diff --git a/qa/pull-tester/rpc-tests.sh b/qa/pull-tester/rpc-tests.sh
index 1d1c60abc..2fc64b1a4 100755
--- a/qa/pull-tester/rpc-tests.sh
+++ b/qa/pull-tester/rpc-tests.sh
@@ -90,6 +90,7 @@ testScripts=(
     'post_heartwood_rollback.py'
     'feature_logging.py'
     'remove_sprout_shielding.py'
+    'feature_walletfile.py'
 );
 testScriptsExt=(
     'getblocktemplate_longpoll.py'
diff --git a/qa/rpc-tests/feature_walletfile.py b/qa/rpc-tests/feature_walletfile.py
new file mode 100755
index 000000000..669641160
--- /dev/null
+++ b/qa/rpc-tests/feature_walletfile.py
@@ -0,0 +1,49 @@
+#!/usr/bin/env python3
+# Copyright (c) 2017 The Bitcoin Core developers
+# Distributed under the MIT software license, see the accompanying
+# file COPYING or http://www.opensource.org/licenses/mit-license.php.
+"""Test wallet file location."""
+
+import os
+
+from test_framework.util import start_node, stop_node, assert_start_raises_init_error
+
+from test_framework.test_framework import BitcoinTestFramework
+
+class WalletFileTest(BitcoinTestFramework):
+    def set_test_params(self):
+        self.num_nodes = 1
+        self.setup_clean_chain = True
+
+    def run_test(self):
+        # test default wallet location
+        assert os.path.isfile(os.path.join(self.options.tmpdir, "node0", "regtest", "wallet.dat"))
+
+        # test alternative wallet file name in datadir
+        stop_node(self.nodes[0], 0)
+        self.nodes[0] = start_node(0, self.options.tmpdir, ["-wallet=altwallet.dat"])
+        assert os.path.isfile(os.path.join(self.options.tmpdir, "node0", "regtest", "altwallet.dat"))
+
+        # test wallet file outside datadir
+        tempname = os.path.join(self.options.tmpdir, "outsidewallet.dat")
+        stop_node(self.nodes[0], 0)
+        self.nodes[0] = start_node(0, self.options.tmpdir, ["-wallet=%s" % tempname])
+        assert os.path.isfile(tempname)
+
+        # full path do not exist
+        invalidpath = os.path.join("/foo/", "foo.dat")
+        stop_node(self.nodes[0], 0)
+        assert_start_raises_init_error(0, "-wallet=%s" % invalidpath,
+            "Error: Absolute path %s do not exist")
+
+        # relative path do not exist
+        invalidpath = os.path.join("wallet", "foo.dat")
+        assert_start_raises_init_error(0, "-wallet=%s" % invalidpath,
+            "Error: Relative path %s do not exist")
+
+        # create dir and retry
+        os.mkdir(os.path.join(self.options.tmpdir, "node0", "regtest", "wallet"))
+        self.nodes[0] = start_node(0, self.options.tmpdir, ["-wallet=%s" % invalidpath])
+
+if __name__ == '__main__':
+    WalletFileTest().main()
diff --git a/src/wallet/wallet.cpp b/src/wallet/wallet.cpp
index 837a26a3e..681a50070 100644
--- a/src/wallet/wallet.cpp
+++ b/src/wallet/wallet.cpp
@@ -873,9 +873,20 @@ bool CWallet::Verify()
     LogPrintf("Using wallet %s\n", walletFile);
     uiInterface.InitMessage(_("Verifying wallet..."));
 
-    // Wallet file must be a plain filename without a directory
-    if (walletFile != boost::filesystem::basename(walletFile) + boost::filesystem::extension(walletFile))
-        return UIError(strprintf(_("Wallet %s resides outside data directory %s"), walletFile, GetDataDir().string()));
+    if (walletFile != boost::filesystem::basename(walletFile) + boost::filesystem::extension(walletFile)) {
+        boost::filesystem::path path(walletFile);
+        if(path.is_absolute()) {
+            if (!boost::filesystem::exists(path.parent_path())) {
+                return UIError(strprintf(_("Absolute path %s do not exist"), walletFile));
+            }
+        }
+        else {
+            boost::filesystem::path full_path = GetDataDir() / path;
+            if(!boost::filesystem::exists(full_path.parent_path())) {
+                return UIError(strprintf(_("Relative path %s do not exist"), walletFile));
+            }
+        }
+    }
 
     if (!bitdb.Open(GetDataDir()))
     {
@@ -4634,7 +4645,7 @@ std::string CWallet::GetWalletHelpString(bool showDebug)
     strUsage += HelpMessageOpt("-txconfirmtarget=<n>", strprintf(_("If paytxfee is not set, include enough fee so transactions begin confirmation on average within n blocks (default: %u)"), DEFAULT_TX_CONFIRM_TARGET));
     strUsage += HelpMessageOpt("-txexpirydelta", strprintf(_("Set the number of blocks after which a transaction that has not been mined will become invalid (min: %u, default: %u (pre-Blossom) or %u (post-Blossom))"), TX_EXPIRING_SOON_THRESHOLD + 1, DEFAULT_PRE_BLOSSOM_TX_EXPIRY_DELTA, DEFAULT_POST_BLOSSOM_TX_EXPIRY_DELTA));
     strUsage += HelpMessageOpt("-upgradewallet", _("Upgrade wallet to latest format on startup"));
-    strUsage += HelpMessageOpt("-wallet=<file>", _("Specify wallet file (within data directory)") + " " + strprintf(_("(default: %s)"), DEFAULT_WALLET_DAT));
+    strUsage += HelpMessageOpt("-wallet=<file>", _("Specify wallet file absolute path or a path relative to the data directory") + " " + strprintf(_("(default: %s)"), DEFAULT_WALLET_DAT));
     strUsage += HelpMessageOpt("-walletbroadcast", _("Make the wallet broadcast transactions") + " " + strprintf(_("(default: %u)"), DEFAULT_WALLETBROADCAST));
     strUsage += HelpMessageOpt("-walletnotify=<cmd>", _("Execute command when a wallet transaction changes (%s in cmd is replaced by TxID)"));
     strUsage += HelpMessageOpt("-zapwallettxes=<mode>", _("Delete all wallet transactions and only recover those parts of the blockchain through -rescan on startup") +