diff --git a/doc/release-notes.md b/doc/release-notes.md
index 6e4fed0a2d848..32f1bef62cd9c 100644
--- a/doc/release-notes.md
+++ b/doc/release-notes.md
@@ -20,7 +20,7 @@ How to Upgrade
 ==============
 
 If you are running an older version, shut it down. Wait until it has completely
-shut down (which might take a few minutes for older versions), then run the 
+shut down (which might take a few minutes for older versions), then run the
 installer (on Windows) or just copy over `/Applications/Bitcoin-Qt` (on Mac)
 or `bitcoind`/`bitcoin-qt` (on Linux).
 
@@ -62,6 +62,20 @@ Due to a backward-incompatible change in the wallet database, wallets created
 with version 0.16.0 will be rejected by previous versions. Also, version 0.16.0
 will only create hierarchical deterministic (HD) wallets.
 
+Custom wallet directories
+---------------------
+The ability to specify a directory other than the default data directory in which to store
+wallets has been added. An existing directory can be specified using the `-walletdir=<dir>`
+argument. Wallets loaded via `-wallet` arguments must be in this wallet directory. Care should be taken
+when choosing a wallet directory location, as if  it becomes unavailable during operation,
+funds may be lost.
+
+Default wallet directory change
+--------------------------
+On new installations (if the data directory doesn't exist), wallets will now be stored in a
+new `wallets/` subdirectory inside the data directory. If this `wallets/` subdirectory
+doesn't exist (i.e. on existing nodes), the current datadir root is used instead, as it was.
+
 Low-level RPC changes
 ----------------------
 - The deprecated RPC `getinfo` was removed. It is recommended that the more specific RPCs are used:
diff --git a/src/Makefile.am b/src/Makefile.am
index 29e4ae56d025c..4b65774fc6f58 100644
--- a/src/Makefile.am
+++ b/src/Makefile.am
@@ -168,6 +168,7 @@ BITCOIN_CORE_H = \
   wallet/rpcwallet.h \
   wallet/wallet.h \
   wallet/walletdb.h \
+  wallet/walletutil.h \
   warnings.h \
   zmq/zmqabstractnotifier.h \
   zmq/zmqconfig.h\
@@ -249,6 +250,7 @@ libbitcoin_wallet_a_SOURCES = \
   wallet/rpcwallet.cpp \
   wallet/wallet.cpp \
   wallet/walletdb.cpp \
+  wallet/walletutil.cpp \
   $(BITCOIN_CORE_H)
 
 # crypto primitives library
diff --git a/src/qt/intro.cpp b/src/qt/intro.cpp
index 9e4c765101bc0..7f8a8394e691a 100644
--- a/src/qt/intro.cpp
+++ b/src/qt/intro.cpp
@@ -214,7 +214,10 @@ bool Intro::pickDataDirectory()
             }
             dataDir = intro.getDataDirectory();
             try {
-                TryCreateDirectories(GUIUtil::qstringToBoostPath(dataDir));
+                if (TryCreateDirectories(GUIUtil::qstringToBoostPath(dataDir))) {
+                    // If a new data directory has been created, make wallets subdirectory too
+                    TryCreateDirectories(GUIUtil::qstringToBoostPath(dataDir) / "wallets");
+                }
                 break;
             } catch (const fs::filesystem_error&) {
                 QMessageBox::critical(0, tr(PACKAGE_NAME),
diff --git a/src/util.cpp b/src/util.cpp
index b87dd091be6f0..d58f39e969b3b 100644
--- a/src/util.cpp
+++ b/src/util.cpp
@@ -574,7 +574,10 @@ const fs::path &GetDataDir(bool fNetSpecific)
     if (fNetSpecific)
         path /= BaseParams().DataDir();
 
