diff --git a/.gitignore b/.gitignore
index c82216832..fc2fb4eb7 100644
--- a/.gitignore
+++ b/.gitignore
@@ -2,10 +2,10 @@ Thumbs.db
 src/brackets.css
 src/brackets.min.css
 
-# ignore everything in the user extension directory EXCEPT the README
+# ignore everything in the dev extension directory EXCEPT the README
 # (so that the directory is non-empty and can be in git)
-src/extensions/user/*
-!src/extensions/user/README
+src/extensions/dev/*
+!src/extensions/dev/README
 
 #OSX .DS_Store files
 .DS_Store
diff --git a/src/brackets.js b/src/brackets.js
index 634eb04b8..a04537d68 100644
--- a/src/brackets.js
+++ b/src/brackets.js
@@ -110,16 +110,44 @@ define(function (require, exports, module) {
     require("search/FindReplace");
     require("utils/ExtensionUtils");
     
+    /**
+     * Returns the full path of the default user extensions directory. This is in the users
+     * application support directory, which is typically:
+     *  /Users/<user>/Application Support/Brackets/extensions/user on the mac
+     *  C:\Users\<user>\AppData\Roaming\Brackets\extensions\user on windows.
+     */
+    function _getUserExtensionPath() {
+        return brackets.app.getApplicationSupportDirectory() + "/extensions/user";
+    }
+    
     // TODO: (issue 1029) Add timeout to main extension loading promise, so that we always call this function
     // Making this fix will fix a warning (search for issue 1029) related to the global brackets 'ready' event.
     function _initExtensions() {
         // allow unit tests to override which plugin folder(s) to load
-        var paths = params.get("extensions") || "default,user";
+        var paths = params.get("extensions");
+        
+        if (!paths) {
+            paths = "default,dev," + _getUserExtensionPath();
+        }
         
         return Async.doInParallel(paths.split(","), function (item) {
+            var extensionPath,
+                relativePath;
+            
+            // If the item has "/" in it, assume it is a full path. Otherwise, load
+            // from our source path + "/extensions/".
+            if (item.indexOf("/") === -1) {
+                extensionPath = FileUtils.getNativeBracketsDirectoryPath() + "/extensions/" + item;
+                relativePath = "extensions/" + item;
+            } else {
+                extensionPath = item;
+                relativePath = PathUtils.makePathRelative(extensionPath,
+                                                          FileUtils.getNativeBracketsDirectoryPath() + "/");
+            }
+            
             return ExtensionLoader.loadAllExtensionsInNativeDirectory(
-                FileUtils.getNativeBracketsDirectoryPath() + "/extensions/" + item,
-                "extensions/" + item
+                extensionPath,
+                relativePath
             );
         });
     }
@@ -242,6 +270,16 @@ define(function (require, exports, module) {
         ProjectManager.openProject(initialProjectPath).always(function () {
             _initTest();
 
+            // Create a new DirectoryEntry and call getDirectory() on the user extension
+            // directory. If the directory doesn't exist, it will be created.
+            // Note that this is an async call and there are no success or failure functions passed
+            // in. If the directory *doesn't* exist, it will be created. Extension loading may happen
+            // before the directory is finished being created, but that is okay, since the extension
+            // loading will work correctly without this directory.
+            // If the directory *does* exist, nothing else needs to be done. It will be scanned normally
+            // during extension loading.
+            new NativeFileSystem.DirectoryEntry().getDirectory(_getUserExtensionPath(), {create: true});
+            
             // WARNING: AppInit.appReady won't fire if ANY extension fails to
             // load or throws an error during init. To fix this, we need to
             // make a change to _initExtensions (filed as issue 1029)
diff --git a/src/extensions/dev/README.txt b/src/extensions/dev/README.txt
new file mode 100644
index 000000000..aaae1c23f
--- /dev/null
+++ b/src/extensions/dev/README.txt
@@ -0,0 +1,6 @@
+This directory contains extensions that are being developed. User-installed
+extensions are placed in the "user" extensions directory, which can be accessed
+by running the _Help > Show Extensions Folder_ menu command. The contents of
+this directory (except the README file) are ignored by git.
+
+(README also serves as a dummy file so this directory can be added to git.)
diff --git a/src/extensions/user/README.txt b/src/extensions/user/README.txt
deleted file mode 100644
index 4b3e83f0e..000000000
--- a/src/extensions/user/README.txt
+++ /dev/null
@@ -1,4 +0,0 @@
-This directory contains extensions enabled by the user. The contents of
-this directory (except the README file) are ignored by git.
-
-(README also serves as a dummy file so this directory can be added to git.)
diff --git a/src/utils/ExtensionLoader.js b/src/utils/ExtensionLoader.js
index c4da6bb41..4eb66acc4 100644
--- a/src/utils/ExtensionLoader.js
+++ b/src/utils/ExtensionLoader.js
@@ -39,8 +39,8 @@ define(function (require, exports, module) {
         Async               = require("utils/Async"),
         contexts            = {},
         globalConfig        = {
-            "text" : "../../../thirdparty/text",
-            "i18n" : "../../../thirdparty/i18n"
+            "text" : FileUtils.getNativeBracketsDirectoryPath() + "/thirdparty/text",
+            "i18n" : FileUtils.getNativeBracketsDirectoryPath() + "/thirdparty/i18n"
         };
     
     /**