diff --git a/Tools/xcodecapp-cocoa/FSEventCallback.m b/Tools/xcodecapp-cocoa/FSEventCallback.m
index 23b4b9248..78a7387fd 100644
--- a/Tools/xcodecapp-cocoa/FSEventCallback.m
+++ b/Tools/xcodecapp-cocoa/FSEventCallback.m
@@ -36,7 +36,7 @@ void fsevents_callback(ConstFSEventStreamRef streamRef,
     
     for (i = 0; i < numEvents; i++)
     {
-        NSString *path = [(NSArray *)eventPaths objectAtIndex:i];
+        NSString *path = [[(NSArray *)eventPaths objectAtIndex:i] stringByStandardizingPath];
 
         if (useFileBasedListening)
         {
@@ -55,27 +55,35 @@ void fsevents_callback(ConstFSEventStreamRef streamRef,
         else
         {
             NSArray *subpaths = [[NSFileManager defaultManager] contentsOfDirectoryAtPath:path error:NULL];
-            
+
+            // Uncomment to test under 10.7
+            // BOOL isDir;
+            // [[NSFileManager defaultManager] fileExistsAtPath:path isDirectory:&isDir];
+            // if (!isDir)
+            //    continue;
+
+            [xcc tidyShadowedFiles:path];
+
             for (NSString *subpath in subpaths)
-            {                
-                NSString *fullPath = [NSString stringWithFormat:@"%@%@", path, subpath];
+            {
+                NSString *fullPath = [[NSString stringWithFormat:@"%@/%@", path, subpath] stringByStandardizingPath];
 
                 if ([xcc isPathMatchingIgnoredPaths:fullPath]
                     || (![xcc isXIBFile:fullPath] && ![xcc isObjJFile:fullPath] && ![xcc isXCCIgnoreFile:fullPath]))
                     continue;
 
-                NSDate *lastModifiedDate = [xcc lastModificationDateForPath:subpath];
+                NSDate *lastModifiedDate = [xcc lastModificationDateForPath:fullPath];
                 NSDictionary *fileAttributes = [[NSFileManager defaultManager] attributesOfItemAtPath:fullPath error:nil];
                 NSDate *fileModDate = [fileAttributes objectForKey:NSFileModificationDate];
-                
+
                 if ([fileModDate compare:lastModifiedDate] == NSOrderedDescending)
                 {
-                    [xcc updateLastModificationDate:fileModDate forPath:subpath];
+                    [xcc updateLastModificationDate:fileModDate forPath:fullPath];
                     [xcc handleFileModification:fullPath notify:YES];
                 }
             }
         }
-        
+
         [xcc updateLastEventId:eventIds[i]];
     }
 }
diff --git a/Tools/xcodecapp-cocoa/TNXCodeCapp.h b/Tools/xcodecapp-cocoa/TNXCodeCapp.h
index e2aac92a2..0f9bb7297 100644
--- a/Tools/xcodecapp-cocoa/TNXCodeCapp.h
+++ b/Tools/xcodecapp-cocoa/TNXCodeCapp.h
@@ -75,10 +75,13 @@ extern NSString * const XCCListeningStartNotification;
 
 @end
 
+
 @interface TNXCodeCapp (SnowLeopard)
 
 - (void)updateLastModificationDate:(NSDate *)date forPath:(NSString *)path;
 - (NSDate*)lastModificationDateForPath:(NSString *)path;
+- (NSString *)unshadowURLForString:(NSString *)aString;
+- (void)tidyShadowedFiles:(NSString*)basePath;
 
 @end
 
diff --git a/Tools/xcodecapp-cocoa/TNXCodeCapp.m b/Tools/xcodecapp-cocoa/TNXCodeCapp.m
index 10f3c941f..24f2d3a91 100644
--- a/Tools/xcodecapp-cocoa/TNXCodeCapp.m
+++ b/Tools/xcodecapp-cocoa/TNXCodeCapp.m
@@ -56,7 +56,9 @@ NSString * const XCCListeningStartNotification = @"XCCListeningStartNotification
         Gestalt(gestaltSystemVersionMinor, &versionMinor);
         
         supportsFileBasedListening = versionMajor >= 10 && versionMinor >= 7;
-        
+        // Uncomment to test under 10.7
+        // supportsFileBasedListening = NO;
+
         if (supportsFileBasedListening)
             DLog(@"using 10.7+ mode listening (clean)");
         else
@@ -544,7 +546,11 @@ NSString * const XCCListeningStartNotification = @"XCCListeningStartNotification
             pathModificationDates = [NSMutableDictionary new];
     }
 
-    [pathModificationDates setObject:[date retain] forKey:path];
+    if (date)
+        [pathModificationDates setObject:[date retain] forKey:path];
+    else
+        [pathModificationDates removeObjectForKey:path];
+
     [[NSUserDefaults standardUserDefaults] setObject:pathModificationDates forKey:@"pathModificationDates"];
 }
 
@@ -564,4 +570,38 @@ NSString * const XCCListeningStartNotification = @"XCCListeningStartNotification
         return appStartedTimestamp;
 }
 
+- (NSString *)unshadowURLForString:(NSString *)aString
+{
+    NSMutableString * unshadowedPath = [NSMutableString stringWithString:aString];
+
+    [unshadowedPath replaceOccurrencesOfString:@"_"
+                             withString:@"/"
+                                options:NSCaseInsensitiveSearch
+                                  range:NSMakeRange(0, [unshadowedPath length])];
+
+    [unshadowedPath replaceOccurrencesOfString:@".h"
+                                    withString:@".j"
+                                       options:NSCaseInsensitiveSearch
+                                         range:NSMakeRange(0, [unshadowedPath length])];
+
+    return [NSString stringWithString:unshadowedPath];
+}
+
+- (void)tidyShadowedFiles:(NSString*)basePath
+{
+    NSArray *subpaths = [[NSFileManager defaultManager] contentsOfDirectoryAtPath:[XCodeSupportProjectSources path] error:NULL];
+
+    for (NSString *subpath in subpaths)
+    {
+        NSString *unshadowed = [self unshadowURLForString:subpath];
+        NSString *shadowFullPath = [NSString stringWithFormat:@"%@/%@", [XCodeSupportProjectSources path], subpath];
+        if (![fm fileExistsAtPath:unshadowed])
+        {
+            DLog(@"cleaning shadow file: %@", subpath);
+            [fm removeItemAtPath:shadowFullPath error:nil];
+            [self updateLastModificationDate:nil forPath:unshadowed];
+        }
+    }
+}
+
 @end