-    fs::create_directories(path);
+    if (fs::create_directories(path)) {
+        // This is the first run, create wallets subdirectory too
+        fs::create_directories(path / "wallets");
+    }
 
     return path;
 }
diff --git a/src/wallet/db.cpp b/src/wallet/db.cpp
index c6fd95f25000f..79ff27279c185 100644
--- a/src/wallet/db.cpp
+++ b/src/wallet/db.cpp
@@ -11,6 +11,7 @@
 #include <protocol.h>
 #include <util.h>
 #include <utilstrencodings.h>
+#include <wallet/walletutil.h>
 
 #include <stdint.h>
 
@@ -257,7 +258,7 @@ bool CDB::Recover(const std::string& filename, void *callbackDataIn, bool (*reco
     return fSuccess;
 }
 
-bool CDB::VerifyEnvironment(const std::string& walletFile, const fs::path& dataDir, std::string& errorStr)
+bool CDB::VerifyEnvironment(const std::string& walletFile, const fs::path& walletDir, std::string& errorStr)
 {
     LogPrintf("Using BerkeleyDB version %s\n", DbEnv::version(0, 0, 0));
     LogPrintf("Using wallet %s\n", walletFile);
@@ -265,15 +266,15 @@ bool CDB::VerifyEnvironment(const std::string& walletFile, const fs::path& dataD
     // Wallet file must be a plain filename without a directory
     if (walletFile != fs::basename(walletFile) + fs::extension(walletFile))
     {
-        errorStr = strprintf(_("Wallet %s resides outside data directory %s"), walletFile, dataDir.string());
+        errorStr = strprintf(_("Wallet %s resides outside wallet directory %s"), walletFile, walletDir.string());
         return false;
     }
 
-    if (!bitdb.Open(dataDir))
+    if (!bitdb.Open(walletDir))
     {
         // try moving the database env out of the way
-        fs::path pathDatabase = dataDir / "database";
-        fs::path pathDatabaseBak = dataDir / strprintf("database.%d.bak", GetTime());
+        fs::path pathDatabase = walletDir / "database";
+        fs::path pathDatabaseBak = walletDir / strprintf("database.%d.bak", GetTime());
         try {
             fs::rename(pathDatabase, pathDatabaseBak);
             LogPrintf("Moved old %s to %s. Retrying.\n", pathDatabase.string(), pathDatabaseBak.string());
@@ -282,18 +283,18 @@ bool CDB::VerifyEnvironment(const std::string& walletFile, const fs::path& dataD
         }
 
         // try again
-        if (!bitdb.Open(dataDir)) {
+        if (!bitdb.Open(walletDir)) {
             // if it still fails, it probably means we can't even create the database env
-            errorStr = strprintf(_("Error initializing wallet database environment %s!"), GetDataDir());
+            errorStr = strprintf(_("Error initializing wallet database environment %s!"), walletDir);
             return false;
         }
     }
     return true;
 }
 
-bool CDB::VerifyDatabaseFile(const std::string& walletFile, const fs::path& dataDir, std::string& warningStr, std::string& errorStr, CDBEnv::recoverFunc_type recoverFunc)
+bool CDB::VerifyDatabaseFile(const std::string& walletFile, const fs::path& walletDir, std::string& warningStr, std::string& errorStr, CDBEnv::recoverFunc_type recoverFunc)
 {
-    if (fs::exists(dataDir / walletFile))
+    if (fs::exists(walletDir / walletFile))
     {
         std::string backup_filename;
         CDBEnv::VerifyResult r = bitdb.Verify(walletFile, recoverFunc, backup_filename);
@@ -303,7 +304,7 @@ bool CDB::VerifyDatabaseFile(const std::string& walletFile, const fs::path& data
                                      " Original %s saved as %s in %s; if"
                                      " your balance or transactions are incorrect you should"
                                      " restore from a backup."),
-                                   walletFile, backup_filename, dataDir);
+                                   walletFile, backup_filename, walletDir);
         }
         if (r == CDBEnv::RECOVER_FAIL)
         {
@@ -407,7 +408,7 @@ CDB::CDB(CWalletDBWrapper& dbw, const char* pszMode, bool fFlushOnCloseIn) : pdb
 
