diff --git a/CHANGES b/CHANGES
index 9d7dcd9b4..92381acc3 100644
--- a/CHANGES
+++ b/CHANGES
@@ -84,6 +84,9 @@ Release 1.0 (in development)
 Release 0.6.5 (in development)
 ==============================
 
+* Make the ``start-after`` and ``end-before`` options to the
+  ``literalinclude`` directive work correctly if not used together.
+
 * #321: Fix link generation in the LaTeX builder.
 
 
diff --git a/sphinx/directives/code.py b/sphinx/directives/code.py
index 6535bdf56..5f2fd51ef 100644
--- a/sphinx/directives/code.py
+++ b/sphinx/directives/code.py
@@ -160,9 +160,9 @@ class LiteralInclude(Directive):
             use = not startafter
             res = []
             for line in lines:
-                if not use and startafter in line:
+                if not use and startafter and startafter in line:
                     use = True
-                elif use and endbefore in line:
+                elif use and endbefore and endbefore in line:
                     use = False
                     break
                 elif use:
diff --git a/sphinx/setup_command.py b/sphinx/setup_command.py
index 1b434fa23..d569b031c 100644
--- a/sphinx/setup_command.py
+++ b/sphinx/setup_command.py
@@ -41,14 +41,18 @@ class BuildDoc(Command):
         self.conf_file_name = 'conf.py'
         self.builder = 'html'
 
+    def _guess_source_dir(self):
+        for guess in ('doc', 'docs'):
+            if not os.path.isdir(guess):
+                continue
+            for root, dirnames, filenames in os.walk(guess):
+                if 'conf.py' in filenames:
+                    return root
+
     def finalize_options(self):
         if self.source_dir is None:
-            if os.path.isdir('doc'):
-                for root, dirnames, filenames in os.walk('doc'):
-                    if 'conf.py' in filenames:
-                        self.source_dir = root
-                        self.announce('Using source directory %s' % root)
-                        break
+            self.source_dir = self._guess_source_dir()
+            self.announce('Using source directory %s' % self.source_dir)
         self.ensure_dirname('source_dir')
         self.source_dir = os.path.abspath(self.source_dir)
 
diff --git a/tests/root/includes.txt b/tests/root/includes.txt
index cb1708403..85cf19701 100644
--- a/tests/root/includes.txt
+++ b/tests/root/includes.txt
@@ -49,6 +49,12 @@ Literalinclude options
    :prepend: START CODE
    :append: END CODE
 
+.. literalinclude:: literal.inc
+   :start-after: utf-8
+
+.. literalinclude:: literal.inc
+   :end-before: class Foo
+
 .. cssclass:: inc-tab3
 .. literalinclude:: tabs.inc
    :tab-width: 3
diff --git a/tests/test_markup.py b/tests/test_markup.py
index fcd5c307e..899fedf77 100644
--- a/tests/test_markup.py
+++ b/tests/test_markup.py
@@ -16,7 +16,6 @@ from util import *
 from docutils import frontend, utils, nodes
 from docutils.parsers import rst
 
-from sphinx import addnodes
 from sphinx.util import texescape
 from sphinx.writers.html import HTMLWriter, SmartyPantsHTMLTranslator
 from sphinx.writers.latex import LaTeXWriter, LaTeXTranslator