diff --git a/.gitignore b/.gitignore
index 30bc162..1b87fb3 100644
--- a/.gitignore
+++ b/.gitignore
@@ -1 +1,2 @@
-/node_modules
\ No newline at end of file
+/node_modules
+.idea/
diff --git a/README.md b/README.md
index e0eda40..f557ffc 100644
--- a/README.md
+++ b/README.md
@@ -72,6 +72,10 @@ By default, the style-loader appends `<style>` elements to the end of the `<head
 
 If defined, the style-loader will re-use a single `<style>` element, instead of adding/removing individual elements for each required module. **Note:** this option is on by default in IE9, which has strict limitations on the number of style tags allowed on a page. You can enable or disable it with the singleton query parameter (`?singleton` or `?-singleton`).
 
+#### `convertToAbsoluteUrls`
+
+If convertToAbsoluteUrls and sourceMaps are both enabled, relative urls will be converted to absolute urls right before the css is injected into the page. This resolves [an issue](https://github.com/webpack/style-loader/pull/96) where relative resources fail to load when source maps are enabled.  You can enable it with the convertToAbsoluteUrls query parameter (`?convertToAbsoluteUrls`).
+
 #### `attrs`
 
 If defined, style-loader will attach given attributes with their values on `<style>` / `<link>` element.
@@ -113,7 +117,7 @@ So the recommended configuration for webpack is:
 }
 ```
 
-**Note** about source maps support and assets referenced with `url`: when style loader is used with ?sourceMap option, the CSS modules will be generated as `Blob`s, so relative paths don't work (they would be relative to `chrome:blob` or `chrome:devtools`). In order for assets to maintain correct paths setting `output.publicPath` property of webpack configuration must be set, so that absolute paths are generated.
+**Note** about source maps support and assets referenced with `url`: when style loader is used with ?sourceMap option, the CSS modules will be generated as `Blob`s, so relative paths don't work (they would be relative to `chrome:blob` or `chrome:devtools`). In order for assets to maintain correct paths setting `output.publicPath` property of webpack configuration must be set, so that absolute paths are generated. Alternatively you can enable the `convertToAbsoluteUrls` option mentioned above.
 
 <h2 align="center">Contributing</h2>
 
diff --git a/addStyles.js b/addStyles.js
index da95b8a..9249cf3 100644
--- a/addStyles.js
+++ b/addStyles.js
@@ -18,7 +18,8 @@ var stylesInDom = {},
 	}),
 	singletonElement = null,
 	singletonCounter = 0,
-	styleElementsInsertedAtTop = [];
+	styleElementsInsertedAtTop = [],
+	fixUrls = require("./fixUrls");
 
 module.exports = function(list, options) {
 	if(typeof DEBUG !== "undefined" && DEBUG) {
@@ -59,7 +60,7 @@ module.exports = function(list, options) {
 			}
 		}
 	};
-}
+};
 
 function addStylesToDom(styles, options) {
 	for(var i = 0; i < styles.length; i++) {
@@ -168,7 +169,7 @@ function addStyle(obj, options) {
 		typeof Blob === "function" &&
 		typeof btoa === "function") {
 		styleElement = createLinkElement(options);
-		update = updateLink.bind(null, styleElement);
+		update = updateLink.bind(null, styleElement, options);
 		remove = function() {
 			removeStyleElement(styleElement);
 			if(styleElement.href)
@@ -239,10 +240,21 @@ function applyToTag(styleElement, obj) {
 	}
 }
 
-function updateLink(linkElement, obj) {
+function updateLink(linkElement, options, obj) {
 	var css = obj.css;
 	var sourceMap = obj.sourceMap;
 
+	/* If convertToAbsoluteUrls isn't defined, but sourcemaps are enabled
+	and there is no publicPath defined then lets turn convertToAbsoluteUrls
+	on by default.  Otherwise default to the convertToAbsoluteUrls option
+	directly
+	*/
+	const autoFixUrls = options.convertToAbsoluteUrls === undefined && sourceMap;
+
+	if (options.convertToAbsoluteUrls || autoFixUrls){
+		css = fixUrls(css);
+	}
+
 	if(sourceMap) {
 		// http://stackoverflow.com/a/26603875
 		css += "\n/*# sourceMappingURL=data:application/json;base64," + btoa(unescape(encodeURIComponent(JSON.stringify(sourceMap)))) + " */";
diff --git a/fixUrls.js b/fixUrls.js
new file mode 100644
index 0000000..148384d
--- /dev/null
+++ b/fixUrls.js
@@ -0,0 +1,63 @@
+
+/**
+ * When source maps are enabled, `style-loader` uses a link element with a data-uri to
+ * embed the css on the page. This breaks all relative urls because now they are relative to a
+ * bundle instead of the current page.
