diff --git a/inttest/tdeps3/a.erl b/inttest/tdeps3/a.erl
new file mode 100644
index 0000000..5a387eb
--- /dev/null
+++ b/inttest/tdeps3/a.erl
@@ -0,0 +1,3 @@
+-module({{module}}).
+
+-include_lib("{{dep}}/include/{{dep}}.hrl").
diff --git a/inttest/tdeps3/a.rebar.config b/inttest/tdeps3/a.rebar.config
new file mode 100644
index 0000000..19b8ef8
--- /dev/null
+++ b/inttest/tdeps3/a.rebar.config
@@ -0,0 +1,4 @@
+{deps, [
+	{b, "1", {git, "../repo/b"}},
+	{f, "1", {git, "../repo/f"}}
+]}.
diff --git a/inttest/tdeps3/b.hrl b/inttest/tdeps3/b.hrl
new file mode 100644
index 0000000..efbeab1
--- /dev/null
+++ b/inttest/tdeps3/b.hrl
@@ -0,0 +1 @@
+-include_lib("c/include/c.hrl").
diff --git a/inttest/tdeps3/b.rebar.config b/inttest/tdeps3/b.rebar.config
new file mode 100644
index 0000000..d1ccae2
--- /dev/null
+++ b/inttest/tdeps3/b.rebar.config
@@ -0,0 +1,5 @@
+{deps, [
+	{c, "1", {git, "../repo/c"}}
+]}.
+
+{lib_dirs, [apps]}.
diff --git a/inttest/tdeps3/c.hrl b/inttest/tdeps3/c.hrl
new file mode 100644
index 0000000..cc87fff
--- /dev/null
+++ b/inttest/tdeps3/c.hrl
@@ -0,0 +1 @@
+-include_lib("d/include/d.hrl").
diff --git a/inttest/tdeps3/c.rebar.config b/inttest/tdeps3/c.rebar.config
new file mode 100644
index 0000000..b590771
--- /dev/null
+++ b/inttest/tdeps3/c.rebar.config
@@ -0,0 +1 @@
+{deps, [{d, "1", {git, "../repo/d"}}]}.
diff --git a/inttest/tdeps3/d.hrl b/inttest/tdeps3/d.hrl
new file mode 100644
index 0000000..02f8088
--- /dev/null
+++ b/inttest/tdeps3/d.hrl
@@ -0,0 +1 @@
+-include_lib("e/include/e.hrl").
diff --git a/inttest/tdeps3/d.rebar.config b/inttest/tdeps3/d.rebar.config
new file mode 100644
index 0000000..4c7cd54
--- /dev/null
+++ b/inttest/tdeps3/d.rebar.config
@@ -0,0 +1 @@
+{deps, [{e, "1", {git, "../repo/e"}}]}.
diff --git a/inttest/tdeps3/e.hrl b/inttest/tdeps3/e.hrl
new file mode 100644
index 0000000..9f02fab
--- /dev/null
+++ b/inttest/tdeps3/e.hrl
@@ -0,0 +1 @@
+-define(HELLO, hello).
diff --git a/inttest/tdeps3/f.hrl b/inttest/tdeps3/f.hrl
new file mode 100644
index 0000000..02f8088
--- /dev/null
+++ b/inttest/tdeps3/f.hrl
@@ -0,0 +1 @@
+-include_lib("e/include/e.hrl").
diff --git a/inttest/tdeps3/root.rebar.config b/inttest/tdeps3/root.rebar.config
new file mode 100644
index 0000000..d1c3793
--- /dev/null
+++ b/inttest/tdeps3/root.rebar.config
@@ -0,0 +1 @@
+{sub_dirs, ["apps/a"]}.
diff --git a/inttest/tdeps3/tdeps3_rt.erl b/inttest/tdeps3/tdeps3_rt.erl
new file mode 100644
index 0000000..da87d43
--- /dev/null
+++ b/inttest/tdeps3/tdeps3_rt.erl
@@ -0,0 +1,89 @@
+-module(tdeps3_rt).
+
+-compile(export_all).
