diff --git a/IPython/genutils.py b/IPython/genutils.py
index 2deca30..d66703b 100644
--- a/IPython/genutils.py
+++ b/IPython/genutils.py
@@ -995,8 +995,8 @@ def get_ipython_dir():
          ipdir_def = '_ipython'
     home_dir = get_home_dir()
     ipdir = os.path.abspath(os.environ.get('IPYTHONDIR',
-                                           os.path.join(home_dir,ipdir_def)))
-    return ipdir
+                                           os.path.join(home_dir, ipdir_def)))
+    return ipdir.decode(sys.getfilesystemencoding())
 
 def get_security_dir():
     """Get the IPython security directory.
diff --git a/IPython/ipmaker.py b/IPython/ipmaker.py
index 6065535..d19a071 100644
--- a/IPython/ipmaker.py
+++ b/IPython/ipmaker.py
@@ -131,20 +131,15 @@ object?   -> Details about 'object'. ?object also works, ?? prints more.
 
     IP.usage = interactive_usage
 
-    # Platform-dependent suffix and directory names.  We use _ipython instead
-    # of .ipython under win32 b/c there's software that breaks with .named
-    # directories on that platform.
+    # Platform-dependent suffix.
     if os.name == 'posix':
         rc_suffix = ''
-        ipdir_def = '.ipython'
     else:
         rc_suffix = '.ini'
-        ipdir_def = '_ipython'
 
     # default directory for configuration
-    ipythondir_def = os.path.abspath(os.environ.get('IPYTHONDIR',
-                                 os.path.join(IP.home_dir,ipdir_def)))
-
+    ipythondir_def = get_ipython_dir() 
+    
     sys.path.insert(0, '') # add . to sys.path. Fix from Prabhu Ramachandran
 
     # we need the directory where IPython itself is installed
diff --git a/IPython/tests/test_genutils.py b/IPython/tests/test_genutils.py
index cae3d9f..8e0caab 100644
--- a/IPython/tests/test_genutils.py
+++ b/IPython/tests/test_genutils.py
@@ -147,11 +147,58 @@ def test_get_home_dir_9():
      wreg.OpenKey, wreg.QueryValueEx,) = oldstuff
      
 
-def test_get_ipython_dir():
+def test_get_ipython_dir_1():
     """Testcase to see if we can call get_ipython_dir without Exceptions."""
     ipdir = genutils.get_ipython_dir()
 
-def test_get_security_dir():
-    """Testcase to see if we can call get_security_dir without Exceptions."""
-    sdir = genutils.get_security_dir()
+def test_get_ipython_dir_2():
+    """Testcase to see if we can call get_ipython_dir without Exceptions."""
+    oldstuff = (env['IPYTHONDIR'],)
+
+    env['IPYTHONDIR']="someplace/.ipython"
+    ipdir = genutils.get_ipython_dir()
+    assert ipdir == os.path.abspath("someplace/.ipython")
+
+    (env['IPYTHONDIR'],)=oldstuff
+
+class test_get_ipython_dir_3:
+    @classmethod
+    def setup_class(cls):
+        cls.oldstuff = (env['IPYTHONDIR'], os.name, genutils.get_home_dir)
+        del env['IPYTHONDIR']
+        genutils.get_home_dir=lambda : "someplace"
+
+    @classmethod
+    def teardown_class(cls):
+        (env['IPYTHONDIR'], os.name, genutils.get_home_dir)=cls.oldstuff
+        
+    def test_get_ipython_dir_a(self):
+        """Testcase to see if we can call get_ipython_dir without Exceptions."""
+
+        os.name="posix"
+        ipdir = genutils.get_ipython_dir()
+        assert ipdir == os.path.abspath(os.path.join("someplace", ".ipython"))
+        
+    def test_get_ipython_dir_b(self):
+        """Testcase to see if we can call get_ipython_dir without Exceptions."""
+
+        os.name="nt"
+        ipdir = genutils.get_ipython_dir()
+        assert ipdir == os.path.abspath(os.path.join("someplace", "_ipython"))
+    
+class test_get_security_dir:
+    @classmethod
+    def setup_class(cls):
+        cls.oldstuff = (env['IPYTHONDIR'], os.name, genutils.get_home_dir)
+        del env['IPYTHONDIR']
+        genutils.get_home_dir=lambda : "someplace"
+
+    @classmethod
+    def teardown_class(cls):
+        (env['IPYTHONDIR'], os.name, genutils.get_home_dir)=cls.oldstuff
+        
+
+    def test_get_security_dir():
+        """Testcase to see if we can call get_security_dir without Exceptions."""
+        sdir = genutils.get_security_dir()
     
\ No newline at end of file