+ *
+ * One solution is to only use full urls, but that may be impossible.
+ *
+ * Instead, this function "fixes" the relative urls to be absolute according to the current page location.
+ *
+ * A rudimentary test suite is located at `test/fixUrls.js` and can be run via the `npm test` command.
+ *
+ */
+
+module.exports = function (css) {
+  // get current location
+  var location = typeof window !== "undefined" && window.location;
+
+  if (!location) {
+    throw new Error("fixUrls requires window.location");
+  }
+
+	// blank or null?
+	if (!css || typeof css !== "string") {
+	  return css;
+  }
+
+  var baseUrl = location.protocol + "//" + location.host;
+  var currentDir = baseUrl + location.pathname.replace(/\/[^\/]*$/, "/");
+
+	// convert each url(...)
+	var fixedCss = css.replace(/url *\( *(.+?) *\)/g, function(fullMatch, origUrl) {
+		// strip quotes (if they exist)
+		var unquotedOrigUrl = origUrl
+			.replace(/^"(.*)"$/, function(o, $1){ return $1; })
+			.replace(/^'(.*)'$/, function(o, $1){ return $1; });
+
+		// already a full url? no change
+		if (/^(#|data:|http:\/\/|https:\/\/|file:\/\/\/)/i.test(unquotedOrigUrl)) {
+		  return fullMatch;
+		}
+
+		// convert the url to a full url
+		var newUrl;
+
+		if (unquotedOrigUrl.indexOf("//") === 0) {
+		  	//TODO: should we add protocol?
+			newUrl = unquotedOrigUrl;
+		} else if (unquotedOrigUrl.indexOf("/") === 0) {
+			// path should be relative to the base url
+			newUrl = baseUrl + unquotedOrigUrl; // already starts with '/'
+		} else {
+			// path should be relative to current directory
+			newUrl = currentDir + unquotedOrigUrl.replace(/^\.\//, ""); // Strip leading './'
+		}
+
+		// send back the fixed url(...)
+		return "url(" + JSON.stringify(newUrl) + ")";
+	});
+
+	// send back the fixed css
+	return fixedCss;
+};
diff --git a/test/fixUrlsTest.js b/test/fixUrlsTest.js
new file mode 100644
index 0000000..d41da4c
--- /dev/null
+++ b/test/fixUrlsTest.js
@@ -0,0 +1,183 @@
+// Node v4 requires "use strict" to allow block scoped let & const
+"use strict";
+var assert = require("assert");
+var url = require('url');
+
+describe("fix urls tests", function() {
+    var fixUrls = require("../fixUrls");
+    var defaultUrl = "https://x.y.z/a/b.html";
+
+    beforeEach(function() {
+        global.window = {
+            location: url.parse(defaultUrl)
+        };
+    });
+
+    var assertUrl = function (origCss, expectedCss, specialUrl) {
+        if (specialUrl) {
+            global.window = {
+                location: url.parse(specialUrl)
+            };
+        }
+        var resultCss = fixUrls(origCss, specialUrl || defaultUrl);
+        expectedCss = expectedCss || origCss;
+
+        assert.equal(resultCss, expectedCss);
+    };
+
+    // no change
+    it("Null css is not modified", function() {
+      assertUrl(null)
+    });
+
+    it("Blank css is not modified", function() { assertUrl("") });
+
+    it("No url is not modified", function () { assertUrl("body { }") });
+
+    it("Full url isn't changed (no quotes)", function() {
+      assertUrl("body { background-image:url(http://example.com/bg.jpg); }")
+    });
+
+    it("Full url isn't changed (no quotes, spaces)", function() {
+      assertUrl("body { background-image:url ( http://example.com/bg.jpg  ); }");
+    });
+
+    it("Full url isn't changed (double quotes)", function() {
+      assertUrl("body { background-image:url(\"http://example.com/bg.jpg\"); }")
+    });
+
+    it("Full url isn't changed (double quotes, spaces)", function() {
+      assertUrl("body { background-image:url (  \"http://example.com/bg.jpg\" ); }")
+    });
+
+    it("Full url isn't changed (single quotes)", function() {
+      assertUrl("body { background-image:url('http://example.com/bg.jpg'); }")
+    });
+
+    it("Full url isn't changed (single quotes, spaces)", function() {
+      assertUrl("body { background-image:url ( 'http://example.com/bg.jpg'  ); }")
+    });
+
+    it("Multiple full urls are not changed", function() {
+      assertUrl(
+          "body { background-image:url(http://example.com/bg.jpg); }\ndiv.main { background-image:url ( 'https://www.anothersite.com/another.png' ); }"
