diff --git a/lib/Host.js b/lib/Host.js
index 9b670fb..42f8b14 100644
--- a/lib/Host.js
+++ b/lib/Host.js
@@ -3,14 +3,17 @@
 var commondir = require('commondir');
 var events    = require('events');
 var fs        = require('fs');
+var realpath  = require('fs.realpath')
 var log       = require('util').debuglog(require('../package').name);
+var trace     = require('util').debuglog(require('../package').name + '-trace');
 var os        = require('os');
 var path      = require('path');
 var util      = require('util');
 
 module.exports = function (ts) {
-	function Host(currentDirectory, languageVersion) {
-		this.currentDirectory = currentDirectory;
+	function Host(currentDirectory, outputDirectory, languageVersion) {
+		this.currentDirectory = this.getCanonicalFileName(path.resolve(currentDirectory));
+		this.outputDirectory = this.getCanonicalFileName(path.resolve(outputDirectory));
 		this.languageVersion = languageVersion;
 		this.files = {};
 		this.previousFiles = {};
@@ -31,13 +34,21 @@ module.exports = function (ts) {
 		log('Resetting (version %d)', this.version);
 	};
 
-	Host.prototype._normalizedRelative = function(filename) {
-		return ts.normalizePath(path.relative(this.currentDirectory, path.resolve(filename)));
-	};
-
 	Host.prototype._addFile = function (filename, root) {
-		var normalized = this._normalizedRelative(filename);
-		log('Parsing %s (norm: %s)', filename, normalized);
+
+		// Ensure that the relative, non-canonical file name is what's passed
+		// to 'createSourceFile', as that's the name that will be used in error
+		// messages, etc.
+
+		var relative = ts.normalizeSlashes(path.relative(
+			this.currentDirectory,
+			path.resolve(
+				this.currentDirectory,
+				filename
+			)
+		));
+		var canonical = this._canonical(filename);
+		trace('Parsing %s', canonical);
 
 		var text;
 		try {
@@ -47,52 +58,44 @@ module.exports = function (ts) {
 		}
 
 		var file;
-		var current = this.files[normalized];
-		var previous = this.previousFiles[normalized];
+		var current = this.files[canonical];
+		var previous = this.previousFiles[canonical];
 		var version;
 
 		if (current && current.contents === text) {
 			file = current.ts;
 			version = current.version;
-			log('Reused current file %s (version %d)', normalized, version);
+			trace('Reused current file %s (version %d)', canonical, version);
 		} else if (previous && previous.contents === text) {
 			file = previous.ts;
 			version = previous.version;
-			log('Reused previous file %s (version %d)', normalized, version);
+			trace('Reused previous file %s (version %d)', canonical, version);
 		} else {
-			file = ts.createSourceFile(filename, text, this.languageVersion, true);
+			file = ts.createSourceFile(relative, text, this.languageVersion, true);
 			version = this.version;
-			log('New version of source file %s (version %d)', normalized, version);
+			trace('New version of source file %s (version %d)', canonical, version);
 		}
 
-		this.files[normalized] = {
-			filename: filename,
+		this.files[canonical] = {
+			filename: relative,
 			contents: text,
 			ts: file,
 			root: root,
 			version: version
 		};
-
-		this._emitFile(normalized);
+		this.emit('file', canonical, relative);
 
 		return file;
 	};
 
-	Host.prototype._emitFile = function (normalized) {
-		var idPath = './' + normalized;
-		var fullPath = path.resolve(idPath);
-		this.emit('file', fullPath, idPath);
-	}
-
 	Host.prototype.getSourceFile = function (filename) {
-		var normalized = this._normalizedRelative(filename);
-
-		if (this.files[normalized])
-			return this.files[normalized].ts;
-
-		if (normalized === '__lib.d.ts')
+		if (filename === '__lib.d.ts') {
 			return this.libDefault;
-
+		}
+		var canonical = this._canonical(filename);
+		if (this.files[canonical]) {
+			return this.files[canonical].ts;
+		}
 		return this._addFile(filename, false);
 	};
 
@@ -103,9 +106,19 @@ module.exports = function (ts) {
 	};
 
 	Host.prototype.writeFile = function (filename, data) {
-		var normalized = this._normalizedRelative(filename);
-		log('Cache write %s (norm: %s)', filename, normalized);
-		this.output[normalized] = data;
+
+		var outputCanonical = this._canonical(filename);
+		log('Cache write %s', outputCanonical);
+		this.output[outputCanonical] = data;
+
+		var sourceCanonical = this._inferSourceCanonical(outputCanonical);
+		var sourceFollowed = this._follow(path.dirname(sourceCanonical)) + '/' + path.basename(sourceCanonical);
+
+		if (sourceFollowed !== sourceCanonical) {
+			outputCanonical = this._inferOutputCanonical(sourceFollowed);
+			log('Cache write (followed) %s', outputCanonical);
+			this.output[outputCanonical] = data;
+		}
 	};
 