     {
         LOCK(env->cs_db);
-        if (!env->Open(GetDataDir()))
+        if (!env->Open(GetWalletDir()))
             throw std::runtime_error("CDB: Failed to open database environment.");
 
         pdb = env->mapDb[strFilename];
@@ -695,7 +696,7 @@ bool CWalletDBWrapper::Backup(const std::string& strDest)
                 env->mapFileUseCount.erase(strFile);
 
                 // Copy wallet file
-                fs::path pathSrc = GetDataDir() / strFile;
+                fs::path pathSrc = GetWalletDir() / strFile;
                 fs::path pathDest(strDest);
                 if (fs::is_directory(pathDest))
                     pathDest /= strFile;
diff --git a/src/wallet/db.h b/src/wallet/db.h
index 5c5948aa295f5..ed2ee65cacc6d 100644
--- a/src/wallet/db.h
+++ b/src/wallet/db.h
@@ -167,9 +167,9 @@ class CDB
        ideal to be called periodically */
     static bool PeriodicFlush(CWalletDBWrapper& dbw);
     /* verifies the database environment */
-    static bool VerifyEnvironment(const std::string& walletFile, const fs::path& dataDir, std::string& errorStr);
+    static bool VerifyEnvironment(const std::string& walletFile, const fs::path& walletDir, std::string& errorStr);
     /* verifies the database file */
-    static bool VerifyDatabaseFile(const std::string& walletFile, const fs::path& dataDir, std::string& warningStr, std::string& errorStr, CDBEnv::recoverFunc_type recoverFunc);
+    static bool VerifyDatabaseFile(const std::string& walletFile, const fs::path& walletDir, std::string& warningStr, std::string& errorStr, CDBEnv::recoverFunc_type recoverFunc);
 
 public:
     template <typename K, typename T>
diff --git a/src/wallet/init.cpp b/src/wallet/init.cpp
index ca6dcccf78dcc..67c46df87d69c 100644
--- a/src/wallet/init.cpp
+++ b/src/wallet/init.cpp
@@ -9,8 +9,9 @@
 #include <util.h>
 #include <utilmoneystr.h>
 #include <validation.h>
-#include <wallet/wallet.h>
 #include <wallet/rpcwallet.h>
+#include <wallet/wallet.h>
+#include <wallet/walletutil.h>
 
 std::string GetWalletHelpString(bool showDebug)
 {
@@ -34,6 +35,7 @@ std::string GetWalletHelpString(bool showDebug)
     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("-walletbroadcast", _("Make the wallet broadcast transactions") + " " + strprintf(_("(default: %u)"), DEFAULT_WALLETBROADCAST));
+    strUsage += HelpMessageOpt("-walletdir=<dir>", _("Specify directory to hold wallets (default: <datadir>/wallets if it exists, otherwise <datadir>)"));
     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") +
                                " " + _("(1 = keep tx meta data e.g. account owner and payment request information, 2 = drop tx meta data)"));
@@ -191,6 +193,12 @@ bool VerifyWallets()
         return true;
     }
 
+    if (gArgs.IsArgSet("-walletdir") && !fs::is_directory(GetWalletDir())) {
+        return InitError(strprintf(_("Error: Specified wallet directory \"%s\" does not exist."), gArgs.GetArg("-walletdir", "").c_str()));
+    }
+
+    LogPrintf("Using wallet directory %s\n", GetWalletDir().string());
+
     uiInterface.InitMessage(_("Verifying wallet(s)..."));
 
     // Keep track of each wallet absolute path to detect duplicates.
@@ -205,7 +213,7 @@ bool VerifyWallets()
             return InitError(strprintf(_("Error loading wallet %s. Invalid characters in -wallet filename."), walletFile));
         }
 
