diff --git a/mopidy/backends/local/__init__.py b/mopidy/backends/local/__init__.py
index 975ec458..db86e56f 100644
--- a/mopidy/backends/local/__init__.py
+++ b/mopidy/backends/local/__init__.py
@@ -7,7 +7,7 @@ import shutil
 from pykka.actor import ThreadingActor
 from pykka.registry import ActorRegistry
 
-from mopidy import audio, core, settings, DATA_PATH
+from mopidy import audio, core, settings
 from mopidy.backends import base
 from mopidy.models import Playlist, Track, Album
 
@@ -88,7 +88,7 @@ class LocalStoredPlaylistsProvider(base.BaseStoredPlaylistsProvider):
         for m3u in glob.glob(os.path.join(self._folder, '*.m3u')):
             name = os.path.basename(m3u)[:-len('.m3u')]
             tracks = []
-            for uri in parse_m3u(m3u):
+            for uri in parse_m3u(m3u, settings.LOCAL_MUSIC_PATH):
                 try:
                     tracks.append(self.backend.library.lookup(uri))
                 except LookupError, e:
diff --git a/mopidy/backends/local/translator.py b/mopidy/backends/local/translator.py
index 3b610a94..1fea555c 100644
--- a/mopidy/backends/local/translator.py
+++ b/mopidy/backends/local/translator.py
@@ -7,7 +7,7 @@ from mopidy.models import Track, Artist, Album
 from mopidy.utils import locale_decode
 from mopidy.utils.path import path_to_uri
 
-def parse_m3u(file_path):
+def parse_m3u(file_path, music_folder):
     """
     Convert M3U file list of uris
 
@@ -29,8 +29,6 @@ def parse_m3u(file_path):
     """
 
     uris = []
-    folder = os.path.dirname(file_path)
-
     try:
         with open(file_path) as m3u:
             contents = m3u.readlines()
@@ -48,7 +46,7 @@ def parse_m3u(file_path):
         if line.startswith('file://'):
             uris.append(line)
         else:
-            path = path_to_uri(folder, line)
+            path = path_to_uri(music_folder, line)
             uris.append(path)
 
     return uris
diff --git a/tests/backends/local/translator_test.py b/tests/backends/local/translator_test.py
index 1dceb737..08f29c1b 100644
--- a/tests/backends/local/translator_test.py
+++ b/tests/backends/local/translator_test.py
@@ -9,6 +9,7 @@ from mopidy.models import Track, Artist, Album
 
 from tests import unittest, path_to_data_dir
 
+data_dir = path_to_data_dir('')
 song1_path = path_to_data_dir('song1.mp3')
 song2_path = path_to_data_dir('song2.mp3')
 encoded_path = path_to_data_dir(u'æøå.mp3')
@@ -21,22 +22,32 @@ encoded_uri = path_to_uri(encoded_path)
 
 class M3UToUriTest(unittest.TestCase):
     def test_empty_file(self):
-        uris = parse_m3u(path_to_data_dir('empty.m3u'))
+        uris = parse_m3u(path_to_data_dir('empty.m3u'), data_dir)
         self.assertEqual([], uris)
 
     def test_basic_file(self):
-        uris = parse_m3u(path_to_data_dir('one.m3u'))
+        uris = parse_m3u(path_to_data_dir('one.m3u'), data_dir)
         self.assertEqual([song1_uri], uris)
 
     def test_file_with_comment(self):
-        uris = parse_m3u(path_to_data_dir('comment.m3u'))
+        uris = parse_m3u(path_to_data_dir('comment.m3u'), data_dir)
         self.assertEqual([song1_uri], uris)
 
+    def test_file_is_relative_to_correct_folder(self):
+        with tempfile.NamedTemporaryFile(delete=False) as tmp:
+            tmp.write('song1.mp3')
+        try:
+            uris = parse_m3u(tmp.name, data_dir)
+            self.assertEqual([song1_uri], uris)
+        finally:
+            if os.path.exists(tmp.name):
+                os.remove(tmp.name)
+
     def test_file_with_absolute_files(self):
         with tempfile.NamedTemporaryFile(delete=False) as tmp:
             tmp.write(song1_path)
         try:
-            uris = parse_m3u(tmp.name)
+            uris = parse_m3u(tmp.name, data_dir)
             self.assertEqual([song1_uri], uris)
         finally:
             if os.path.exists(tmp.name):
@@ -48,29 +59,28 @@ class M3UToUriTest(unittest.TestCase):
             tmp.write('# comment \n')
             tmp.write(song2_path)
         try:
-            uris = parse_m3u(tmp.name)
+            uris = parse_m3u(tmp.name, data_dir)
             self.assertEqual([song1_uri, song2_uri], uris)
         finally:
             if os.path.exists(tmp.name):
                 os.remove(tmp.name)
 
-
     def test_file_with_uri(self):
         with tempfile.NamedTemporaryFile(delete=False) as tmp:
             tmp.write(song1_uri)
         try:
-            uris = parse_m3u(tmp.name)
+            uris = parse_m3u(tmp.name, data_dir)
             self.assertEqual([song1_uri], uris)
         finally:
             if os.path.exists(tmp.name):
                 os.remove(tmp.name)
 
     def test_encoding_is_latin1(self):
-        uris = parse_m3u(path_to_data_dir('encoding.m3u'))
+        uris = parse_m3u(path_to_data_dir('encoding.m3u'), data_dir)
         self.assertEqual([encoded_uri], uris)
 
     def test_open_missing_file(self):
-        uris = parse_m3u(path_to_data_dir('non-existant.m3u'))
+        uris = parse_m3u(path_to_data_dir('non-existant.m3u'), data_dir)
         self.assertEqual([], uris)