diff --git a/CHANGES b/CHANGES
index e1fd96a2b..b4ca3722b 100644
--- a/CHANGES
+++ b/CHANGES
@@ -141,6 +141,8 @@ New features added
 Bugs fixed
 ----------
 
+* Fix the handling of images in different directories.
+
 * Support option lists in the text writer.  Make sure that dashes
   introducing long option names are not contracted to en-dashes.
 
diff --git a/sphinx/environment.py b/sphinx/environment.py
index 3b7eb91e1..5e753a1bf 100644
--- a/sphinx/environment.py
+++ b/sphinx/environment.py
@@ -32,7 +32,7 @@ except ImportError:
 from docutils import nodes
 from docutils.io import FileInput, NullOutput
 from docutils.core import Publisher
-from docutils.utils import Reporter
+from docutils.utils import Reporter, relative_path
 from docutils.readers import standalone
 from docutils.parsers.rst import roles
 from docutils.parsers.rst.languages import en as english
@@ -619,19 +619,22 @@ class BuildEnvironment:
             node['uri'] = imgpath
             if imgpath.endswith(os.extsep + '*'):
                 for filename in glob(path.join(self.srcdir, imgpath)):
-                    dir, base = path.split(filename)
-                    if base.lower().endswith('.pdf'):
-                        candidates['application/pdf'] = path.join(docdir, base)
-                    elif base.lower().endswith('.svg'):
-                        candidates['image/svg+xml'] = path.join(docdir, base)
+                    relname = relative_path(self.srcdir, filename)
+                    if filename.lower().endswith('.pdf'):
+                        candidates['application/pdf'] = path.join(docdir, relname)
+                    elif filename.lower().endswith('.svg'):
+                        candidates['image/svg+xml'] = path.join(docdir, relname)
                     else:
-                        f = open(filename, 'rb')
                         try:
-                            imgtype = imghdr.what(f)
-                        finally:
-                            f.close()
+                            f = open(filename, 'rb')
+                            try:
+                                imgtype = imghdr.what(f)
+                            finally:
+                                f.close()
+                        except (OSError, IOError):
+                            self.warn(docname, 'Image file %s not readable' % filename)
                         if imgtype:
-                            candidates['image/' + imgtype] = path.join(docdir, base)
+                            candidates['image/' + imgtype] = path.join(docdir, relname)
             else:
                 candidates['*'] = imgpath
             for imgpath in candidates.itervalues():
diff --git a/tests/root/images.txt b/tests/root/images.txt
index 84f89c6e0..d73375424 100644
--- a/tests/root/images.txt
+++ b/tests/root/images.txt
@@ -18,3 +18,6 @@ Sphinx image handling
 
 .. a non-local image URI
 .. image:: http://www.python.org/logo.png
+
+.. an image with subdir and unspecified extension
+.. image:: subdir/simg.*
diff --git a/tests/root/subdir/simg.png b/tests/root/subdir/simg.png
new file mode 100644
index 000000000..72c12d13f
Binary files /dev/null and b/tests/root/subdir/simg.png differ
diff --git a/tests/test_build.py b/tests/test_build.py
index 07a946964..c62c2f8cb 100644
--- a/tests/test_build.py
+++ b/tests/test_build.py
@@ -27,7 +27,7 @@ latex_warnfile = StringIO()
 
 ENV_WARNINGS = """\
 WARNING: %(root)s/images.txt:9: Image file not readable: foo.png
-WARNING: %(root)s/images.txt:20: Nonlocal image URI found: http://www.python.org/logo.png
+WARNING: %(root)s/images.txt:21: Nonlocal image URI found: http://www.python.org/logo.png
 WARNING: %(root)s/includes.txt:: (WARNING/2) Encoding 'utf-8' used for reading included \
 file u'wrongenc.inc' seems to be wrong, try giving an :encoding: option
 """
@@ -44,6 +44,7 @@ HTML_XPATH = {
     'images.html': {
         ".//img[@src='_images/img.png']": '',
         ".//img[@src='_images/img1.png']": '',
+        ".//img[@src='_images/simg.png']": '',
     },
     'includes.html': {
         ".//pre/span[@class='s']": u'üöä',
diff --git a/tests/test_env.py b/tests/test_env.py
index 528edc48f..a8af1e428 100644
--- a/tests/test_env.py
+++ b/tests/test_env.py
@@ -54,16 +54,19 @@ def test_images():
     htmlbuilder = StandaloneHTMLBuilder(app, env)
     htmlbuilder.post_process_images(tree)
     assert "no matching candidate for image URI u'foo.*'" in app._warning.content[-1]
-    assert set(htmlbuilder.images.keys()) == set(['subdir/img.png', 'img.png'])
-    assert set(htmlbuilder.images.values()) == set(['img.png', 'img1.png'])
+    assert set(htmlbuilder.images.keys()) == set(['subdir/img.png', 'img.png',
+                                                  'subdir/simg.png'])
+    assert set(htmlbuilder.images.values()) == set(['img.png', 'img1.png',
+                                                    'simg.png'])
 
     app._warning.reset()
     latexbuilder = LaTeXBuilder(app, env)
     latexbuilder.post_process_images(tree)
     assert "no matching candidate for image URI u'foo.*'" in app._warning.content[-1]
-    assert set(latexbuilder.images.keys()) == set(['subdir/img.png',
+    assert set(latexbuilder.images.keys()) == set(['subdir/img.png', 'subdir/simg.png',
                                                    'img.png', 'img.pdf'])
-    assert set(latexbuilder.images.values()) == set(['img.pdf', 'img.png', 'img1.png'])
+    assert set(latexbuilder.images.values()) == set(['img.pdf', 'img.png',
+                                                     'img1.png', 'simg.pdf'])
 
 def test_second_update():
     # delete, add and "edit" (change saved mtime) some files and update again