diff --git a/middleman-core/features/directory_index.feature b/middleman-core/features/directory_index.feature
index 634267de..0a7db97b 100644
--- a/middleman-core/features/directory_index.feature
+++ b/middleman-core/features/directory_index.feature
@@ -46,10 +46,21 @@ Feature: Directory Index
     unknown_link_to: <%= link_to "Unknown", "/unknown.html" %>
     relative_link_to: <%= link_to "Relative", "needs_index.html" %>
     """
+    And a file named "source/link_to/sub.html.erb" with:
+    """
+    link_to: <%= link_to "Needs Index", "/needs_index.html" %>
+    explicit_link_to: <%= link_to "Explicit", "/needs_index/index.html" %>
+    unknown_link_to: <%= link_to "Unknown", "/unknown.html" %>
+    relative_link_to: <%= link_to "Relative", "../needs_index.html" %>
+    """
     And the Server is running at "indexable-app"
     When I go to "/link_to/"
     Then I should see 'link_to: <a href="/needs_index/">Needs Index</a>'
     Then I should see 'explicit_link_to: <a href="/needs_index/index.html">Explicit</a>'
     Then I should see 'unknown_link_to: <a href="/unknown.html">Unknown</a>'
-    # Relative links aren't touched
-    Then I should see 'relative_link_to: <a href="needs_index.html">Relative</a>'
\ No newline at end of file
+    Then I should see 'relative_link_to: <a href="/needs_index/">Relative</a>'
+    When I go to "/link_to/sub/"
+    Then I should see 'link_to: <a href="/needs_index/">Needs Index</a>'
+    Then I should see 'explicit_link_to: <a href="/needs_index/index.html">Explicit</a>'
+    Then I should see 'unknown_link_to: <a href="/unknown.html">Unknown</a>'
+    Then I should see 'relative_link_to: <a href="/needs_index/">Relative</a>'
\ No newline at end of file
diff --git a/middleman-core/features/helpers_relative_link_to.feature b/middleman-core/features/helpers_relative_link_to.feature
new file mode 100644
index 00000000..b9ba39d2
--- /dev/null
+++ b/middleman-core/features/helpers_relative_link_to.feature
@@ -0,0 +1,68 @@
+Feature: relative_link_to helper
+
+  Scenario: relative_link_to produces relative links
+    Given a fixture app "indexable-app"
+    And an empty file named "config.rb"
+    And a file named "source/link_to.html.erb" with:
+    """
+    absolute: <%= link_to "Needs Index", "/needs_index.html", :relative => true %>
+    relative: <%= link_to "Relative", "needs_index.html", :relative => true %>
+    """
+    And a file named "source/link_to/sub.html.erb" with:
+    """
+    absolute: <%= link_to "Needs Index", "/needs_index.html", :relative => true %>
+    relative: <%= link_to "Relative", "../needs_index.html", :relative => true %>
+    """
+    And the Server is running at "indexable-app"
+    When I go to "/link_to.html"
+    Then I should see 'absolute: <a href="needs_index.html">Needs Index</a>'
+    Then I should see 'relative: <a href="needs_index.html">Relative</a>'
+    When I go to "/link_to/sub.html"
+    Then I should see 'absolute: <a href="../needs_index.html">Needs Index</a>'
+    Then I should see 'relative: <a href="../needs_index.html">Relative</a>'
+
+  Scenario: relative_link_to produces relative links when :relative_links is set to true
+    Given a fixture app "indexable-app"
+    And a file named "config.rb" with:
+    """
+    set :relative_links, true
+    """
+    And a file named "source/link_to.html.erb" with:
+    """
+    absolute: <%= link_to "Needs Index", "/needs_index.html" %>
+    relative: <%= link_to "Relative", "needs_index.html", :relative => false %>
+    unknown: <%= link_to "Unknown", "foo.html" %>
+    """
+    And a file named "source/link_to/sub.html.erb" with:
+    """
+    absolute: <%= link_to "Needs Index", "/needs_index.html" %>
+    relative: <%= link_to "Relative", "../needs_index.html" %>
+    """
+    And the Server is running at "indexable-app"
+    When I go to "/link_to.html"
+    Then I should see 'absolute: <a href="needs_index.html">Needs Index</a>'
+    Then I should see 'relative: <a href="/needs_index.html">Relative</a>'
+    Then I should see 'unknown: <a href="foo.html">Unknown</a>'
+    When I go to "/link_to/sub.html"
+    Then I should see 'absolute: <a href="../needs_index.html">Needs Index</a>'
+    Then I should see 'relative: <a href="../needs_index.html">Relative</a>'
+
+  Scenario: relative_link_to knows about directory indexes
+    Given a fixture app "indexable-app"
+    And a file named "source/link_to.html.erb" with:
+    """
+    absolute: <%= link_to "Needs Index", "/needs_index.html", :relative => true %>