-        fs::path wallet_path = fs::absolute(walletFile, GetDataDir());
+        fs::path wallet_path = fs::absolute(walletFile, GetWalletDir());
 
         if (fs::exists(wallet_path) && (!fs::is_regular_file(wallet_path) || fs::is_symlink(wallet_path))) {
             return InitError(strprintf(_("Error loading wallet %s. -wallet filename must be a regular file."), walletFile));
@@ -216,7 +224,7 @@ bool VerifyWallets()
         }
 
         std::string strError;
-        if (!CWalletDB::VerifyEnvironment(walletFile, GetDataDir().string(), strError)) {
+        if (!CWalletDB::VerifyEnvironment(walletFile, GetWalletDir().string(), strError)) {
             return InitError(strError);
         }
 
@@ -230,7 +238,7 @@ bool VerifyWallets()
         }
 
         std::string strWarning;
-        bool dbV = CWalletDB::VerifyDatabaseFile(walletFile, GetDataDir().string(), strWarning, strError);
+        bool dbV = CWalletDB::VerifyDatabaseFile(walletFile, GetWalletDir().string(), strWarning, strError);
         if (!strWarning.empty()) {
             InitWarning(strWarning);
         }
diff --git a/src/wallet/rpcwallet.cpp b/src/wallet/rpcwallet.cpp
index 23559eb350807..9a7861f978ee0 100644
--- a/src/wallet/rpcwallet.cpp
+++ b/src/wallet/rpcwallet.cpp
@@ -26,6 +26,7 @@
 #include <wallet/feebumper.h>
 #include <wallet/wallet.h>
 #include <wallet/walletdb.h>
+#include <wallet/walletutil.h>
 
 #include <init.h>  // For StartShutdown
 
diff --git a/src/wallet/walletdb.cpp b/src/wallet/walletdb.cpp
index 66b8dea4ad43f..5116d6419e898 100644
--- a/src/wallet/walletdb.cpp
+++ b/src/wallet/walletdb.cpp
@@ -814,14 +814,14 @@ bool CWalletDB::RecoverKeysOnlyFilter(void *callbackData, CDataStream ssKey, CDa
     return true;
 }
 
-bool CWalletDB::VerifyEnvironment(const std::string& walletFile, const fs::path& dataDir, std::string& errorStr)
+bool CWalletDB::VerifyEnvironment(const std::string& walletFile, const fs::path& walletDir, std::string& errorStr)
 {
-    return CDB::VerifyEnvironment(walletFile, dataDir, errorStr);
+    return CDB::VerifyEnvironment(walletFile, walletDir, errorStr);
 }
 
-bool CWalletDB::VerifyDatabaseFile(const std::string& walletFile, const fs::path& dataDir, std::string& warningStr, std::string& errorStr)
+bool CWalletDB::VerifyDatabaseFile(const std::string& walletFile, const fs::path& walletDir, std::string& warningStr, std::string& errorStr)
 {
-    return CDB::VerifyDatabaseFile(walletFile, dataDir, warningStr, errorStr, CWalletDB::Recover);
+    return CDB::VerifyDatabaseFile(walletFile, walletDir, warningStr, errorStr, CWalletDB::Recover);
 }
 
 bool CWalletDB::WriteDestData(const std::string &address, const std::string &key, const std::string &value)
diff --git a/src/wallet/walletdb.h b/src/wallet/walletdb.h
index 0a85fc3bc0856..e815bcfeda61d 100644
--- a/src/wallet/walletdb.h
+++ b/src/wallet/walletdb.h
@@ -226,9 +226,9 @@ class CWalletDB
     /* Function to determine if a certain KV/key-type is a key (cryptographical key) type */
     static bool IsKeyType(const std::string& strType);
     /* verifies the database environment */
-    static bool VerifyEnvironment(const std::string& walletFile, const fs::path& dataDir, std::string& errorStr);
+    static bool VerifyEnvironment(const std::string& walletFile, const fs::path& walletDir, std::string& errorStr);
     /* verifies the database file */
-    static bool VerifyDatabaseFile(const std::string& walletFile, const fs::path& dataDir, std::string& warningStr, std::string& errorStr);
+    static bool VerifyDatabaseFile(const std::string& walletFile, const fs::path& walletDir, std::string& warningStr, std::string& errorStr);
 
