diff --git a/opm/autodiff/FlowMain.hpp b/opm/autodiff/FlowMain.hpp
index c43a21424..a71bf6d73 100644
--- a/opm/autodiff/FlowMain.hpp
+++ b/opm/autodiff/FlowMain.hpp
@@ -145,8 +145,8 @@ namespace Opm
             if (!ok) {
                 return EXIT_FAILURE;
             }
-            asImpl().setupOutput();
             asImpl().readDeckInput();
+            asImpl().setupOutput();
             asImpl().setupLogging();
             asImpl().extractMessages();
             asImpl().setupGridAndProps();
@@ -365,14 +365,17 @@ namespace Opm
         // Throws std::runtime_error if failed to create (if requested) output dir.
         void setupOutput()
         {
-            // Write parameters used for later reference. (only if rank is zero)
             output_to_files_ = output_cout_ && param_.getDefault("output", true);
-            // Always read output_dir as it will be set unconditionally later.
-            // Not doing this might cause files to be created in the current
-            // directory.
-            output_dir_ =
-                param_.getDefault("output_dir", std::string("."));
 
+            // Setup output directory.
+            auto& ioConfig = eclipse_state_->getIOConfig();
+            // Default output directory is the directory where the deck is found.
+            const std::string default_output_dir = ioConfig.getOutputDir();
+            output_dir_ = param_.getDefault("output_dir", default_output_dir);
+            // Override output directory if user specified.
+            ioConfig.setOutputDir(output_dir_);
+
+            // Write parameters used for later reference. (only if rank is zero)
             if (output_to_files_) {
                 // Create output directory if needed.
                 boost::filesystem::path fpath(output_dir_);
@@ -409,13 +412,9 @@ namespace Opm
             } else {
                 baseName = path(fpath.filename()).string();
             }
-            if (param_.has("output_dir")) {
-                logFileStream << output_dir_ << "/";
-                debugFileStream << output_dir_ + "/";
-            }
 
-            logFileStream << baseName;
-            debugFileStream << "." << baseName;
+            logFileStream << output_dir_ << "/" << baseName;
+            debugFileStream << output_dir_ << "/" << "." << baseName;
 
             if ( must_distribute_ && mpi_rank_ != 0 )
             {
@@ -511,8 +510,6 @@ namespace Opm
                 }
 
                 eclipse_state_.reset(new EclipseState(*deck_, parseContext));
-                auto& ioConfig = eclipse_state_->getIOConfig();
-                ioConfig.setOutputDir(output_dir_);
             }
             catch (const std::invalid_argument& e) {
                 std::cerr << "Failed to create valid EclipseState object. See logfile: " << logFile_ << std::endl;
diff --git a/opm/autodiff/FlowMainEbos.hpp b/opm/autodiff/FlowMainEbos.hpp
index b681cc573..05445a193 100644
--- a/opm/autodiff/FlowMainEbos.hpp
+++ b/opm/autodiff/FlowMainEbos.hpp
@@ -87,8 +87,8 @@ namespace Opm
                     return EXIT_FAILURE;
                 }
 
-                setupOutput();
                 setupEbosSimulator();
+                setupOutput();
                 setupLogging();
                 extractMessages();
                 setupGridAndProps();
@@ -225,14 +225,17 @@ namespace Opm
         // Throws std::runtime_error if failed to create (if requested) output dir.
         void setupOutput()
         {
-            // Write parameters used for later reference. (only if rank is zero)
             output_to_files_ = output_cout_ && param_.getDefault("output", true);
-            // Always read output_dir as it will be set unconditionally later.
-            // Not doing this might cause files to be created in the current
-            // directory.
-            output_dir_ =
-                param_.getDefault("output_dir", std::string("."));
 
+            // Setup output directory.
+            auto& ioConfig = eclState().getIOConfig();
+            // Default output directory is the directory where the deck is found.
+            const std::string default_output_dir = ioConfig.getOutputDir();
+            output_dir_ = param_.getDefault("output_dir", default_output_dir);
+            // Override output directory if user specified.
+            ioConfig.setOutputDir(output_dir_);
+
+            // Write parameters used for later reference. (only if rank is zero)
             if (output_to_files_) {
                 // Create output directory if needed.
                 boost::filesystem::path fpath(output_dir_);
@@ -265,13 +268,9 @@ namespace Opm
             } else {
                 baseName = path(fpath.filename()).string();
             }
-            if (param_.has("output_dir")) {
-                logFileStream << output_dir_ << "/";
-                debugFileStream << output_dir_ + "/";
-            }
 
-            logFileStream << baseName;
-            debugFileStream << "." << baseName;
+            logFileStream << output_dir_ << "/" << baseName;
+            debugFileStream << output_dir_ << "/" << "." << baseName;
 
             if ( must_distribute_ && mpi_rank_ != 0 )
             {
@@ -354,12 +353,10 @@ namespace Opm
                     MissingFeatures::checkKeywords(deck());
                 }
 
