diff --git a/Cargo.toml b/Cargo.toml
index d05d3737ac..94cc096773 100644
--- a/Cargo.toml
+++ b/Cargo.toml
@@ -39,6 +39,8 @@ tempdir = "0.3.4"
 itertools = "0.7"
 shlex = "0.1"
 toml-query = "0.6"
+relative-path = { version = "0.3", features = ["serde"] }
+url = "1.6"
 
 # Watch feature
 notify = { version = "4.0", optional = true }
diff --git a/book-example/src/SUMMARY.md b/book-example/src/SUMMARY.md
index aba9ab5d45..15531178b5 100644
--- a/book-example/src/SUMMARY.md
+++ b/book-example/src/SUMMARY.md
@@ -19,5 +19,6 @@
 - [For Developers](for_developers/index.md)
     - [Preprocessors](for_developers/preprocessors.md)
     - [Alternate Backends](for_developers/backends.md)
+- [Test](test.md)
 -----------
 [Contributors](misc/contributors.md)
diff --git a/book-example/src/cli/init.md b/book-example/src/cli/init.md
index 43d1ae02d3..781153cd83 100644
--- a/book-example/src/cli/init.md
+++ b/book-example/src/cli/init.md
@@ -22,7 +22,7 @@ configuration files, etc.
 - The `book` directory is where your book is rendered. All the output is ready to be uploaded
 to a server to be seen by your audience.
 
-- The `SUMMARY.md` file is the most important file, it's the skeleton of your book and is discussed in more detail in another  [chapter](format/summary.html).
+- The `SUMMARY.md` file is the most important file, it's the skeleton of your book and is discussed in more detail in another  [chapter](../format/summary.md).
 
 #### Tip & Trick: Hidden Feature
 When a `SUMMARY.md` file already exists, the `init` command will first parse it and generate the missing files according to the paths used in the `SUMMARY.md`. This allows you to think and create the whole structure of your book and then let mdBook generate it for you.
diff --git a/book-example/src/for_developers/index.md b/book-example/src/for_developers/index.md
index 4f173c904d..ae1069fc8b 100644
--- a/book-example/src/for_developers/index.md
+++ b/book-example/src/for_developers/index.md
@@ -11,8 +11,8 @@ The *For Developers* chapters are here to show you the more advanced usage of
 
 The two main ways a developer can hook into the book's build process is via,
 
-- [Preprocessors](for_developers/preprocessors.html)
-- [Alternate Backends](for_developers/backends.html)
+- [Preprocessors](preprocessors.md)
+- [Alternate Backends](backends.md)
 
 
 ## The Build Process
diff --git a/book-example/src/test.md b/book-example/src/test.md
new file mode 100644
index 0000000000..9e7c5a1ec5
--- /dev/null
+++ b/book-example/src/test.md
@@ -0,0 +1,5 @@
+# This is just a test page
+
+* [Link to format summary](format/summary.md)
+* [Link to directory (doesn't behave well)](format)
+* [Bad Link :(](format/bad.md)
diff --git a/src/lib.rs b/src/lib.rs
index 559cec303a..8326cee2cb 100644
--- a/src/lib.rs
+++ b/src/lib.rs
@@ -95,6 +95,8 @@ extern crate shlex;
 extern crate tempdir;
 extern crate toml;
 extern crate toml_query;
+extern crate relative_path;
+extern crate url;
 