+    relative: <%= link_to "Relative", "needs_index.html", :relative => true %>
+    """
+    And a file named "source/link_to/sub.html.erb" with:
+    """
+    absolute: <%= link_to "Needs Index", "/needs_index.html", :relative => true %>
+    relative: <%= link_to "Relative", "../needs_index.html", :relative => true %>
+    """
+    And the Server is running at "indexable-app"
+    When I go to "/link_to/"
+    Then I should see 'absolute: <a href="needs_index/">Needs Index</a>'
+    Then I should see 'relative: <a href="needs_index/">Relative</a>'
+    When I go to "/link_to/sub/"
+    Then I should see 'absolute: <a href="../needs_index/">Needs Index</a>'
+    Then I should see 'relative: <a href="../needs_index/">Relative</a>'
\ No newline at end of file
diff --git a/middleman-core/lib/middleman-core/core_extensions/default_helpers.rb b/middleman-core/lib/middleman-core/core_extensions/default_helpers.rb
index f695037b..23c5d306 100644
--- a/middleman-core/lib/middleman-core/core_extensions/default_helpers.rb
+++ b/middleman-core/lib/middleman-core/core_extensions/default_helpers.rb
@@ -20,6 +20,8 @@ module Middleman
           # app.helpers ::Padrino::Helpers::TranslationHelpers
 
           app.helpers Helpers
+
+          app.set :relative_links, false
         end
         alias :included :registered
       end
@@ -106,18 +108,65 @@ module Middleman
           "#{result_path}"
         end
 
+        # Overload the regular link_to to be sitemap-aware - if you
+        # reference a source path, either absolutely or relatively,
+        # you'll get that resource's nice URL. Also, there is a
+        # :relative option which, if set to true, will produce
+        # relative URLs instead of absolute URLs. You can also add
+        #
+        # set :relative_links, true
+        #
+        # to config.rb to have all links default to relative.
         def link_to(*args, &block)
           url_arg_index = block_given? ? 0 : 1
+          options_index = block_given? ? 1 : 2
+
           if url = args[url_arg_index]
-            # Only try to work with absolute URLs
-            if url.start_with? '/'
+            options = args[options_index] || {}
+            relative = options.delete(:relative)
+            
+
+            if url.include? '://'
+              raise "Can't use the relative option with an external URL" if relative
+            else
+              # Handle relative urls
+              current_dir = Pathname('/' + current_resource.path).dirname
+              path = Pathname(url)
+
+              url = current_dir.join(path).to_s if path.relative?
+
               resource = sitemap.find_resource_by_path(url)
-              args[url_arg_index] = resource.url if resource
+              
+              # Allow people to turn on relative paths for all links with set :relative_links, true
+              # but still override on a case by case basis with the :relative parameter.
+              effective_relative = relative || false
+              if relative.nil? && relative_links
+                effective_relative = true
+              end
+
+              if resource
+                if effective_relative
+                  resource_url = resource.url
+                  new_url = Pathname(resource_url).relative_path_from(current_dir).to_s
+
+                  # Put back the trailing slash to avoid unnecessary Apache redirects
+                  if resource_url.end_with?('/') && !new_url.end_with?('/')
+                    new_url << '/'
+                  end
+                else
+                  new_url = resource.url
+                end
+
+                args[url_arg_index] = new_url
+              else
+                raise "No resource exists at #{url}" if relative
+              end
             end
           end
+
           super(*args, &block)
         end
       end
     end
   end
-end
\ No newline at end of file
+end
diff --git a/middleman-core/lib/middleman-core/sitemap/resource.rb b/middleman-core/lib/middleman-core/sitemap/resource.rb
index 76054b7e..2ca7ae12 100644
--- a/middleman-core/lib/middleman-core/sitemap/resource.rb
+++ b/middleman-core/lib/middleman-core/sitemap/resource.rb
@@ -140,8 +140,8 @@ module Middleman
       # just foo. Best for linking.
       # @return [String]
       def url
-        '/' + destination_path.sub(/#{Regexp.escape(app.index_file)}$/, '')
+        ('/' + destination_path).sub(/\/#{Regexp.escape(app.index_file)}$/, '/')
       end
     end
   end
-end
\ No newline at end of file
+end