 	Host.prototype.getCurrentDirectory = function () {
@@ -113,7 +126,7 @@ module.exports = function (ts) {
 	};
 
 	Host.prototype.getCanonicalFileName = function (filename) {
-		return this._normalizedRelative(filename);
+		return ts.normalizeSlashes(ts.sys.useCaseSensitiveFileNames ? filename : filename.toLowerCase());
 	};
 
 	Host.prototype.useCaseSensitiveFileNames = function () {
@@ -130,8 +143,7 @@ module.exports = function (ts) {
 	};
 
 	Host.prototype.readFile = function (filename) {
-		var normalized = this._normalizedRelative(filename);
-		return ts.sys.readFile(normalized);
+		return ts.sys.readFile(filename);
 	};
 
 	Host.prototype._rootDir = function () {
@@ -140,10 +152,91 @@ module.exports = function (ts) {
 			if (!Object.hasOwnProperty.call(this.files, filename)) continue;
 			if (/\.d\.ts$/.test(filename)) continue;
 
-			dirs.push(path.dirname(filename));
+			dirs.push(this.getCanonicalFileName(path.dirname(filename)));
 		}
 		var result = commondir(this.currentDirectory, dirs);
-		return result;
+		return this.getCanonicalFileName(result);
+	};
+
+	Host.prototype._rootFilenames = function () {
+
+		var rootFilenames = [];
+
+		for (var filename in this.files) {
+			if (!Object.hasOwnProperty.call(this.files, filename)) continue;
+			if (!this.files[filename].root) continue;
+			rootFilenames.push(filename);
+		}
+		return rootFilenames;
+	}
+
+	Host.prototype._output = function (filename) {
+
+		var outputCanonical = this._inferOutputCanonical(filename);
+		log('Cache read %s', outputCanonical);
+
+		var output = this.output[outputCanonical];
+		if (!output) {
+			log('Cache miss on %s', outputCanonical);
+		}
+		return output;
+	}
+
+	Host.prototype._canonical = function (filename) {
+		return this.getCanonicalFileName(path.resolve(
+			this.currentDirectory,
+			filename
+		));
+	}
+
+	Host.prototype._inferOutputCanonical = function (filename) {
+
+		var sourceCanonical = this._canonical(filename);
+		var outputRelative = path.relative(
+			this._rootDir(),
+			sourceCanonical
+		);
+		var outputCanonical = this.getCanonicalFileName(path.resolve(
+			this.outputDirectory,
+			outputRelative
+		));
+		return outputCanonical;
+	}
+
+	Host.prototype._inferSourceCanonical = function (filename) {
+
+		var outputCanonical = this._canonical(filename);
+		var outputRelative = path.relative(
+			this.outputDirectory,
+			outputCanonical
+		);
+		var sourceCanonical = this.getCanonicalFileName(path.resolve(
+			this._rootDir(),
+			outputRelative
+		));
+		return sourceCanonical;
+	}
+
+	Host.prototype._follow = function (filename) {
+
+		filename = this._canonical(filename);
+		var basename;
+		var parts = [];
+
+		do {
+			var stats = fs.lstatSync(filename);
+			if (stats.isSymbolicLink()) {
+				filename = realpath.realpathSync(filename);
+			} else {
+				basename = path.basename(filename);
+				if (basename) {
+					parts.unshift(basename);
+					filename = path.dirname(filename);
+				}
+			}
+		} while (basename);
+
+		return ts.normalizeSlashes(filename + parts.join('/'));
 	};
 
 	return Host;
diff --git a/lib/Tsifier.js b/lib/Tsifier.js
index 87835dd..32d9596 100644
--- a/lib/Tsifier.js
+++ b/lib/Tsifier.js
@@ -5,6 +5,7 @@ var events   = require('events');
 var extend   = require('util')._extend;
 var fs       = require('fs');
 var log      = require('util').debuglog(require('../package').name);
+var trace    = require('util').debuglog(require('../package').name + '-trace');
 var path     = require('path');
 var through  = require('through2');
 var time     = require('./time');
@@ -38,10 +39,6 @@ module.exports = function (ts) {
 		return file.replace(/\.\w+$/i, extension);
 	}
 