 #[cfg(test)]
 #[macro_use]
@@ -115,6 +117,7 @@ pub use config::Config;
 /// The error types used through out this crate.
 pub mod errors {
     use std::path::PathBuf;
+    use relative_path::FromPathError;
 
     error_chain!{
         foreign_links {
@@ -122,6 +125,7 @@ pub mod errors {
             HandlebarsRender(::handlebars::RenderError) #[doc = "Handlebars rendering failed"];
             HandlebarsTemplate(Box<::handlebars::TemplateError>) #[doc = "Unable to parse the template"];
             Utf8(::std::string::FromUtf8Error) #[doc = "Invalid UTF-8"];
+            FromPathError(FromPathError) #[doc = "Failed to convert to relative path"];
         }
 
         links {
diff --git a/src/renderer/html_handlebars/hbs_renderer.rs b/src/renderer/html_handlebars/hbs_renderer.rs
index 6535a4a3dd..ec47b558b5 100644
--- a/src/renderer/html_handlebars/hbs_renderer.rs
+++ b/src/renderer/html_handlebars/hbs_renderer.rs
@@ -13,6 +13,8 @@ use std::fs::{self, File};
 use std::io::{Read, Write};
 use std::collections::BTreeMap;
 use std::collections::HashMap;
+use std::collections::HashSet;
+use relative_path::{RelativePathBuf, RelativePath};
 
 use handlebars::Handlebars;
 
@@ -41,15 +43,39 @@ impl HtmlHandlebars {
 
     fn render_item(
         &self,
-                   item: &BookItem,
-                   mut ctx: RenderItemContext,
+        item: &BookItem,
+        targets: &HashSet<RelativePathBuf>,
+        mut ctx: RenderItemContext,
         print_content: &mut String,
     ) -> Result<()> {
         // FIXME: This should be made DRY-er and rely less on mutable state
         match *item {
             BookItem::Chapter(ref ch) => {
                 let content = ch.content.clone();
-                let content = utils::render_markdown(&content, ctx.html_config.curly_quotes);
+
+                let path = RelativePathBuf::from_path(&ch.path)?;
+                let parent = path.parent().unwrap_or(RelativePath::new("."));
+
+                let link_filter = utils::ChangeExtLinkFilter::new(
+                    parent,
+                    move |dest| {
+                        let check = parent.join_normalized(dest);
+
+                        if !targets.contains(&check) {
+                            warn!("link to non-existent destination: {:?}", dest);
+                            return false;
+                        }
+
+                        true
+                    },
+                    "md",
+                    "html",
+                );
+
+                let content = utils::render_markdown(
+                    &content, Some(&link_filter), ctx.html_config.curly_quotes
+                );
+
                 print_content.push_str(&content);
 
                 // Update the context with data for this file
@@ -307,6 +333,15 @@ impl Renderer for HtmlHandlebars {
         fs::create_dir_all(&destination)
             .chain_err(|| "Unexpected error when constructing destination path")?;
 
+        // valid link targets
+        let mut targets = HashSet::new();
+
+        for item in book.iter() {
+            if let BookItem::Chapter(ref ch) = *item {
+                targets.insert(RelativePathBuf::from_path(&ch.path)?);
+            }
+        }
+
         for (i, item) in book.iter().enumerate() {
             let ctx = RenderItemContext {
                 handlebars: &handlebars,
@@ -315,7 +350,7 @@ impl Renderer for HtmlHandlebars {
                 is_index: i == 0,
                 html_config: html_config.clone(),
             };
-            self.render_item(item, ctx, &mut print_content)?;
+            self.render_item(item, &targets, ctx, &mut print_content)?;
         }
 