     //! write the hdchain model (external chain child index counter)
     bool WriteHDChain(const CHDChain& chain);
diff --git a/src/wallet/walletutil.cpp b/src/wallet/walletutil.cpp
new file mode 100644
index 0000000000000..fbb5215a51efd
--- /dev/null
+++ b/src/wallet/walletutil.cpp
@@ -0,0 +1,27 @@
+// 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.
+
+#include "wallet/walletutil.h"
+
+fs::path GetWalletDir()
+{
+    fs::path path;
+
+    if (gArgs.IsArgSet("-walletdir")) {
+        path = fs::system_complete(gArgs.GetArg("-walletdir", ""));
+        if (!fs::is_directory(path)) {
+            // If the path specified doesn't exist, we return the deliberately
+            // invalid empty string.
+            path = "";
+        }
+    } else {
+        path = GetDataDir();
+        // If a wallets directory exists, use that, otherwise default to GetDataDir
+        if (fs::is_directory(path / "wallets")) {
+            path /= "wallets";
+        }
+    }
+
+    return path;
+}
diff --git a/src/wallet/walletutil.h b/src/wallet/walletutil.h
new file mode 100644
index 0000000000000..a94f286a44219
--- /dev/null
+++ b/src/wallet/walletutil.h
@@ -0,0 +1,13 @@
+// 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.
+
+#ifndef BITCOIN_WALLET_UTIL_H
+#define BITCOIN_WALLET_UTIL_H
+
+#include "util.h"
+
+//! Get the path of the wallet directory.
+fs::path GetWalletDir();
+
+#endif // BITCOIN_WALLET_UTIL_H
diff --git a/test/functional/keypool-topup.py b/test/functional/keypool-topup.py
index 160a0f7ae570a..e7af3c3987186 100755
--- a/test/functional/keypool-topup.py
+++ b/test/functional/keypool-topup.py
@@ -33,7 +33,7 @@ def run_test(self):
 
         self.stop_node(1)
 
-        shutil.copyfile(self.tmpdir + "/node1/regtest/wallet.dat", self.tmpdir + "/wallet.bak")
+        shutil.copyfile(self.tmpdir + "/node1/regtest/wallets/wallet.dat", self.tmpdir + "/wallet.bak")
         self.start_node(1, self.extra_args[1])
         connect_nodes_bi(self.nodes, 0, 1)
 
@@ -56,7 +56,7 @@ def run_test(self):
 
         self.stop_node(1)
 
-        shutil.copyfile(self.tmpdir + "/wallet.bak", self.tmpdir + "/node1/regtest/wallet.dat")
+        shutil.copyfile(self.tmpdir + "/wallet.bak", self.tmpdir + "/node1/regtest/wallets/wallet.dat")
 
         self.log.info("Verify keypool is restored and balance is correct")
 
diff --git a/test/functional/multiwallet.py b/test/functional/multiwallet.py
index 7a0fbce477aae..4a721d11099f6 100755
--- a/test/functional/multiwallet.py
+++ b/test/functional/multiwallet.py
@@ -27,18 +27,40 @@ def run_test(self):
         self.assert_start_raises_init_error(0, ['-wallet=w1', '-wallet=w1'], 'Error loading wallet w1. Duplicate -wallet filename specified.')
 
         # should not initialize if wallet file is a directory
-        os.mkdir(os.path.join(self.options.tmpdir, 'node0', 'regtest', 'w11'))
+        wallet_dir = os.path.join(self.options.tmpdir, 'node0', 'regtest', 'wallets')
+        os.mkdir(os.path.join(wallet_dir, 'w11'))
         self.assert_start_raises_init_error(0, ['-wallet=w11'], 'Error loading wallet w11. -wallet filename must be a regular file.')
 
