diff --git a/lib/layouts/sweave.module b/lib/layouts/sweave.module
index a77fd1e09b..e1b25e554c 100644
--- a/lib/layouts/sweave.module
+++ b/lib/layouts/sweave.module
@@ -17,6 +17,13 @@ ClassOptions
 	Other          "noae"
 End
 
+Preamble
+	<<echo=F>>=
+	  if(exists("ls.dir")) setwd(ls.dir)
+	  if(exists("ls.enc")) options(encoding=ls.enc)
+	@
+EndPreamble
+
 Style Chunk
 	Category              Sweave
 	LatexType             Paragraph
diff --git a/lib/scripts/lyxsweave.R b/lib/scripts/lyxsweave.R
index a8ab184984..1723cd7166 100644
--- a/lib/scripts/lyxsweave.R
+++ b/lib/scripts/lyxsweave.R
@@ -1,6 +1,7 @@
 # Wrapper around Sweave that sets up some things for LyX
 # argument 1 is the file name
 # argument 2 is the iconv name for the encoding of the file
+# argument 3 is the document directory
 
 ls.args <- commandArgs(trailingOnly=T)
 
@@ -8,8 +9,13 @@ ls.args <- commandArgs(trailingOnly=T)
 ls.sweavesty <- system("kpsewhich Sweave.sty", intern=T, ignore.stderr=T)
 ls.sp <- (length(ls.sweavesty) == 0)
 
-# set default encoding to the one of the file
+# set default encoding to the one of the file; it will be reset to previous
+# default by the sweave module
+ls.enc=getOption("encoding")
 options(encoding=ls.args[2])
 
+# pass document dir to sweave module
+ls.dir <- ls.args[3]
+
 #run sweave
 Sweave(ls.args[1], stylepath=ls.sp)