diff --git a/ChangeLog.md b/ChangeLog.md
--- a/ChangeLog.md
+++ b/ChangeLog.md
@@ -1,3 +1,7 @@
+## 1.4.9.2
+
+* Collapse paths in keter bundles, see [mailing list thread](https://groups.google.com/d/msg/yesodweb/Ndd310qfSEc/pZOXldsKowsJ)
+
 ## 1.4.9
 
 * Command line options for `yesod init` [#986](https://github.com/yesodweb/yesod/pull/986)
diff --git a/Keter.hs b/Keter.hs
--- a/Keter.hs
+++ b/Keter.hs
@@ -60,12 +60,18 @@
             go ("exec", String s) = tellFile s
             go ("extraFiles", Array a) = Fold.mapM_ tellExtra a
             go (_, v') = findFiles v'
-            tellFile s = tell ["config" </> T.unpack s]
+            tellFile s = tell [collapse $ "config" </> T.unpack s]
             tellExtra (String s) = tellFile s
             tellExtra _          = error "extraFiles should be a flat array"
         findFiles (Array v) = Fold.mapM_ findFiles v
         findFiles _ = return ()
         bundleFiles = execWriter $ findFiles $ Object value
+
+        collapse = T.unpack . T.intercalate "/" . collapse' . T.splitOn "/" . T.pack
+        collapse' (_:"..":rest) = collapse' rest
+        collapse' (".":xs) = collapse' xs
+        collapse' (x:xs) = x : collapse' xs
+        collapse' [] = []
 
     unless noBuild $ do
         run cabal ["clean"]
diff --git a/yesod-bin.cabal b/yesod-bin.cabal
--- a/yesod-bin.cabal
+++ b/yesod-bin.cabal
@@ -1,5 +1,5 @@
 name:            yesod-bin
-version:         1.4.9.1
+version:         1.4.9.2
 license:         MIT
 license-file:    LICENSE
 author:          Michael Snoyman <michael@snoyman.com>