diff --git a/collects/compiler/zo-marshal.rkt b/collects/compiler/zo-marshal.rkt
index f10a095f3b..da13079be1 100644
--- a/collects/compiler/zo-marshal.rkt
+++ b/collects/compiler/zo-marshal.rkt
@@ -8,7 +8,9 @@
          racket/local
          racket/list
          racket/dict
-         racket/function)
+         racket/function
+         racket/pretty
+         racket/path)
 
 (provide/contract
  [zo-marshal (compilation-top? . -> . bytes?)]
@@ -901,6 +903,7 @@
                    CPT_BYTE_STRING
                    #f
                    out)]
+    #;
     [(path? expr)
      (out-as-bytes expr 
                    path->bytes
@@ -1024,7 +1027,20 @@
      (if (quoted? expr)
          (out-data (quoted-v expr) out)
          (let ([s (open-output-bytes)])
-           (write expr s)
+           ;; print `expr' to a string, but print paths
+           ;; in a special way
+           (parameterize ([pretty-print-size-hook
+                           (lambda (v mode port)
+                             (and (path? v)
+                                  (let ([v (make-relative v)])
+                                    (+ 2 (let ([p (open-output-bytes)])
+                                           (write (path->bytes v) p)
+                                           (bytes-length (get-output-bytes p)))))))]
+                          [pretty-print-print-hook
+                           (lambda (v mode port)
+                             (display "#^" port)
+                             (write (path->bytes (make-relative v)) port))])
+             (pretty-write expr s))
            (out-byte CPT_ESCAPE out)
            (let ([bstr (get-output-bytes s)])
              (out-number (bytes-length bstr) out)
@@ -1041,5 +1057,11 @@
 
 (define-struct svector (vec))
 
+(define (make-relative v)
+  (let ([r (current-write-relative-directory)])
+    (if r
+        (find-relative-path r v)
+        v)))
+
 ;; ----------------------------------------
 
diff --git a/collects/compiler/zo-parse.rkt b/collects/compiler/zo-parse.rkt
index 3afd74e4d3..ed2541fdaf 100644
--- a/collects/compiler/zo-parse.rkt
+++ b/collects/compiler/zo-parse.rkt
@@ -732,7 +732,23 @@
                             [read-decimal-as-inexact #t]
                             [read-accept-dot #t]
                             [read-accept-infix-dot #t]
-                            [read-accept-quasiquote #t])
+                            [read-accept-quasiquote #t]
+                            ;; Use a readtable for special path support in escaped:
+                            [current-readtable
+                             (make-readtable 
+                              #f
+                              #\^ 
+                              'dispatch-macro
+                              (lambda (char port src line col pos)
+                                (let ([b (read port)])
+                                  (unless (bytes? b)
+                                    (error 'read-escaped-path
+                                           "expected a byte string after #^"))
+                                  (let ([p (bytes->path b)])
+                                    (if (and (relative-path? p)
+                                             (current-load-relative-directory))
+                                        (build-path (current-load-relative-directory) p)
+                                        p)))))])
                (read/recursive (open-input-bytes s))))]
           [(reference)
            (make-primval (read-compact-number cp))]