diff --git a/plugins/gradle/src/org/jetbrains/plugins/gradle/service/project/BaseGradleProjectResolverExtension.java b/plugins/gradle/src/org/jetbrains/plugins/gradle/service/project/BaseGradleProjectResolverExtension.java
index d233eb5cec2a..b5a46ca698ac 100644
--- a/plugins/gradle/src/org/jetbrains/plugins/gradle/service/project/BaseGradleProjectResolverExtension.java
+++ b/plugins/gradle/src/org/jetbrains/plugins/gradle/service/project/BaseGradleProjectResolverExtension.java
@@ -942,7 +942,7 @@ public class BaseGradleProjectResolverExtension implements GradleProjectResolver
 
     if (moduleVersion == null) {
       // use module library level if the dependency does not originate from a remote repository.
-      level = LibraryLevel.MODULE;
+      level = LibraryLevel.PROJECT;
 
       if (binaryPath.isFile()) {
         libraryName = FileUtil.getNameWithoutExtension(binaryPath);
@@ -1025,9 +1025,7 @@ public class BaseGradleProjectResolverExtension implements GradleProjectResolver
       library.addPath(LibraryPathType.DOC, javadocPath.getAbsolutePath());
     }
 
-    if (level == LibraryLevel.PROJECT) {
-      linkProjectLibrary(ideProject, library);
-    }
+    linkProjectLibrary(ideProject, library);
 
     return new LibraryDependencyData(ownerModule.getData(), library, level);
   }
diff --git a/plugins/gradle/testSources/org/jetbrains/plugins/gradle/importing/GradleDependenciesImportingTest.java b/plugins/gradle/testSources/org/jetbrains/plugins/gradle/importing/GradleDependenciesImportingTest.java
index 599cb8c84d35..ebd648f88dcb 100644
--- a/plugins/gradle/testSources/org/jetbrains/plugins/gradle/importing/GradleDependenciesImportingTest.java
+++ b/plugins/gradle/testSources/org/jetbrains/plugins/gradle/importing/GradleDependenciesImportingTest.java
@@ -25,6 +25,7 @@ import com.intellij.openapi.externalSystem.service.notification.ExternalSystemPr
 import com.intellij.openapi.externalSystem.util.ExternalSystemUtil;
 import com.intellij.openapi.module.Module;
 import com.intellij.openapi.roots.*;
+import com.intellij.openapi.roots.libraries.Library;
 import com.intellij.openapi.vfs.VirtualFile;
 import com.intellij.util.PathUtil;
 import com.intellij.util.containers.ContainerUtil;
@@ -38,7 +39,9 @@ import org.junit.Test;
 
 import java.io.IOException;
 import java.util.Collections;
+import java.util.HashSet;
 import java.util.List;
+import java.util.Set;
 
 import static com.intellij.openapi.externalSystem.util.ExternalSystemApiUtil.*;
 import static com.intellij.openapi.util.text.StringUtil.*;
@@ -359,6 +362,34 @@ public class GradleDependenciesImportingTest extends GradleImportingTestCase {
     }
   }
 
+
+  @Test
+  public void testFileDepsImportedAsProjectLibraries() throws  Exception {
+    final VirtualFile depJar = createProjectJarSubFile("lib/dep.jar");
+    createSettingsFile("include 'p1'\n" +
+                       "include 'p2'");
+
+    importProjectUsingSingeModulePerGradleProject("allprojects {\n" +
+                  "apply plugin: 'java'\n" +
+                  "  dependencies {\n" +
+                  "     compile rootProject.files('lib/dep.jar')\n" +
+                  "  }\n" +
+                  "}");
+
+    assertModules("project", "p1", "p2");
+    Set<Library> libs = new HashSet<>();
+    final List<LibraryOrderEntry> moduleLibDeps = getModuleLibDeps("p1", "Gradle: dep");
+    moduleLibDeps.addAll(getModuleLibDeps("p2", "Gradle: dep"));
+    for (LibraryOrderEntry libDep : moduleLibDeps) {
+      libs.add(libDep.getLibrary());
+      assertFalse("Dependency be project level: " + libDep.toString(), libDep.isModuleLevel());
+    }
+
+    assertProjectLibraries("Gradle: dep");
+    assertEquals("All deps should be on same library", 1, libs.size());
+    assertEquals("The library should point to deps file", depJar.getUrl(), libs.iterator().next().getUrls(OrderRootType.CLASSES)[0]);
+  }
+
   @Test
   public void testProjectWithUnresolvedDependency() throws Exception {
     final VirtualFile depJar = createProjectJarSubFile("lib/dep/dep/1.0/dep-1.0.jar");