+      );
+    });
+
+    it("Http url isn't changed", function() {
+      assertUrl("body { background-image:url(http://example.com/bg.jpg); }");
+    });
+
+    it("Https url isn't changed", function() {
+      assertUrl("body { background-image:url(https://example.com/bg.jpg); }");
+    });
+
+    it("HTTPS url isn't changed", function() {
+      assertUrl("body { background-image:url(HTTPS://example.com/bg.jpg); }")
+    });
+
+    it("File url isn't changed", function() {
+      assertUrl("body { background-image:url(file:///example.com/bg.jpg); }")
+    });
+
+    it("Double slash url isn't changed", function() {
+      assertUrl(
+          "body { background-image:url(//example.com/bg.jpg); }",
+          "body { background-image:url(\"//example.com/bg.jpg\"); }"
+      )
+    });
+
+    it("Image data uri url isn't changed", function() {
+      assertUrl("body { background-image:url(data:image/png;base64,qsrwABYuwNkimqm3gAAAABJRU5ErkJggg==); }")
+    });
+
+    it("Font data uri url isn't changed", function() {
+      assertUrl(
+          "body { background-image:url(data:application/x-font-woff;charset=utf-8;base64,qsrwABYuwNkimqm3gAAAABJRU5ErkJggg); }"
+      );
+    });
+
+    // relative urls
+    it("Relative url", function() {
+      assertUrl(
+          "body { background-image:url(bg.jpg); }",
+          "body { background-image:url(\"https://x.y.z/a/bg.jpg\"); }"
+      );
+    });
+
+    it("Relative url with path", function() {
+      assertUrl(
+          "body { background-image:url(c/d/bg.jpg); }",
+          "body { background-image:url(\"https://x.y.z/a/c/d/bg.jpg\"); }"
+      );
+    });
+    it("Relative url with dot slash", function() {
+      assertUrl(
+          "body { background-image:url(./c/d/bg.jpg); }",
+          "body { background-image:url(\"https://x.y.z/a/c/d/bg.jpg\"); }"
+      );
+    });
+
+    it("Multiple relative urls", function() {
+      assertUrl(
+          "body { background-image:url(bg.jpg); }\ndiv.main { background-image:url(./c/d/bg.jpg); }",
+          "body { background-image:url(\"https://x.y.z/a/bg.jpg\"); }\ndiv.main { background-image:url(\"https://x.y.z/a/c/d/bg.jpg\"); }"
+      );
+    });
+    it("Relative url that looks like data-uri", function() {
+      assertUrl(
+          "body { background-image:url(data/image/png.base64); }",
+          "body { background-image:url(\"https://x.y.z/a/data/image/png.base64\"); }"
+      );
+    });
+
+    // urls with hashes
+    it("Relative url with hash are not changed", function() {
+        assertUrl("body { background-image:url(#bg.jpg); }");
+    });
+
+    // rooted urls
+    it("Rooted url", function() {
+      assertUrl(
+          "body { background-image:url(/bg.jpg); }",
+          "body { background-image:url(\"https://x.y.z/bg.jpg\"); }"
+      );
+    });
+    it("Rooted url with path", function() {
+      assertUrl(
+          "body { background-image:url(/a/b/bg.jpg); }",
+          "body { background-image:url(\"https://x.y.z/a/b/bg.jpg\"); }"
+      );
+    });
+
+    //special locations
+    it("Location with no path, filename only", function() {
+      assertUrl(
+          "body { background-image:url(bg.jpg); }",
+          "body { background-image:url(\"http://x.y.z/bg.jpg\"); }",
+          "http://x.y.z"
+      );
+    });
+
+    it("Location with no path, path with filename", function() {
+      assertUrl(
+          "body { background-image:url(a/bg.jpg); }",
+          "body { background-image:url(\"http://x.y.z/a/bg.jpg\"); }",
+          "http://x.y.z"
+      );
+    });
+    it("Location with no path, rel path with filename", function() {
+      assertUrl(
+          "body { background-image:url(./a/bg.jpg); }",
+          "body { background-image:url(\"http://x.y.z/a/bg.jpg\"); }",
+          "http://x.y.z"
+      );
+    });
+    it("Location with no path, root filename", function() {
+      assertUrl(
+          "body { background-image:url(/a/bg.jpg); }",
+          "body { background-image:url(\"http://x.y.z/a/bg.jpg\"); }",
+          "http://x.y.z"
+      );
+    });
+});
