diff --git a/README.rst b/README.rst
index 4c4ed0eec..53800f8c7 100644
--- a/README.rst
+++ b/README.rst
@@ -650,7 +650,7 @@ and its KMS and PGP keys are used to encrypt the file. It should be noted that
 the looking up of ``.sops.yaml`` is from the working directory (CWD) instead of
 the directory of the encrypting file (see `Issue 242 <https://github.com/mozilla/sops/issues/242>`_).
 
-The path_regex checks the full path of the encrypting file. Here is another example:
+The path_regex checks the path of the encrypting file relative to the .sops.yaml config file. Here is another example:
 
 * files located under directory **development** should use one set of KMS A
 * files located under directory **production** should use another set of KMS B
diff --git a/config/config.go b/config/config.go
index 18a71c3df..f1baf0d93 100644
--- a/config/config.go
+++ b/config/config.go
@@ -8,7 +8,9 @@ import (
 	"io/ioutil"
 	"os"
 	"path"
+	"path/filepath"
 	"regexp"
+	"strings"
 
 	"gopkg.in/yaml.v3"
 	"github.com/sirupsen/logrus"
@@ -313,12 +315,20 @@ func parseDestinationRuleForFile(conf *configFile, filePath string, kmsEncryptio
 	return config, nil
 }
 
-func parseCreationRuleForFile(conf *configFile, filePath string, kmsEncryptionContext map[string]*string) (*Config, error) {
+func parseCreationRuleForFile(conf *configFile, confPath, filePath string, kmsEncryptionContext map[string]*string) (*Config, error) {
 	// If config file doesn't contain CreationRules (it's empty or only contains DestionationRules), assume it does not exist
 	if conf.CreationRules == nil {
 		return nil, nil
 	}
 
+	configDir, err := filepath.Abs(filepath.Dir(confPath))
+	if err != nil {
+		return nil, err
+	}
+
+	// compare file path relative to path of config file
+	filePath = strings.TrimPrefix(filePath, configDir + string(filepath.Separator))
+
 	var rule *creationRule
 
 	for _, r := range conf.CreationRules {
@@ -354,7 +364,8 @@ func LoadCreationRuleForFile(confPath string, filePath string, kmsEncryptionCont
 	if err != nil {
 		return nil, err
 	}
-	return parseCreationRuleForFile(conf, filePath, kmsEncryptionContext)
+
+	return parseCreationRuleForFile(conf, confPath, filePath, kmsEncryptionContext)
 }
 
 // LoadDestinationRuleForFile works the same as LoadCreationRuleForFile, but gets the "creation_rule" from the matching destination_rule's
diff --git a/config/config_test.go b/config/config_test.go
index 183eb7836..6ec5a2dc6 100644
--- a/config/config_test.go
+++ b/config/config_test.go
@@ -75,6 +75,15 @@ creation_rules:
     hc_vault_uris: https://foz:443/v1/foz/keys/foz
 `)
 
+var sampleConfigWithAmbiguousPath = []byte(`
+creation_rules:
+  - path_regex: foo/*
+    kms: "1"
+    pgp: "2"
+    gcp_kms: "3"
+    hc_vault_uris: http://4:8200/v1/4/keys/4
+`)
+
 var sampleConfigWithGroups = []byte(`
 creation_rules:
   - path_regex: foobar*
@@ -281,56 +290,56 @@ func TestLoadConfigFileWithGroups(t *testing.T) {
 }
 
 func TestLoadConfigFileWithNoMatchingRules(t *testing.T) {
-	_, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithNoMatchingRules, t), "foobar2000", nil)
+	_, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithNoMatchingRules, t), "/conf/path", "foobar2000", nil)
 	assert.NotNil(t, err)
 }
 
 func TestLoadEmptyConfigFile(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleEmptyConfig, t), "foobar2000", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleEmptyConfig, t), "/conf/path", "foobar2000", nil)
 	assert.Nil(t, conf)
 	assert.Nil(t, err)
 }
 
 func TestLoadConfigFileWithEmptyCreationRules(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithEmptyCreationRules, t), "foobar2000", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithEmptyCreationRules, t), "/conf/path", "foobar2000", nil)
 	assert.Nil(t, conf)
 	assert.Nil(t, err)
 }
 
