diff --git a/lib/index.js b/lib/index.js
index cb938081..102bef1a 100644
--- a/lib/index.js
+++ b/lib/index.js
@@ -91,11 +91,16 @@ $RefParser.prototype.parse = function (path, schema, options, callback) {
     pathType = 'file';
   }
 
-  // Resolve the absolute path of the schema
-  args.path = url.resolve(url.cwd(), args.path);
 
   if (args.schema && typeof args.schema === 'object') {
     // A schema object was passed-in.
+    if (args.schema.$id) { // if an id is passed it will use the base uri for the path of the object
+      var u = url.parse(args.schema.$id);
+      args.path = u.protocol + '//' + u.host + '/#';
+    }
+    else {
+      args.path = url.resolve(url.cwd(), args.path);
+    }
     // So immediately add a new $Ref with the schema object as its value
     var $ref = this.$refs._add(args.path);
     $ref.value = args.schema;
@@ -104,6 +109,8 @@ $RefParser.prototype.parse = function (path, schema, options, callback) {
   }
   else {
     // Parse the schema file/url
+    // Resolve the absolute path of the schema
+    args.path = url.resolve(url.cwd(), args.path);
     promise = parse(args.path, this.$refs, args.options);
   }