diff --git a/tools/resources/__init__.py b/tools/resources/__init__.py
index ccb03a79b0..5d3d6446a3 100644
--- a/tools/resources/__init__.py
+++ b/tools/resources/__init__.py
@@ -261,26 +261,26 @@ class Resources(object):
         return list(self._file_refs[file_type])
 
     def _all_parents(self, files):
-        for name in files:
+        for name, path in files:
             components = name.split(self._sep)
-            start_at = 2 if components[0] in set(['', '.']) else 1
-            for index, directory in reversed(list(enumerate(components))[start_at:]):
+            start_at = 0
+            for index, directory in reversed(list(enumerate(components))):
                 if directory in self._prefixed_labels:
                     start_at = index + 1
                     break
+            prefix = path.replace(name, "")
             for n in range(start_at, len(components)):
-                parent = self._sep.join(components[:n])
-                yield parent
+                parent_name = self._sep.join(components[:n])
+                parent_path = join(prefix, *components[:n])
+                yield FileRef(parent_name, parent_path)
 
     def _get_from_refs(self, file_type, key):
         if file_type is FileType.INC_DIR:
-            parents = set(self._all_parents(self._get_from_refs(
-                FileType.HEADER, key)))
-            parents.add(".")
+            parents = set(self._all_parents(self._file_refs[FileType.HEADER]))
         else:
             parents = set()
         return sorted(
-            list(parents) + [key(f) for f in self.get_file_refs(file_type)]
+            [key(f) for f in list(parents) + self.get_file_refs(file_type)]
         )
 
 
diff --git a/tools/toolchains/arm.py b/tools/toolchains/arm.py
index 15b844ddeb..abc1b32f39 100644
--- a/tools/toolchains/arm.py
+++ b/tools/toolchains/arm.py
@@ -188,7 +188,7 @@ class ARM(mbedToolchain):
         if self.RESPONSE_FILES:
             opts += ['--via', self.get_inc_file(includes)]
         else:
-            opts += ["-I%s" % i for i in includes]
+            opts += ["-I%s" % i for i in includes if i]
 
         return opts
 
@@ -474,7 +474,7 @@ class ARMC6(ARM_STD):
 
     def get_compile_options(self, defines, includes, for_asm=False):
         opts = ['-D%s' % d for d in defines]
-        opts.extend(["-I%s" % i for i in includes])
+        opts.extend(["-I%s" % i for i in includes if i])
         if for_asm:
             return ["--cpreproc",
                     "--cpreproc_opts=%s" % ",".join(self.flags['common'] + opts)]