diff --git a/src/org/exist/source/SourceFactory.java b/src/org/exist/source/SourceFactory.java
index fbc8a93a2a2..239ac5f016c 100644
--- a/src/org/exist/source/SourceFactory.java
+++ b/src/org/exist/source/SourceFactory.java
@@ -77,14 +77,9 @@ public class SourceFactory {
         Source source = null;
 
         /* resource: */
-        if (location.startsWith(ClassLoaderSource.PROTOCOL)) {
-            source = new ClassLoaderSource(location);
-        } else if (contextPath != null && contextPath.startsWith(ClassLoaderSource.PROTOCOL)) {
-            // Pretend it is a file on the local system so we can resolve it easily with URL() class.
-            final String conPathNoProtocol = contextPath.replace(ClassLoaderSource.PROTOCOL, "file://");
-            String resolvedURL = new URL(new URL(conPathNoProtocol), location).toString();
-            resolvedURL = resolvedURL.replaceFirst("file://", ClassLoaderSource.PROTOCOL);
-            source = new ClassLoaderSource(resolvedURL);
+        if (location.startsWith(ClassLoaderSource.PROTOCOL)
+                || (contextPath != null && contextPath.startsWith(ClassLoaderSource.PROTOCOL))) {
+            source = getSource_fromClasspath(contextPath, location);
         }
 
         /* xmldb */
@@ -154,6 +149,26 @@ private static String firstPathSegment(final String path) {
                 .getRawCollectionPath();
     }
 
+    private static Source getSource_fromClasspath(final String contextPath, final String location) throws IOException {
+        if (location.startsWith(ClassLoaderSource.PROTOCOL)) {
+            return new ClassLoaderSource(location);
+        }
+
+        final Path rootPath = Paths.get(contextPath.substring(ClassLoaderSource.PROTOCOL.length()));
+
+        // 1) try resolving location as child
+        final Path childLocation = rootPath.resolve(location);
+        try {
+            return new ClassLoaderSource(ClassLoaderSource.PROTOCOL + childLocation.toString().replace('\\', '/'));
+        } catch (final IOException e) {
+            // no-op, we will try again below
+        }
+
+        // 2) try resolving location as sibling
+        final Path siblingLocation = rootPath.resolveSibling(location);
+        return new ClassLoaderSource(ClassLoaderSource.PROTOCOL + siblingLocation.toString().replace('\\', '/'));
+    }
+
     /**
      * Get the resource source from the database.
      *
diff --git a/test/src/org/exist/source/SourceFactoryTest.java b/test/src/org/exist/source/SourceFactoryTest.java
index 6de6080391d..f0c3a9583aa 100644
--- a/test/src/org/exist/source/SourceFactoryTest.java
+++ b/test/src/org/exist/source/SourceFactoryTest.java
@@ -133,6 +133,53 @@ public void getSourceFromResource_contextAbsoluteFileUrl_locationRelativeUrl_bas
         assertEquals(getClass().getResource(location), relativeSource.getKey());
     }
 
+    @Test
+    public void getSourceFromResource_contextFolderUrl_locationRelative() throws IOException, PermissionDeniedException {
+        final String contextPath = "resource:org/exist/source";
+        final String location = "library.xqm";
+
+        final Source source = SourceFactory.getSource(null, contextPath, location, false);
+
+        assertTrue(source instanceof ClassLoaderSource);
+        assertEquals(getClass().getResource("library.xqm"), source.getKey());
+    }
+
+    @Test
+    public void getSourceFromResource_contextFolderUrl_locationAbsoluteUrl() throws IOException, PermissionDeniedException {
+        final String contextPath = "resource:org/exist/source";
+        final String location = "resource:org/exist/source/library.xqm";
+
+        final Source source = SourceFactory.getSource(null, contextPath, location, false);
+
+        assertTrue(source instanceof ClassLoaderSource);
+        assertEquals(getClass().getResource("library.xqm"), source.getKey());
+    }
+
+    @Test
+    public void getSourceFromResource_contextFolderUrl_locationRelativeUrl() throws IOException, PermissionDeniedException {
+        final String contextPath = "resource:org/exist/source";
+        final String location = "library.xqm";
+
+        final Source source = SourceFactory.getSource(null, contextPath, location, false);
+
+        assertTrue(source instanceof ClassLoaderSource);
+        assertEquals(getClass().getResource("library.xqm"), source.getKey());
+    }
+
+    @Test
+    public void getSourceFromResource_contextFolderUrl_locationRelativeUrl_basedOnSource() throws IOException, PermissionDeniedException {
+        final String contextPath = "resource:org/exist/source";
+        final String location = "library.xqm";
+
+        final Source mainSource = SourceFactory.getSource(null, "", contextPath, false);
+        assertTrue(mainSource instanceof ClassLoaderSource);
+
+        final Source relativeSource = SourceFactory.getSource(null, ((ClassLoaderSource)mainSource).getSource(), location, false);
+
+        assertTrue(relativeSource instanceof ClassLoaderSource);
+        assertEquals(getClass().getResource(location), relativeSource.getKey());
+    }
+
     @Test
     public void getSourceFromXmldb_noContext() throws IOException, PermissionDeniedException {
         final String contextPath = null;