT_TYPE(event) ((event)->response_type & ~SEND_EVENT_MASK)