diff --git a/scripts/oe-setup-builddir b/scripts/oe-setup-builddir
index b06880c9cb..201cea30bf 100755
--- a/scripts/oe-setup-builddir
+++ b/scripts/oe-setup-builddir
@@ -46,7 +46,10 @@ fi
 
 . "$OEROOT/.templateconf"
 
-# 
+# Keep the original TEMPLATECONF before possibly prefixing it with $OEROOT below.
+ORG_TEMPLATECONF=$TEMPLATECONF
+
+#
 # $TEMPLATECONF can point to a directory for the template local.conf & bblayers.conf
 #
 if [ -n "$TEMPLATECONF" ]; then
@@ -131,5 +134,5 @@ fi
 unset OECORENOTESCONF
 
 if [ ! -f "$BUILDDIR/conf/templateconf.cfg" ]; then
-    echo "$TEMPLATECONF" >"$BUILDDIR/conf/templateconf.cfg"
+    echo "$ORG_TEMPLATECONF" >"$BUILDDIR/conf/templateconf.cfg"
 fi