+
+%% Exercise transitive dependencies where there are multiple files
+%% depending on the same set of deps as well as lib_dir directives
+%% A -> B -> C -> D -> E
+%%      |--> G(via lib_dir)
+%% |--> F -> D -> E
+
+files() ->
+    [
+     %% A1 application
+     {create, "ebin/a.app", app(a, [a])},
+     {template, "a.erl", "src/a.erl", dict:from_list([{module, a}, {dep, b}])},
+
+     {copy, "a.rebar.config", "rebar.config"},
+     {copy, "../../rebar", "rebar"},
+
+     %% B application
+     {create, "repo/b/ebin/b.app", app(b, [b])},
+     {template, "a.erl", "repo/b/src/b.erl", dict:from_list([{module, b}, {dep, b}])},
+     {copy, "b.rebar.config", "repo/b/rebar.config"},
+     {copy, "b.hrl", "repo/b/include/b.hrl"},
+
+     %% C application
+     {create, "repo/c/ebin/c.app", app(c, [c])},
+     {template, "a.erl", "repo/c/src/c.erl", dict:from_list([{module, c}, {dep, d}])},
+     {copy, "c.rebar.config", "repo/c/rebar.config"},
+     {copy, "c.hrl", "repo/c/include/c.hrl"},
+
+     %% D application
+     {create, "repo/d/ebin/d.app", app(d, [d])},
+     {template, "a.erl", "repo/d/src/d.erl", dict:from_list([{module, d}, {dep, e}])},
+     {copy, "d.rebar.config", "repo/d/rebar.config"},
+     {copy, "d.hrl", "repo/d/include/d.hrl"},
+
+     %% E application
+     {create, "repo/e/ebin/e.app", app(e, [])},
+     {copy, "e.hrl", "repo/e/include/e.hrl"},
+
+
+     %% F application
+     {create, "repo/f/ebin/f.app", app(f, [f])},
+     {template, "a.erl", "repo/f/src/f.erl", dict:from_list([{module, f}, {dep, d}])},
+     {copy, "c.rebar.config", "repo/f/rebar.config"},
+     {copy, "f.hrl", "repo/f/include/f.hrl"},
+
+     %% G application, which is part of the B repo, in a lib_dir
+     {create, "repo/b/apps/g/ebin/g.app", app(g, [])},
+     {copy, "e.hrl", "repo/b/apps/g/include/g.hrl"}
+
+    ].
+
+apply_cmds([], _Params) ->
+    ok;
+apply_cmds([Cmd | Rest], Params) ->
+    io:format("Running: ~s (~p)\n", [Cmd, Params]),
+    {ok, _} = retest_sh:run(Cmd, Params),
+    apply_cmds(Rest, Params).
+
+run(_Dir) ->
+    %% Initialize the b/c apps as git repos so that dependencies pull
+    %% properly
+    GitCmds = ["git init",
+               "git add -A",
+               "git config user.email 'tdeps@example.com'",
+               "git config user.name 'tdeps'",
+               "git commit -a -m 'Initial Commit'"],
+    ok = apply_cmds(GitCmds, [{dir, "repo/b"}]),
+    ok = apply_cmds(GitCmds, [{dir, "repo/c"}]),
+    ok = apply_cmds(GitCmds, [{dir, "repo/d"}]),
+    ok = apply_cmds(GitCmds, [{dir, "repo/e"}]),
+    ok = apply_cmds(GitCmds, [{dir, "repo/f"}]),
+
+    {ok, _} = retest_sh:run("./rebar -v get-deps compile", []),
+    ok.
+
+%%
+%% Generate the contents of a simple .app file
+%%
+app(Name, Modules) ->
+    App = {application, Name,
+           [{description, atom_to_list(Name)},
+            {vsn, "1"},
+            {modules, Modules},
+            {registered, []},
+            {applications, [kernel, stdlib]}]},
+    io_lib:format("~p.\n", [App]).
diff --git a/src/rebar_core.erl b/src/rebar_core.erl
index 4d50f4f..2e0768e 100644
--- a/src/rebar_core.erl
+++ b/src/rebar_core.erl
@@ -399,18 +399,19 @@ update_code_path(Config) ->
         [] ->
             no_change;
         Paths ->
-            OldPath = code:get_path(),
             LibPaths = expand_lib_dirs(Paths, rebar_utils:get_cwd(), []),
             ok = code:add_pathsa(LibPaths),
-            {old, OldPath}
+            %% track just the paths we added, so we can remove them without
+            %% removing other paths added by this dep
+            {added, LibPaths}
     end.
 
 restore_code_path(no_change) ->
     ok;
-restore_code_path({old, Path}) ->
+restore_code_path({added, Paths}) ->
     %% Verify that all of the paths still exist -- some dynamically
     %% added paths can get blown away during clean.
-    true = code:set_path([F || F <- Path, erl_prim_loader_is_file(F)]),
+    [true = code:del_path(F) || F <- Paths, erl_prim_loader_is_file(F)],
     ok.
 
 erl_prim_loader_is_file(File) ->