diff --git a/lib/runner.js b/lib/runner.js
index 45126e374..bda2132fd 100644
--- a/lib/runner.js
+++ b/lib/runner.js
@@ -182,12 +182,13 @@ class Runner extends EventEmitter {
 
 	compareTestSnapshot(options) {
 		if (!this.snapshots) {
-			const name = path.basename(this.file);
-			// TODO: Only use __snapshots__ directory name if file is inside a
-			// __tests__ directory (relative to the project root).
-			const dir = path.join(path.dirname(this.file), '__snapshots__');
-			const relFile = path.relative(this.projectDir, this.file);
-			this.snapshots = snapshotManager.load(dir, name, relFile, this.updateSnapshots);
+			this.snapshots = snapshotManager.load({
+				name: path.basename(this.file),
+				projectDir: this.projectDir,
+				relFile: path.relative(this.projectDir, this.file),
+				testDir: path.dirname(this.file),
+				updating: this.updateSnapshots
+			});
 			this.emit('dependency', this.snapshots.snapPath);
 		}
 
diff --git a/lib/snapshot-manager.js b/lib/snapshot-manager.js
index 5b710df69..e7a053919 100644
--- a/lib/snapshot-manager.js
+++ b/lib/snapshot-manager.js
@@ -354,15 +354,26 @@ class Manager {
 	}
 }
 
-function load(dir, name, relFile, updating) {
-	const reportFile = `${name}.md`;
-	const snapFile = `${name}.snap`;
+function determineSnapshotDir(projectDir, testDir) {
+	const parts = new Set(path.relative(projectDir, testDir).split(path.sep));
+	if (parts.has('__tests__')) {
+		return path.join(testDir, '__snapshots__');
+	} else if (parts.has('test') || parts.has('tests')) { // Accept tests, even though it's not in the default test patterns
+		return path.join(testDir, 'snapshots');
+	}
+	return testDir;
+}
+
+function load(options) {
+	const dir = determineSnapshotDir(options.projectDir, options.testDir);
+	const reportFile = `${options.name}.md`;
+	const snapFile = `${options.name}.snap`;
 	const snapPath = path.join(dir, snapFile);
 
-	let appendOnly = !updating;
+	let appendOnly = !options.updating;
 	let snapshotsByHash;
 
-	if (!updating) {
+	if (!options.updating) {
 		const buffer = tryRead(snapPath);
 		if (buffer) {
 			snapshotsByHash = decodeSnapshots(buffer, snapPath);
@@ -374,7 +385,7 @@ function load(dir, name, relFile, updating) {
 	return new Manager({
 		appendOnly,
 		dir,
-		relFile,
+		relFile: options.relFile,
 		reportFile,
 		snapFile,
 		snapPath,
diff --git a/test/assert.js b/test/assert.js
index 7a17e7a97..8902ca82b 100644
--- a/test/assert.js
+++ b/test/assert.js
@@ -736,9 +736,16 @@ test('.snapshot()', t => {
 	// "$(npm bin)"/tap --no-cov -R spec test/assert.js
 	//
 	// Ignore errors and make sure not to run tests with the `-b` (bail) option.
-	const update = false;
+	const updating = false;
 
-	const manager = snapshotManager.load(path.join(__dirname, 'fixture'), 'assert.js', 'test/assert.js', update);
+	const projectDir = path.join(__dirname, 'fixture');
+	const manager = snapshotManager.load({
+		projectDir,
+		testDir: projectDir,
+		name: 'assert.js',
+		relFile: 'test/assert.js',
+		updating
+	});
 	const setup = title => {
 		const fauxTest = new Test({
 			title,
@@ -760,7 +767,7 @@ test('.snapshot()', t => {
 
 	{
 		const executionContext = setup('fails');
-		if (update) {
+		if (updating) {
 			assertions.snapshot.call(executionContext, {foo: 'bar'});
 		} else {
 			failsWith(t, () => {
@@ -784,7 +791,7 @@ test('.snapshot()', t => {
 
 	{
 		const executionContext = setup('fails');
-		if (update) {
+		if (updating) {
 			assertions.snapshot.call(executionContext, {foo: 'bar'}, 'my message');
 		} else {
 			failsWith(t, () => {
@@ -799,7 +806,7 @@ test('.snapshot()', t => {
 