         # should not initialize if one wallet is a copy of another
-        shutil.copyfile(os.path.join(self.options.tmpdir, 'node0', 'regtest', 'w2'),
-                        os.path.join(self.options.tmpdir, 'node0', 'regtest', 'w22'))
+        shutil.copyfile(os.path.join(wallet_dir, 'w2'), os.path.join(wallet_dir, 'w22'))
         self.assert_start_raises_init_error(0, ['-wallet=w2', '-wallet=w22'], 'duplicates fileid')
 
         # should not initialize if wallet file is a symlink
-        os.symlink(os.path.join(self.options.tmpdir, 'node0', 'regtest', 'w1'), os.path.join(self.options.tmpdir, 'node0', 'regtest', 'w12'))
+        os.symlink(os.path.join(wallet_dir, 'w1'), os.path.join(wallet_dir, 'w12'))
         self.assert_start_raises_init_error(0, ['-wallet=w12'], 'Error loading wallet w12. -wallet filename must be a regular file.')
 
+        # should not initialize if the specified walletdir does not exist
+        self.assert_start_raises_init_error(0, ['-walletdir=bad'], 'Error: Specified wallet directory "bad" does not exist.')
+
+        # if wallets/ doesn't exist, datadir should be the default wallet dir
+        wallet_dir2 = os.path.join(self.options.tmpdir, 'node0', 'regtest', 'walletdir')
+        os.rename(wallet_dir, wallet_dir2)
+        self.start_node(0, ['-wallet=w4', '-wallet=w5'])
+        assert_equal(set(self.nodes[0].listwallets()), {"w4", "w5"})
+        w5 = self.nodes[0].get_wallet_rpc("w5")
+        w5.generate(1)
+        self.stop_node(0)
+
+        # now if wallets/ exists again, but the rootdir is specified as the walletdir, w4 and w5 should still be loaded
+        os.rename(wallet_dir2, wallet_dir)
+        self.start_node(0, ['-wallet=w4', '-wallet=w5', '-walletdir=' + os.path.join(self.options.tmpdir, 'node0', 'regtest')])
+        assert_equal(set(self.nodes[0].listwallets()), {"w4", "w5"})
+        w5 = self.nodes[0].get_wallet_rpc("w5")
+        w5_info = w5.getwalletinfo()
+        assert_equal(w5_info['immature_balance'], 50)
+
+        self.stop_node(0)
+
         self.start_node(0, self.extra_args[0])
 
         w1 = self.nodes[0].get_wallet_rpc("w1")
diff --git a/test/functional/test_framework/test_framework.py b/test/functional/test_framework/test_framework.py
index 8df50474f3371..4590b4c650912 100755
--- a/test/functional/test_framework/test_framework.py
+++ b/test/functional/test_framework/test_framework.py
@@ -432,7 +432,7 @@ def _initialize_chain(self):
             self.disable_mocktime()
             for i in range(MAX_NODES):
                 os.remove(log_filename(self.options.cachedir, i, "debug.log"))
-                os.remove(log_filename(self.options.cachedir, i, "db.log"))
+                os.remove(log_filename(self.options.cachedir, i, "wallets/db.log"))
                 os.remove(log_filename(self.options.cachedir, i, "peers.dat"))
                 os.remove(log_filename(self.options.cachedir, i, "fee_estimates.dat"))
 
diff --git a/test/functional/test_runner.py b/test/functional/test_runner.py
index ca36426a0a2b5..d953e1585cb97 100755
--- a/test/functional/test_runner.py
+++ b/test/functional/test_runner.py
@@ -300,7 +300,11 @@ def run_tests(test_list, src_dir, build_dir, exeext, tmpdir, jobs=1, enable_cove
 
     if len(test_list) > 1 and jobs > 1:
         # Populate cache
-        subprocess.check_output([tests_dir + 'create_cache.py'] + flags + ["--tmpdir=%s/cache" % tmpdir])
+        try:
+            subprocess.check_output([tests_dir + 'create_cache.py'] + flags + ["--tmpdir=%s/cache" % tmpdir])
+        except Exception as e:
+            print(e.output)
+            raise e
 
