diff --git a/dev/core/src/com/google/gwt/dev/Compiler.java b/dev/core/src/com/google/gwt/dev/Compiler.java
index c66c979..cdb318c 100644
--- a/dev/core/src/com/google/gwt/dev/Compiler.java
+++ b/dev/core/src/com/google/gwt/dev/Compiler.java
@@ -202,7 +202,7 @@
 
       File persistentUnitCacheDir = null;
       if (options.getWarDir() != null && !options.getWarDir().getName().endsWith(".jar")) {
-        persistentUnitCacheDir = new File(options.getWarDir(), "WEB-INF");
+        persistentUnitCacheDir = new File(options.getWarDir(), "../");
       }
       CompilationStateBuilder.init(logger, persistentUnitCacheDir);
 
diff --git a/dev/core/src/com/google/gwt/dev/DevMode.java b/dev/core/src/com/google/gwt/dev/DevMode.java
index c3cd4f1..47845a4 100644
--- a/dev/core/src/com/google/gwt/dev/DevMode.java
+++ b/dev/core/src/com/google/gwt/dev/DevMode.java
@@ -418,7 +418,7 @@
 
     File persistentCacheDir = null;
     if (options.getWarDir() != null && !options.getWarDir().getName().endsWith(".jar")) {
-      persistentCacheDir = new File(options.getWarDir(), "WEB-INF");
+      persistentCacheDir = new File(options.getWarDir(), "../");
     }
 
     if (!super.doStartup(persistentCacheDir)) {