 	{
 		const executionContext = setup('rendered comparison');
-		if (update) {
+		if (updating) {
 			assertions.snapshot.call(executionContext, renderer.create(React.createElement(HelloMessage, {name: 'Sindre'})).toJSON());
 		} else {
 			passes(t, () => {
@@ -810,7 +817,7 @@ test('.snapshot()', t => {
 
 	{
 		const executionContext = setup('rendered comparison');
-		if (update) {
+		if (updating) {
 			assertions.snapshot.call(executionContext, renderer.create(React.createElement(HelloMessage, {name: 'Sindre'})).toJSON());
 		} else {
 			failsWith(t, () => {
@@ -825,7 +832,7 @@ test('.snapshot()', t => {
 
 	{
 		const executionContext = setup('element comparison');
-		if (update) {
+		if (updating) {
 			assertions.snapshot.call(executionContext, React.createElement(HelloMessage, {name: 'Sindre'}));
 		} else {
 			failsWith(t, () => {
diff --git a/test/cli.js b/test/cli.js
index 8446a614d..161ac2f71 100644
--- a/test/cli.js
+++ b/test/cli.js
@@ -354,7 +354,7 @@ test('watcher reruns test files when snapshot dependencies change', t => {
 			} else {
 				passedFirst = true;
 				setTimeout(() => {
-					touch.sync(path.join(__dirname, 'fixture/snapshots/__snapshots__/test.js.snap'));
+					touch.sync(path.join(__dirname, 'fixture/snapshots/test.js.snap'));
 				}, 500);
 			}
 		}
@@ -556,29 +556,39 @@ test('promise tests fail if event loop empties before they\'re resolved', t => {
 	});
 });
 
-test('snapshots work', t => {
-	try {
-		fs.unlinkSync(path.join(__dirname, 'fixture', 'snapshots', '__snapshots__', 'test.js.snap'));
-	} catch (err) {
-		if (err.code !== 'ENOENT') {
-			throw err;
+for (const obj of [
+	{type: 'colocated', rel: '', dir: ''},
+	{type: '__tests__', rel: '__tests__-dir', dir: '__tests__/__snapshots__'},
+	{type: 'test', rel: 'test-dir', dir: 'test/snapshots'},
+	{type: 'tests', rel: 'tests-dir', dir: 'tests/snapshots'}
+]) {
+	test(`snapshots work (${obj.type})`, t => {
+		const snapPath = path.join(__dirname, 'fixture', 'snapshots', obj.rel, obj.dir, 'test.js.snap');
+		try {
+			fs.unlinkSync(snapPath);
+		} catch (err) {
+			if (err.code !== 'ENOENT') {
+				throw err;
+			}
 		}
-	}
 
-	// Test should pass, and a snapshot gets written
-	execCli(['--update-snapshots', 'test.js'], {dirname: 'fixture/snapshots'}, err => {
-		t.ifError(err);
-
-		// Test should pass, and the snapshot gets used
-		execCli(['test.js'], {dirname: 'fixture/snapshots'}, err => {
+		const dirname = path.join('fixture/snapshots', obj.rel);
+		// Test should pass, and a snapshot gets written
+		execCli(['--update-snapshots'], {dirname}, err => {
 			t.ifError(err);
-			t.end();
+			t.true(fs.existsSync(snapPath));
+
+			// Test should pass, and the snapshot gets used
+			execCli([], {dirname}, err => {
+				t.ifError(err);
+				t.end();
+			});
 		});
 	});
-});
+}
 
 test('outdated snapshot version is reported to the console', t => {
-	const snapPath = path.join(__dirname, 'fixture', 'snapshots', '__snapshots__', 'test.js.snap');
+	const snapPath = path.join(__dirname, 'fixture', 'snapshots', 'test.js.snap');
 	fs.writeFileSync(snapPath, Buffer.from([0x0A, 0x00, 0x00]));
 
 	execCli(['test.js'], {dirname: 'fixture/snapshots'}, (err, stdout, stderr) => {
@@ -592,7 +602,7 @@ test('outdated snapshot version is reported to the console', t => {
 });
 
 test('newer snapshot version is reported to the console', t => {
-	const snapPath = path.join(__dirname, 'fixture', 'snapshots', '__snapshots__', 'test.js.snap');
+	const snapPath = path.join(__dirname, 'fixture', 'snapshots', 'test.js.snap');
 	fs.writeFileSync(snapPath, Buffer.from([0x0A, 0xFF, 0xFF]));
 
