diff --git a/packages/angular-cli/models/webpack-build-common.ts b/packages/angular-cli/models/webpack-build-common.ts
index 27b85cfad977..2fdb0a9fe381 100644
--- a/packages/angular-cli/models/webpack-build-common.ts
+++ b/packages/angular-cli/models/webpack-build-common.ts
@@ -58,9 +58,12 @@ export function getWebpackCommonConfig(
     devtool: sourcemap ? 'source-map' : false,
     resolve: {
       extensions: ['.ts', '.js'],
-      modules: [nodeModules]
+      modules: [nodeModules],
     },
-    context: path.resolve(__dirname, './'),
+    resolveLoader: {
+      modules: [path.resolve(projectRoot, 'node_modules')]
+    },
+    context: projectRoot,
     entry: entry,
     output: {
       path: path.resolve(projectRoot, appConfig.outDir),
diff --git a/packages/angular-cli/models/webpack-build-test.js b/packages/angular-cli/models/webpack-build-test.js
index 5c1541044e69..a82057506a8c 100644
--- a/packages/angular-cli/models/webpack-build-test.js
+++ b/packages/angular-cli/models/webpack-build-test.js
@@ -56,7 +56,7 @@ const getWebpackTestConfig = function (projectRoot, environment, appConfig, test
 
   return {
     devtool: testConfig.sourcemap ? 'inline-source-map' : 'eval',
-    context: path.resolve(__dirname, './'),
+    context: projectRoot,
     resolve: {
       extensions: ['.ts', '.js'],
       plugins: [