         // Print version
diff --git a/src/utils/link_filter.rs b/src/utils/link_filter.rs
new file mode 100644
index 0000000000..e53f6e19b4
--- /dev/null
+++ b/src/utils/link_filter.rs
@@ -0,0 +1,61 @@
+use url::Url;
+use relative_path::RelativePath;
+
+/// Translate the given destination from a relative link with an '.md' extension, to a link with
+/// a '.html' extension.
+pub struct ChangeExtLinkFilter<'a, F> {
+    base: &'a RelativePath,
+    is_dest: F,
+    expected: &'a str,
+    ext: &'a str,
+}
+
+impl<'a, F> ChangeExtLinkFilter<'a, F>
+    where F: Fn(&RelativePath) -> bool
+{
+    pub fn new(base: &'a RelativePath, is_dest: F, expected: &'a str, ext: &'a str) -> ChangeExtLinkFilter<'a, F> {
+        ChangeExtLinkFilter {
+            base: base,
+            is_dest: is_dest,
+            expected: expected,
+            ext: ext,
+        }
+    }
+}
+
+impl<'a, F> LinkFilter for ChangeExtLinkFilter<'a, F>
+    where F: Fn(&RelativePath) -> bool
+{
+    fn apply(&self, dest: &str) -> Option<String> {
+        use url::ParseError;
+
+        // Verify that specified URL is relative.
+        if let Err(ParseError::RelativeUrlWithoutBase) = Url::parse(dest) {
+            // extract fragment.
+            let mut split = dest.splitn(2, '#');
+
+            if let Some(base) = split.next() {
+                let dest = RelativePath::new(base);
+
+                if Some(self.expected) == dest.extension() && (self.is_dest)(dest) {
+                    let dest = self.base.join_normalized(dest).with_extension(self.ext);
+                    let dest = dest.display().to_string();
+
+                    if let Some(fragment) = split.next() {
+                        return Some(format!("{}#{}", dest, fragment));
+                    }
+
+                    return Some(dest);
+                }
+            }
+        }
+
+        None
+    }
+}
+
+/// A filter to optionally apply to links.
+pub trait LinkFilter {
+    /// Optionally translate the given destination, if applicable.
+    fn apply(&self, dest: &str) -> Option<String>;
+}
diff --git a/src/utils/mod.rs b/src/utils/mod.rs
index 56291aeb10..4e307d545d 100644
--- a/src/utils/mod.rs
+++ b/src/utils/mod.rs
@@ -1,6 +1,7 @@
 #![allow(missing_docs)] // FIXME: Document this
 
 pub mod fs;
+mod link_filter;
 mod string;
 use errors::Error;
 
@@ -9,9 +10,14 @@ use pulldown_cmark::{html, Event, Options, Parser, Tag, OPTION_ENABLE_FOOTNOTES,
 use std::borrow::Cow;
 
 pub use self::string::{RangeArgument, take_lines};
+pub use self::link_filter::{LinkFilter, ChangeExtLinkFilter};
 
 /// Wrapper around the pulldown-cmark parser for rendering markdown to HTML.
-pub fn render_markdown(text: &str, curly_quotes: bool) -> String {
+pub fn render_markdown(
+    text: &str,
+    link_filter: Option<&LinkFilter>,
+    curly_quotes: bool,
+) -> String {
     let mut s = String::with_capacity(text.len() * 3 / 2);
 
     let mut opts = Options::empty();
@@ -19,10 +25,19 @@ pub fn render_markdown(text: &str, curly_quotes: bool) -> String {
     opts.insert(OPTION_ENABLE_FOOTNOTES);
 
     let p = Parser::new_ext(text, opts);
+
     let mut converter = EventQuoteConverter::new(curly_quotes);
+
     let events = p.map(clean_codeblock_headers)
                   .map(|event| converter.convert(event));
 
+    let events: Box<Iterator<Item = Event>> = if let Some(filter) = link_filter {
+        let mut link_filter_converter = LinkFilterConverter::new(filter);
+        Box::new(events.map(move |event| link_filter_converter.convert(event)))
+    } else {
+        Box::new(events)
+    };
+
     html::push_html(&mut s, events);
     s
 }
@@ -62,6 +77,31 @@ impl EventQuoteConverter {
     }
 }
 