 	execCli(['test.js'], {dirname: 'fixture/snapshots'}, (err, stdout, stderr) => {
@@ -606,7 +616,7 @@ test('newer snapshot version is reported to the console', t => {
 });
 
 test('snapshot corruption is reported to the console', t => {
-	const snapPath = path.join(__dirname, 'fixture', 'snapshots', '__snapshots__', 'test.js.snap');
+	const snapPath = path.join(__dirname, 'fixture', 'snapshots', 'test.js.snap');
 	fs.writeFileSync(snapPath, Buffer.from([0x0A, 0x01, 0x00]));
 
 	execCli(['test.js'], {dirname: 'fixture/snapshots'}, (err, stdout, stderr) => {
@@ -620,7 +630,7 @@ test('snapshot corruption is reported to the console', t => {
 });
 
 test('legacy snapshot files are reported to the console', t => {
-	const snapPath = path.join(__dirname, 'fixture', 'snapshots', '__snapshots__', 'test.js.snap');
+	const snapPath = path.join(__dirname, 'fixture', 'snapshots', 'test.js.snap');
 	fs.writeFileSync(snapPath, Buffer.from('// Jest Snapshot v1, https://goo.gl/fbAQLP\n'));
 
 	execCli(['test.js'], {dirname: 'fixture/snapshots'}, (err, stdout, stderr) => {
diff --git a/test/fixture/snapshots/.gitignore b/test/fixture/snapshots/.gitignore
index b05c2dfa7..c8bddd146 100644
--- a/test/fixture/snapshots/.gitignore
+++ b/test/fixture/snapshots/.gitignore
@@ -1 +1,4 @@
+*.snap
+*.md
+snapshots
 __snapshots__
diff --git a/test/fixture/snapshots/__tests__-dir/__tests__/test.js b/test/fixture/snapshots/__tests__-dir/__tests__/test.js
new file mode 100644
index 000000000..b1ba91e85
--- /dev/null
+++ b/test/fixture/snapshots/__tests__-dir/__tests__/test.js
@@ -0,0 +1,11 @@
+import test from '../../../../..';
+
+test('test title', t => {
+	t.snapshot({foo: 'bar'});
+
+	t.snapshot({answer: 42});
+});
+
+test('another test', t => {
+	t.snapshot(new Map());
+});
diff --git a/test/fixture/snapshots/__tests__-dir/package.json b/test/fixture/snapshots/__tests__-dir/package.json
new file mode 100644
index 000000000..0967ef424
--- /dev/null
+++ b/test/fixture/snapshots/__tests__-dir/package.json
@@ -0,0 +1 @@
+{}
diff --git a/test/fixture/snapshots/test-dir/package.json b/test/fixture/snapshots/test-dir/package.json
new file mode 100644
index 000000000..0967ef424
--- /dev/null
+++ b/test/fixture/snapshots/test-dir/package.json
@@ -0,0 +1 @@
+{}
diff --git a/test/fixture/snapshots/test-dir/test/test.js b/test/fixture/snapshots/test-dir/test/test.js
new file mode 100644
index 000000000..b1ba91e85
--- /dev/null
+++ b/test/fixture/snapshots/test-dir/test/test.js
@@ -0,0 +1,11 @@
+import test from '../../../../..';
+
+test('test title', t => {
+	t.snapshot({foo: 'bar'});
+
+	t.snapshot({answer: 42});
+});
+
+test('another test', t => {
+	t.snapshot(new Map());
+});
diff --git a/test/fixture/snapshots/tests-dir/package.json b/test/fixture/snapshots/tests-dir/package.json
new file mode 100644
index 000000000..07510b0f5
--- /dev/null
+++ b/test/fixture/snapshots/tests-dir/package.json
@@ -0,0 +1,5 @@
+{
+	"ava": {
+		"files": "tests"
+	}
+}
diff --git a/test/fixture/snapshots/tests-dir/tests/test.js b/test/fixture/snapshots/tests-dir/tests/test.js
new file mode 100644
index 000000000..b1ba91e85
--- /dev/null
+++ b/test/fixture/snapshots/tests-dir/tests/test.js
@@ -0,0 +1,11 @@
+import test from '../../../../..';
+
+test('test title', t => {
+	t.snapshot({foo: 'bar'});
+
+	t.snapshot({answer: 42});
+});
+
+test('another test', t => {
+	t.snapshot(new Map());
+});