-                IOConfig& ioConfig = eclState().getIOConfig();
-                ioConfig.setOutputDir(output_dir_);
-
                 // Possible to force initialization only behavior (NOSIM).
                 if (param_.has("nosim")) {
                     const bool nosim = param_.get<bool>("nosim");
+                    auto& ioConfig = eclState().getIOConfig();
                     ioConfig.overrideNOSIM( nosim );
                 }
             }
diff --git a/opm/autodiff/SimulatorFullyImplicitBlackoilOutput.hpp b/opm/autodiff/SimulatorFullyImplicitBlackoilOutput.hpp
index 7743ac18f..f85e8ff8a 100644
--- a/opm/autodiff/SimulatorFullyImplicitBlackoilOutput.hpp
+++ b/opm/autodiff/SimulatorFullyImplicitBlackoilOutput.hpp
@@ -310,7 +310,6 @@ namespace Opm
 
         // Parameters for output.
         const std::string outputDir_;
-        const int output_interval_;
         const bool restart_double_si_;
 
         int lastBackupReportStep_;
@@ -341,8 +340,7 @@ namespace Opm
                          const Opm::PhaseUsage &phaseUsage)
       : output_( param.getDefault("output", true) ),
         parallelOutput_( output_ ? new ParallelDebugOutput< Grid >( grid, eclipseState, phaseUsage.num_phases, phaseUsage ) : 0 ),
-        outputDir_( output_ ? param.getDefault("output_dir", std::string("output")) : "." ),
-        output_interval_( output_ ? param.getDefault("output_interval", 1): 0 ),
+        outputDir_( eclipseState.getIOConfig().getOutputDir() ),
         restart_double_si_( output_ ? param.getDefault("restart_double_si", false) : false ),
         lastBackupReportStep_( -1 ),
         phaseUsage_( phaseUsage ),
diff --git a/tests/run-init-regressionTest.sh b/tests/run-init-regressionTest.sh
index c68e90189..e1fe25807 100755
--- a/tests/run-init-regressionTest.sh
+++ b/tests/run-init-regressionTest.sh
@@ -21,7 +21,7 @@ TEST_ARGS="$@"
 rm -Rf  ${RESULT_PATH}
 mkdir -p ${RESULT_PATH}
 cd ${RESULT_PATH}
-${BINPATH}/${EXE_NAME} ${TEST_ARGS} nosim=true
+${BINPATH}/${EXE_NAME} ${TEST_ARGS} nosim=true output_dir=${RESULT_PATH}
 cd ..
 
 ecode=0
diff --git a/tests/run-parallel-regressionTest.sh b/tests/run-parallel-regressionTest.sh
index 1c149b6ca..051ced320 100755
--- a/tests/run-parallel-regressionTest.sh
+++ b/tests/run-parallel-regressionTest.sh
@@ -19,11 +19,11 @@ TEST_ARGS="$@"
 rm -Rf ${RESULT_PATH}
 mkdir -p ${RESULT_PATH}
 cd ${RESULT_PATH}
-${BINPATH}/${EXE_NAME} ${TEST_ARGS}.DATA linear_solver_reduction=1e-7 tolerance_cnv=5e-6 tolerance_mb=1e-8
+${BINPATH}/${EXE_NAME} ${TEST_ARGS}.DATA linear_solver_reduction=1e-7 tolerance_cnv=5e-6 tolerance_mb=1e-8 output_dir=${RESULT_PATH}
 test $? -eq 0 || exit 1
 mkdir mpi
 cd mpi
-mpirun -np 4 ${BINPATH}/${EXE_NAME} ${TEST_ARGS}.DATA linear_solver_reduction=1e-7 tolerance_cnv=5e-6 tolerance_mb=1e-8
+mpirun -np 4 ${BINPATH}/${EXE_NAME} ${TEST_ARGS}.DATA linear_solver_reduction=1e-7 tolerance_cnv=5e-6 tolerance_mb=1e-8 output_dir=${RESULT_PATH}/mpi
 test $? -eq 0 || exit 1
 cd ..
 
diff --git a/tests/run-regressionTest.sh b/tests/run-regressionTest.sh
index f6a808f6b..16565a590 100755
--- a/tests/run-regressionTest.sh
+++ b/tests/run-regressionTest.sh
@@ -18,7 +18,7 @@ TEST_ARGS="$@"
 rm -Rf  ${RESULT_PATH}
 mkdir -p ${RESULT_PATH}
 cd ${RESULT_PATH}
-${BINPATH}/${EXE_NAME} ${TEST_ARGS}
+${BINPATH}/${EXE_NAME} ${TEST_ARGS} output_dir=${RESULT_PATH}
 cd ..
 
 ecode=0
diff --git a/tests/run-restart-regressionTest.sh b/tests/run-restart-regressionTest.sh
index f5e9bb28a..da87be72e 100755
--- a/tests/run-restart-regressionTest.sh
+++ b/tests/run-restart-regressionTest.sh
@@ -19,9 +19,9 @@ TEST_ARGS="$@"
 rm -Rf ${RESULT_PATH}
 mkdir -p ${RESULT_PATH}
 cd ${RESULT_PATH}
-${BINPATH}/${EXE_NAME} ${TEST_ARGS}.DATA timestep.adaptive=false
+${BINPATH}/${EXE_NAME} ${TEST_ARGS}.DATA timestep.adaptive=false output_dir=${RESULT_PATH}
 test $? -eq 0 || exit 1
-${BINPATH}/${EXE_NAME} ${TEST_ARGS}_RESTART.DATA timestep.adaptive=false
+${BINPATH}/${EXE_NAME} ${TEST_ARGS}_RESTART.DATA timestep.adaptive=false output_dir=${RESULT_PATH}
 test $? -eq 0 || exit 1
 
 ecode=0