diff --git a/mopidy/utils/path.py b/mopidy/utils/path.py
index ee8f3c65..7f1b9233 100644
--- a/mopidy/utils/path.py
+++ b/mopidy/utils/path.py
@@ -62,9 +62,10 @@ def split_path(path):
 
 
 def expand_path(path):
+    path = string.Template(path).safe_substitute(XDG_DIRS)
     path = os.path.expanduser(path)
     path = os.path.abspath(path)
-    return string.Template(path).safe_substitute(XDG_DIRS)
+    return path
 
 
 def find_files(path):
diff --git a/tests/utils/path_test.py b/tests/utils/path_test.py
index 184970ae..d6b2b5a7 100644
--- a/tests/utils/path_test.py
+++ b/tests/utils/path_test.py
@@ -1,12 +1,13 @@
 # encoding: utf-8
 
+import glib
 import os
 import shutil
 import sys
 import tempfile
 
 from mopidy.utils.path import (get_or_create_folder, mtime,
-    path_to_uri, uri_to_path, split_path, find_files)
+    path_to_uri, uri_to_path, expand_path, split_path, find_files)
 
 from tests import unittest, path_to_data_dir
 
@@ -135,6 +136,30 @@ class SplitPathTest(unittest.TestCase):
         self.assertEqual([], split_path('/'))
 
 
+class ExpandPathTest(unittest.TestCase):
+    # TODO: test via mocks?
+
+    def test_empty_path(self):
+        self.assertEqual(os.path.abspath('.'), expand_path(''))
+
+    def test_absolute_path(self):
+        self.assertEqual('/tmp/foo', expand_path('/tmp/foo'))
+
+    def test_home_dir_expansion(self):
+        self.assertEqual(os.path.expanduser('~/foo'), expand_path('~/foo'))
+
+    def test_abspath(self):
+        self.assertEqual(os.path.abspath('./foo'), expand_path('./foo'))
+
+    def test_xdg_subsititution(self):
+        self.assertEqual(glib.get_user_data_dir() + '/foo',
+            expand_path('$XDG_DATA_DIR/foo'))
+
+    def test_xdg_subsititution_unknown(self):
+        self.assertEqual('/tmp/$XDG_INVALID_DIR/foo',
+            expand_path('/tmp/$XDG_INVALID_DIR/foo'))
+
+
 class FindFilesTest(unittest.TestCase):
     def find(self, path):
         return list(find_files(path_to_data_dir(path)))