diff --git a/CHANGES.md b/CHANGES.md
index fc9612b..c073c14 100644
--- a/CHANGES.md
+++ b/CHANGES.md
@@ -1,3 +1,9 @@
+2014-12-02, Version 2.5.0
+=========================
+
+ * compiler: resolve paths in middleware params (Miroslav Bajtoš)
+
+
 2014-11-27, Version 2.4.0
 =========================
 
diff --git a/lib/compiler.js b/lib/compiler.js
index 6cfd3ad..f8f058b 100644
--- a/lib/compiler.js
+++ b/lib/compiler.js
@@ -364,6 +364,11 @@ function buildMiddlewareInstructions(rootDir, config) {
         var middlewareConfig = cloneDeep(config);
         middlewareConfig.phase = phase;
 
+        if (middlewareConfig.params) {
+          middlewareConfig.params = resolveMiddlewareParams(
+            rootDir, middlewareConfig.params);
+        }
+
         var item = {
           sourceFile: resolved.sourceFile,
           config: middlewareConfig
@@ -448,3 +453,16 @@ function resolveMiddlewarePath(rootDir, middleware) {
   }
   throw err;
 }
+
+// Match values starting with `$!./` or `$!../`
+var MIDDLEWARE_PATH_PARAM_REGEX = /^\$!(\.\/|\.\.\/)/;
+
+function resolveMiddlewareParams(rootDir, params) {
+  return cloneDeep(params, function resolvePathParam(value) {
+    if (typeof value === 'string' && MIDDLEWARE_PATH_PARAM_REGEX.test(value)) {
+      return path.resolve(rootDir, value.slice(2));
+    } else {
+      return undefined; // no change
+    }
+  });
+}
diff --git a/package.json b/package.json
index a5b39c0..47a268c 100644
--- a/package.json
+++ b/package.json
@@ -1,6 +1,6 @@
 {
   "name": "loopback-boot",
-  "version": "2.4.0",
+  "version": "2.5.0",
   "description": "Convention-based bootstrapper for LoopBack applications",
   "keywords": [
     "StrongLoop",
diff --git a/test/compiler.test.js b/test/compiler.test.js
index a4f9a1d..edc128e 100644
--- a/test/compiler.test.js
+++ b/test/compiler.test.js
@@ -790,7 +790,7 @@ describe('compiler', function() {
 
       var instructions = boot.compile(appdir.PATH);
 
-      expect(instructions.middleware.middleware[0].config.params).to.eql({
+      expectFirstMiddlewareParams(instructions).to.eql({
         key: 'custom value'
       });
     });
@@ -954,9 +954,93 @@ describe('compiler', function() {
           'sourceFile',
           appdir.resolve(HANDLER_FILE));
       });
+
+    describe('config with relative paths in params', function() {
+      var RELATIVE_PATH_PARAMS = [
+        '$!./here',
+        '$!../there'
+      ];
+
+      var absolutePathParams;
+      beforeEach(function resolveRelativePathParams() {
+        absolutePathParams = RELATIVE_PATH_PARAMS.map(function(p) {
+          return appdir.resolve(p.slice(2));
+        });
+      });
+
+      it('converts paths in top-level array items', function() {
+        givenMiddlewareEntrySync({ params: RELATIVE_PATH_PARAMS });
+
+        var instructions = boot.compile(appdir.PATH);
+
+        expectFirstMiddlewareParams(instructions)
+          .to.eql(absolutePathParams);
+      });
+
+      it('converts paths in top-level object properties', function() {
+        givenMiddlewareEntrySync({ params: {
+          path: RELATIVE_PATH_PARAMS[0],
+        }});
+
+        var instructions = boot.compile(appdir.PATH);
+
+        expectFirstMiddlewareParams(instructions)
+          .to.eql({ path: absolutePathParams[0] });
+      });
+
+      it('converts path value when params is a string', function() {
+        givenMiddlewareEntrySync({ params: RELATIVE_PATH_PARAMS[0] });
+
+        var instructions = boot.compile(appdir.PATH);
+
+        expectFirstMiddlewareParams(instructions)
+          .to.eql(absolutePathParams[0]);
+      });
+
+      it('converts paths in nested properties', function() {
+        givenMiddlewareEntrySync({ params: {
+          nestedObject: {
+            path: RELATIVE_PATH_PARAMS[0]
+          },
+          nestedArray: RELATIVE_PATH_PARAMS
+        }});
+
+        var instructions = boot.compile(appdir.PATH);
+
+        expectFirstMiddlewareParams(instructions)
+          .to.eql({
+            nestedObject: {
+              path: absolutePathParams[0]
+            },
+            nestedArray: absolutePathParams
+          });
+      });
+
+      it('does not convert values not starting with `./` or `../`', function() {
+        var PARAMS = ['$!.somerc', '$!/root', '$!hello!'];
+        givenMiddlewareEntrySync({ params: PARAMS});
+
+        var instructions = boot.compile(appdir.PATH);
+
+        expectFirstMiddlewareParams(instructions).to.eql(PARAMS);
+      });
+    });
   });
 });
 
 function getNameProperty(obj) {
   return obj.name;
 }
+
+function givenMiddlewareEntrySync(config) {
+  appdir.writeConfigFileSync('middleware.json', {
+    initial: {
+      // resolves to ./middleware.json
+      './middleware': config
+    }
+  });
+}
+
+function expectFirstMiddlewareParams(instructions) {
+  return expect(instructions.middleware.middleware[0].config.params);
+}