diff --git a/tests/vm/Makefile.include b/tests/vm/Makefile.include
index 4e041103b7..99c06832ac 100644
--- a/tests/vm/Makefile.include
+++ b/tests/vm/Makefile.include
@@ -41,6 +41,7 @@ endif
 	@echo "    J=[0..9]*            	 - Override the -jN parameter for make commands"
 	@echo "    DEBUG=1              	 - Enable verbose output on host and interactive debugging"
 	@echo "    V=1				 - Enable verbose ouput on host and guest commands"
+	@echo "    QEMU_LOCAL=1                 - Use QEMU binary local to this build."
 	@echo "    QEMU=/path/to/qemu		 - Change path to QEMU binary"
 	@echo "    QEMU_IMG=/path/to/qemu-img	 - Change path to qemu-img tool"
 ifeq ($(PYTHON_YAML),yes)
@@ -62,6 +63,7 @@ $(IMAGES_DIR)/%.img:	$(SRC_PATH)/tests/vm/% \
 	$(call quiet-command, \
 		$(PYTHON) $< \
 		$(if $(V)$(DEBUG), --debug) \
+		--build-path $(BUILD_DIR)\
 		--image "$@" \
 		--force \
 		--build-image $@, \
@@ -76,6 +78,7 @@ vm-build-%: $(IMAGES_DIR)/%.img
 		$(if $(DEBUG), --interactive) \
 		$(if $(J),--jobs $(J)) \
 		$(if $(V),--verbose) \
+		--build-path $(BUILD_DIR)\
 		--image "$<" \
 		$(if $(BUILD_TARGET),--build-target $(BUILD_TARGET)) \
 		--snapshot \
@@ -97,6 +100,7 @@ vm-boot-ssh-%: $(IMAGES_DIR)/%.img
 		$(PYTHON) $(SRC_PATH)/tests/vm/$* \
 		$(if $(J),--jobs $(J)) \
 		$(if $(V)$(DEBUG), --debug) \
+		--build-path $(BUILD_DIR)\
 		--image "$<" \
 		--interactive \
 		false, \
diff --git a/tests/vm/basevm.py b/tests/vm/basevm.py
index 97f8ac4218..1cb104c402 100644
--- a/tests/vm/basevm.py
+++ b/tests/vm/basevm.py
@@ -86,8 +86,10 @@ class BaseVM(object):
     # 4 is arbitrary, but greater than 2,
     # since we found we need to wait more than twice as long.
     tcg_ssh_timeout_multiplier = 4
-    def __init__(self, debug=False, vcpus=None, config=None):
+    def __init__(self, debug=False, vcpus=None, config=None,
+                 build_path=None):
         self._guest = None
+        self._build_path = build_path
         # Allow input config to override defaults.
         self._config = DEFAULT_CONFIG.copy()
         if config != None:
@@ -272,15 +274,15 @@ class BaseVM(object):
         args = self._args + boot_params.split(' ')
         args += self._data_args + extra_args + self._config['extra_args']
         logging.debug("QEMU args: %s", " ".join(args))
-        qemu_bin = os.environ.get("QEMU", "qemu-system-" + self.arch)
-        guest = QEMUMachine(binary=qemu_bin, args=args)
+        qemu_path = get_qemu_path(self.arch, self._build_path)
+        guest = QEMUMachine(binary=qemu_path, args=args)
         guest.set_machine(self._config['machine'])
         guest.set_console()
         try:
             guest.launch()
         except:
             logging.error("Failed to launch QEMU, command line:")
-            logging.error(" ".join([qemu_bin] + args))
+            logging.error(" ".join([qemu_path] + args))
             logging.error("Log:")
             logging.error(guest.get_log())
             logging.error("QEMU version >= 2.10 is required")
@@ -479,6 +481,22 @@ class BaseVM(object):
                                stderr=self._stdout)
         return os.path.join(cidir, "cloud-init.iso")
 
+def get_qemu_path(arch, build_path=None):
+    """Fetch the path to the qemu binary."""
+    qemu_local = os.environ.get("QEMU_LOCAL", 0)
+    # If QEMU environment variable set, it takes precedence
+    if "QEMU" in os.environ:
+        qemu_path = os.environ["QEMU"]
+    elif qemu_local:
+        if not build_path:
+            raise Exception("--build-path option required with QEMU_LOCAL")
+        qemu_path = os.path.join(build_path, arch + "-softmmu")
+        qemu_path = os.path.join(qemu_path, "qemu-system-" + arch)
+    else:
+        # Default is to use system path for qemu.
+        qemu_path = "qemu-system-" + arch
+    return qemu_path
+
 def parse_config(config, args):
     """ Parse yaml config and populate our config structure.
         The yaml config allows the user to override the
@@ -551,6 +569,8 @@ def parse_args(vmcls):
     parser.add_option("--config", "-c", default=None,
                       help="Provide config yaml for configuration. "\
                            "See config_example.yaml for example.")
+    parser.add_option("--build-path", default=None,
+                      help="Path of build directory. ")
     parser.disable_interspersed_args()
     return parser.parse_args()
 
@@ -565,7 +585,8 @@ def main(vmcls, config=None):
         config = parse_config(config, args)
         logging.basicConfig(level=(logging.DEBUG if args.debug
                                    else logging.WARN))
-        vm = vmcls(debug=args.debug, vcpus=args.jobs, config=config)
+        vm = vmcls(debug=args.debug, vcpus=args.jobs, config=config,
+                   build_path=args.build_path)
         if args.build_image:
             if os.path.exists(args.image) and not args.force:
                 sys.stderr.writelines(["Image file exists: %s\n" % args.image,
