diff --git a/jps/model-api/src/org/jetbrains/jps/model/JpsEncodingProjectConfiguration.java b/jps/model-api/src/org/jetbrains/jps/model/JpsEncodingProjectConfiguration.java
index 5b918fe0f6d0..a41fbf891897 100644
--- a/jps/model-api/src/org/jetbrains/jps/model/JpsEncodingProjectConfiguration.java
+++ b/jps/model-api/src/org/jetbrains/jps/model/JpsEncodingProjectConfiguration.java
@@ -3,6 +3,7 @@ package org.jetbrains.jps.model;
 import org.jetbrains.annotations.NotNull;
 import org.jetbrains.annotations.Nullable;
 
+import java.io.File;
 import java.util.Map;
 
 /**
@@ -10,7 +11,7 @@ import java.util.Map;
  */
 public interface JpsEncodingProjectConfiguration extends JpsElement {
   @Nullable
-  String getEncoding(@NotNull String url);
+  String getEncoding(@NotNull File file);
 
   @Nullable
   String getProjectEncoding();
diff --git a/jps/model-impl/src/org/jetbrains/jps/model/impl/JpsEncodingProjectConfigurationImpl.java b/jps/model-impl/src/org/jetbrains/jps/model/impl/JpsEncodingProjectConfigurationImpl.java
index 5fe77c852ed9..a929662bdbcc 100644
--- a/jps/model-impl/src/org/jetbrains/jps/model/impl/JpsEncodingProjectConfigurationImpl.java
+++ b/jps/model-impl/src/org/jetbrains/jps/model/impl/JpsEncodingProjectConfigurationImpl.java
@@ -1,11 +1,17 @@
 package org.jetbrains.jps.model.impl;
 
+import com.intellij.openapi.util.io.FileUtilRt;
 import org.jetbrains.annotations.NotNull;
+import org.jetbrains.annotations.Nullable;
 import org.jetbrains.jps.model.JpsElementChildRole;
+import org.jetbrains.jps.model.JpsEncodingConfigurationService;
 import org.jetbrains.jps.model.JpsEncodingProjectConfiguration;
+import org.jetbrains.jps.model.JpsModel;
 import org.jetbrains.jps.model.ex.JpsElementBase;
 import org.jetbrains.jps.model.ex.JpsElementChildRoleBase;
+import org.jetbrains.jps.util.JpsPathUtil;
 
+import java.io.File;
 import java.util.Collections;
 import java.util.HashMap;
 import java.util.Map;
@@ -13,7 +19,8 @@ import java.util.Map;
 /**
  * @author nik
  */
-public class JpsEncodingProjectConfigurationImpl extends JpsElementBase<JpsEncodingProjectConfigurationImpl> implements JpsEncodingProjectConfiguration {
+public class JpsEncodingProjectConfigurationImpl extends JpsElementBase<JpsEncodingProjectConfigurationImpl>
+  implements JpsEncodingProjectConfiguration {
   public static final JpsElementChildRole<JpsEncodingProjectConfiguration> ROLE = JpsElementChildRoleBase.create("encoding configuration");
   private final Map<String, String> myUrlToEncoding = new HashMap<String, String>();
   private final String myProjectEncoding;
@@ -23,9 +30,30 @@ public class JpsEncodingProjectConfigurationImpl extends JpsElementBase<JpsEncod
     myProjectEncoding = projectEncoding;
   }
 
+  @Nullable
   @Override
-  public String getEncoding(@NotNull String url) {
-    return myUrlToEncoding.get(url);
+  public String getEncoding(@NotNull File file) {
+    if (!myUrlToEncoding.isEmpty()) {
+
+      File current = file;
+      while (current != null) {
+        String encoding = myUrlToEncoding.get(JpsPathUtil.pathToUrl(FileUtilRt.toSystemIndependentName(current.getPath())));
+
+        if (encoding != null) {
+          return encoding;
+        }
+
+        current = FileUtilRt.getParentFile(current);
+      }
+    }
+
+    if (myProjectEncoding != null) {
+      return myProjectEncoding;
+    }
+
+    final JpsModel model = getModel();
+    assert model != null;
+    return JpsEncodingConfigurationService.getInstance().getGlobalEncoding(model.getGlobal());
   }
 
   @NotNull
@@ -34,6 +62,7 @@ public class JpsEncodingProjectConfigurationImpl extends JpsElementBase<JpsEncod
     return Collections.unmodifiableMap(myUrlToEncoding);
   }
 
+  @Nullable
   @Override
   public String getProjectEncoding() {
     return myProjectEncoding;
diff --git a/jps/model-serialization/testSrc/org/jetbrains/jps/model/serialization/JpsProjectSerializationTest.java b/jps/model-serialization/testSrc/org/jetbrains/jps/model/serialization/JpsProjectSerializationTest.java
index 6879dab3c066..172f0befaa3b 100644
--- a/jps/model-serialization/testSrc/org/jetbrains/jps/model/serialization/JpsProjectSerializationTest.java
+++ b/jps/model-serialization/testSrc/org/jetbrains/jps/model/serialization/JpsProjectSerializationTest.java
@@ -92,7 +92,9 @@ public class JpsProjectSerializationTest extends JpsSerializationTestCase {
     JpsEncodingProjectConfiguration configuration = service.getEncodingConfiguration(myProject);
     assertNotNull(configuration);
     assertEquals("UTF-8", configuration.getProjectEncoding());
-    assertEquals("windows-1251", configuration.getEncoding(getUrl("util")));
+    assertEquals("windows-1251", configuration.getEncoding(new File(getAbsolutePath("util"))));
+    assertEquals("windows-1251", configuration.getEncoding(new File(getAbsolutePath("util/foo/bar/file.txt"))));
+    assertEquals("UTF-8", configuration.getEncoding(new File(getAbsolutePath("other"))));
   }
 
   public void testSaveProject() {