-	function getRelativeFilename(file) {
-		return './' + ts.normalizeSlashes(path.relative(currentDirectory, file));
-	}
-
 	function fileExists(file) {
 		try {
 			var stats = fs.lstatSync(file);
@@ -128,7 +125,11 @@ module.exports = function (ts) {
 		self.opts = parsedOptions.options;
 		self.files = parsedOptions.fileNames;
 		self.bopts = bopts;
-		self.host = new Host(currentDirectory, this.opts.target);
+		self.host = new Host(
+			currentDirectory,
+			this.opts.outDir,
+			this.opts.target
+		);
 
 		self.host.on('file', function (file, id) {
 			self.emit('file', file, id);
@@ -140,15 +141,15 @@ module.exports = function (ts) {
 	Tsifier.prototype.reset = function () {
 		var self = this;
 		self.host._reset();
-		self.addAll(self.files.map(getRelativeFilename));
+		self.addFiles(self.files);
 	};
 
 	Tsifier.prototype.generateCache = function (files) {
-		this.addAll(files.map(getRelativeFilename));
+		this.addFiles(files);
 		this.compile();
 	};
 
-	Tsifier.prototype.addAll = function (files) {
+	Tsifier.prototype.addFiles = function (files) {
 		var self = this;
 		files.forEach(function (file) {
 			self.host._addFile(file, true);
@@ -157,12 +158,7 @@ module.exports = function (ts) {
 
 	Tsifier.prototype.compile = function () {
 		var self = this;
-		var rootFilenames = [];
-		for (var filename in self.host.files) {
-			if (!Object.hasOwnProperty.call(self.host.files, filename)) continue;
-			if (!self.host.files[filename].root) continue;
-			rootFilenames.push(filename);
-		}
+		var rootFilenames = self.host._rootFilenames();
 
 		log('Compiling files:');
 		rootFilenames.forEach(function (file) { log('  %s', file); });
@@ -252,7 +248,7 @@ module.exports = function (ts) {
 	Tsifier.prototype.transform = function (file) {
 		var self = this;
 
-		log('Transforming %s', file);
+		trace('Transforming %s', file);
 
 		if (isTypescriptDeclaration(file)) {
 			return through(transform);
@@ -271,7 +267,7 @@ module.exports = function (ts) {
 			if (self.host.error)
 				return;
 
-			var compiled = self.getCompiledFile(getRelativeFilename(file));
+			var compiled = self.getCompiledFile(file);
 			if (compiled) {
 				this.push(compiled);
 			}
@@ -282,22 +278,12 @@ module.exports = function (ts) {
 
 	Tsifier.prototype.getCompiledFile = function (inputFile, alreadyMissedCache) {
 		var self = this;
-		var normalized = ts.normalizePath(inputFile);
-		var rootDir = self.host._rootDir();
-
 		var outputExtension = (self.opts.jsx === ts.JsxEmit.Preserve && isTsx(inputFile)) ? '.jsx' : '.js';
-		var outputFile = '__tsify__/' + ts.normalizeSlashes(path.relative(
-			rootDir,
-			path.resolve(replaceFileExtension(normalized, outputExtension))
-		));
-		var output = self.host.output[outputFile];
-
-		log('Cache read %s (norm: %s)', outputFile, normalized);
+		var output = self.host._output(replaceFileExtension(inputFile, outputExtension));
 
 		if (!output) {
 			if (alreadyMissedCache)
 				return;
-			log('Cache miss on %s (norm: %s)', outputFile, normalized);
 			self.generateCache([inputFile]);
 			if (self.host.error)
 				return;
@@ -305,17 +291,17 @@ module.exports = function (ts) {
 		}
 
 		if (self.opts.inlineSourceMap) {
-			output = self.setFullSourcePathInSourcemap(output, normalized);
+			output = self.setSourcePathInSourcemap(output, inputFile);
 		}
-
 		return output;
 	};
 
-	Tsifier.prototype.setFullSourcePathInSourcemap = function (output, normalized) {
+	Tsifier.prototype.setSourcePathInSourcemap = function (output, inputFile) {
 		var self = this;
-		if (self.bopts.basedir) {
-			normalized = ts.normalizeSlashes(path.relative(self.bopts.basedir, normalized));
-		}
+		var normalized = ts.normalizePath(path.relative(
+			self.bopts.basedir || currentDirectory,
+			inputFile
+		));
 
 		var sourcemap = convert.fromComment(output);
 		sourcemap.setProperty('sources', [normalized]);
diff --git a/package.json b/package.json
index 359bd5b..32851f1 100644
--- a/package.json
+++ b/package.json
@@ -39,6 +39,7 @@
     "eslint": "^2.7.0",
     "event-stream": "^3.3.1",
     "fs-extra": "^0.28.0",
+    "fs.realpath": "^1.0.0",
     "node-foo": "^0.2.3",
     "semver": "^5.1.0",
     "source-map": "^0.5.3",