+struct LinkFilterConverter<'filter> {
+    filter: &'filter LinkFilter,
+}
+
+impl<'filter> LinkFilterConverter<'filter> {
+    fn new(filter: &'filter LinkFilter) -> Self {
+        LinkFilterConverter {
+            filter: filter,
+        }
+    }
+
+    fn convert<'a>(&mut self, event: Event<'a>) -> Event<'a> {
+        match event {
+            Event::Start(Tag::Link(dest, title)) => {
+                if let Some(translated) = self.filter.apply(&dest) {
+                    return Event::Start(Tag::Link(Cow::Owned(translated), title));
+                }
+
+                Event::Start(Tag::Link(dest, title))
+            }
+            _ => event,
+        }
+    }
+}
+
 fn clean_codeblock_headers(event: Event) -> Event {
     match event {
         Event::Start(Tag::CodeBlock(ref info)) => {
@@ -118,10 +158,12 @@ pub fn log_backtrace(e: &Error) {
 mod tests {
     mod render_markdown {
         use super::super::render_markdown;
+        use super::super::ChangeExtLinkFilter;
+        use relative_path::RelativePath;
 
         #[test]
         fn it_can_keep_quotes_straight() {
-            assert_eq!(render_markdown("'one'", false), "<p>'one'</p>\n");
+            assert_eq!(render_markdown("'one'", None, false), "<p>'one'</p>\n");
         }
 
         #[test]
@@ -137,7 +179,7 @@ mod tests {
 </code></pre>
 <p><code>'three'</code> ‘four’</p>
 "#;
-            assert_eq!(render_markdown(input, true), expected);
+            assert_eq!(render_markdown(input, None, true), expected);
         }
 
         #[test]
@@ -159,8 +201,8 @@ more text with spaces
 </code></pre>
 <p>more text with spaces</p>
 "#;
-            assert_eq!(render_markdown(input, false), expected);
-            assert_eq!(render_markdown(input, true), expected);
+            assert_eq!(render_markdown(input, None, false), expected);
+            assert_eq!(render_markdown(input, None, true), expected);
         }
 
         #[test]
@@ -173,8 +215,8 @@ more text with spaces
             let expected =
                 r#"<pre><code class="language-rust,no_run,should_panic,property_3"></code></pre>
 "#;
-            assert_eq!(render_markdown(input, false), expected);
-            assert_eq!(render_markdown(input, true), expected);
+            assert_eq!(render_markdown(input, None, false), expected);
+            assert_eq!(render_markdown(input, None, true), expected);
         }
 
         #[test]
@@ -187,8 +229,8 @@ more text with spaces
             let expected =
                 r#"<pre><code class="language-rust,no_run,,,should_panic,,property_3"></code></pre>
 "#;
-            assert_eq!(render_markdown(input, false), expected);
-            assert_eq!(render_markdown(input, true), expected);
+            assert_eq!(render_markdown(input, None, false), expected);
+            assert_eq!(render_markdown(input, None, true), expected);
         }
 
         #[test]
@@ -200,15 +242,37 @@ more text with spaces
 
             let expected = r#"<pre><code class="language-rust"></code></pre>
 "#;
-            assert_eq!(render_markdown(input, false), expected);
-            assert_eq!(render_markdown(input, true), expected);
+            assert_eq!(render_markdown(input, None, false), expected);
+            assert_eq!(render_markdown(input, None, true), expected);
 
             let input = r#"
 ```rust
 ```
 "#;
-            assert_eq!(render_markdown(input, false), expected);
-            assert_eq!(render_markdown(input, true), expected);
+            assert_eq!(render_markdown(input, None, false), expected);
+            assert_eq!(render_markdown(input, None, true), expected);
+        }
+
+        #[test]
+        fn test_link_filter() {
+            let input = r#"
+[foo](./bar.md)
+[foo](./baz.md)
+"#;
+
+            let expected = "<p><a href=\"bar.html\">foo</a>\n<a href=\"./baz.md\">foo</a></p>\n";
+
+            let bar = RelativePath::new("./bar.md");
+
+            let filter = ChangeExtLinkFilter::new(
+                RelativePath::new("."),
+                |path| path == bar,
+                "md",
+                "html"
+            );
+
+            // only bar is a file.
+            assert_eq!(render_markdown(input, Some(&filter), false), expected);
         }
     }