     #Run Tests
     job_queue = TestHandler(jobs, tests_dir, tmpdir, test_list, flags)
diff --git a/test/functional/wallet-hd.py b/test/functional/wallet-hd.py
index 9b6ce68609db5..d21656a971656 100755
--- a/test/functional/wallet-hd.py
+++ b/test/functional/wallet-hd.py
@@ -73,7 +73,7 @@ def run_test (self):
         # otherwise node1 would auto-recover all funds in flag the keypool keys as used
         shutil.rmtree(os.path.join(tmpdir, "node1/regtest/blocks"))
         shutil.rmtree(os.path.join(tmpdir, "node1/regtest/chainstate"))
-        shutil.copyfile(os.path.join(tmpdir, "hd.bak"), os.path.join(tmpdir, "node1/regtest/wallet.dat"))
+        shutil.copyfile(os.path.join(tmpdir, "hd.bak"), os.path.join(tmpdir, "node1/regtest/wallets/wallet.dat"))
         self.start_node(1)
 
         # Assert that derivation is deterministic
diff --git a/test/functional/walletbackup.py b/test/functional/walletbackup.py
index 85a149793e730..8ef5620cd8cfc 100755
--- a/test/functional/walletbackup.py
+++ b/test/functional/walletbackup.py
@@ -90,9 +90,9 @@ def stop_three(self):
         self.stop_node(2)
 
     def erase_three(self):
-        os.remove(self.options.tmpdir + "/node0/regtest/wallet.dat")
-        os.remove(self.options.tmpdir + "/node1/regtest/wallet.dat")
-        os.remove(self.options.tmpdir + "/node2/regtest/wallet.dat")
+        os.remove(self.options.tmpdir + "/node0/regtest/wallets/wallet.dat")
+        os.remove(self.options.tmpdir + "/node1/regtest/wallets/wallet.dat")
+        os.remove(self.options.tmpdir + "/node2/regtest/wallets/wallet.dat")
 
     def run_test(self):
         self.log.info("Generating initial blockchain")
@@ -154,9 +154,9 @@ def run_test(self):
         shutil.rmtree(self.options.tmpdir + "/node2/regtest/chainstate")
 
         # Restore wallets from backup
-        shutil.copyfile(tmpdir + "/node0/wallet.bak", tmpdir + "/node0/regtest/wallet.dat")
-        shutil.copyfile(tmpdir + "/node1/wallet.bak", tmpdir + "/node1/regtest/wallet.dat")
-        shutil.copyfile(tmpdir + "/node2/wallet.bak", tmpdir + "/node2/regtest/wallet.dat")
+        shutil.copyfile(tmpdir + "/node0/wallet.bak", tmpdir + "/node0/regtest/wallets/wallet.dat")
+        shutil.copyfile(tmpdir + "/node1/wallet.bak", tmpdir + "/node1/regtest/wallets/wallet.dat")
+        shutil.copyfile(tmpdir + "/node2/wallet.bak", tmpdir + "/node2/regtest/wallets/wallet.dat")
 
         self.log.info("Re-starting nodes")
         self.start_three()
@@ -192,10 +192,10 @@ def run_test(self):
 
         # Backup to source wallet file must fail
         sourcePaths = [
-            tmpdir + "/node0/regtest/wallet.dat",
-            tmpdir + "/node0/./regtest/wallet.dat",
-            tmpdir + "/node0/regtest/",
-            tmpdir + "/node0/regtest"]
+            tmpdir + "/node0/regtest/wallets/wallet.dat",
+            tmpdir + "/node0/./regtest/wallets/wallet.dat",
+            tmpdir + "/node0/regtest/wallets/",
+            tmpdir + "/node0/regtest/wallets"]
 
         for sourcePath in sourcePaths:
             assert_raises_rpc_error(-4, "backup failed", self.nodes[0].backupwallet, sourcePath)