 func TestLoadConfigFileWithOnlyDestinationRules(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithOnlyDestinationRules, t), "foobar2000", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithOnlyDestinationRules, t), "/conf/path", "foobar2000", nil)
 	assert.Nil(t, conf)
 	assert.Nil(t, err)
 }
 
 func TestKeyGroupsForFile(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfig, t), "foobar2000", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfig, t), "/conf/path", "foobar2000", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "2", conf.KeyGroups[0][0].ToString())
 	assert.Equal(t, "1", conf.KeyGroups[0][1].ToString())
-	conf, err = parseCreationRuleForFile(parseConfigFile(sampleConfig, t), "whatever", nil)
+	conf, err = parseCreationRuleForFile(parseConfigFile(sampleConfig, t), "/conf/path", "whatever", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "bar", conf.KeyGroups[0][0].ToString())
 	assert.Equal(t, "foo", conf.KeyGroups[0][1].ToString())
 }
 
 func TestKeyGroupsForFileWithPath(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithPath, t), "foo/bar2000", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithPath, t), "/conf/path", "foo/bar2000", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "2", conf.KeyGroups[0][0].ToString())
 	assert.Equal(t, "1", conf.KeyGroups[0][1].ToString())
-	conf, err = parseCreationRuleForFile(parseConfigFile(sampleConfigWithPath, t), "somefilename.yml", nil)
+	conf, err = parseCreationRuleForFile(parseConfigFile(sampleConfigWithPath, t), "/conf/path", "somefilename.yml", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "baggins", conf.KeyGroups[0][0].ToString())
 	assert.Equal(t, "bilbo", conf.KeyGroups[0][1].ToString())
-	conf, err = parseCreationRuleForFile(parseConfigFile(sampleConfig, t), "whatever", nil)
+	conf, err = parseCreationRuleForFile(parseConfigFile(sampleConfig, t), "/conf/path", "whatever", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "bar", conf.KeyGroups[0][0].ToString())
 	assert.Equal(t, "foo", conf.KeyGroups[0][1].ToString())
 }
 
 func TestKeyGroupsForFileWithGroups(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithGroups, t), "whatever", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithGroups, t), "/conf/path", "whatever", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "bar", conf.KeyGroups[0][0].ToString())
 	assert.Equal(t, "foo", conf.KeyGroups[0][1].ToString())
@@ -339,31 +348,39 @@ func TestKeyGroupsForFileWithGroups(t *testing.T) {
 }
 
 func TestLoadConfigFileWithUnencryptedSuffix(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithSuffixParameters, t), "foobar", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithSuffixParameters, t), "/conf/path", "foobar", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "_unencrypted", conf.UnencryptedSuffix)
 }
 
 func TestLoadConfigFileWithEncryptedSuffix(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithSuffixParameters, t), "barfoo", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithSuffixParameters, t), "/conf/path", "barfoo", nil)
 	assert.Nil(t, err)
 	assert.Equal(t, "_enc", conf.EncryptedSuffix)
 }
 
 func TestLoadConfigFileWithUnencryptedRegex(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithRegexParameters, t), "barbar", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithRegexParameters, t), "/conf/path", "barbar", nil)
 	assert.Equal(t, nil, err)
 	assert.Equal(t, "^dec:", conf.UnencryptedRegex)
 }
 
 func TestLoadConfigFileWithEncryptedRegex(t *testing.T) {
-	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithRegexParameters, t), "barbar", nil)
+	conf, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithRegexParameters, t), "/conf/path", "barbar", nil)
 	assert.Equal(t, nil, err)
 	assert.Equal(t, "^enc:", conf.EncryptedRegex)
 }
 
 func TestLoadConfigFileWithInvalidParameters(t *testing.T) {
-	_, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithInvalidParameters, t), "foobar", nil)
+	_, err := parseCreationRuleForFile(parseConfigFile(sampleConfigWithInvalidParameters, t), "/conf/path", "foobar", nil)
+	assert.NotNil(t, err)
+}
+
+func TestLoadConfigFileWithAmbiguousPath(t *testing.T) {
+	config := parseConfigFile(sampleConfigWithAmbiguousPath, t)
+	_, err := parseCreationRuleForFile(config, "/foo/config", "/foo/foo/bar", nil)
+	assert.Nil(t, err)
+	_, err = parseCreationRuleForFile(config, "/foo/config", "/foo/fuu/bar", nil)
 	assert.NotNil(t, err)
 }