diff --git a/IPython/genutils.py b/IPython/genutils.py
index 38f93ef..2dbe37a 100644
--- a/IPython/genutils.py
+++ b/IPython/genutils.py
@@ -928,12 +928,17 @@ def get_home_dir():
     # first, check py2exe distribution root directory for _ipython.
     # This overrides all. Normally does not exist.
 
-    if '\\library.zip\\' in IPython.__file__.lower():
-        root, rest = IPython.__file__.lower().split('library.zip')
-        if isdir(root + '_ipython'):
+    if hasattr(sys, "frozen"): #Is frozen by py2exe
+        if '\\library.zip\\' in IPython.__file__.lower():#libraries compressed to zip-file
+            root, rest = IPython.__file__.lower().split('library.zip')
+            if isdir(root + '_ipython'):
+                os.environ["IPYKITROOT"] = root.rstrip('\\')
+                return root
+        else: 
+            root=os.path.abspath(os.path.join(os.path.split(IPython.__file__)[0],"../../"))
+        if isdir(os.path.join(root, '_ipython')):
             os.environ["IPYKITROOT"] = root.rstrip('\\')
             return root
-
     try:
         homedir = env['HOME']
         if not isdir(homedir):
diff --git a/IPython/tests/test_genutils.py b/IPython/tests/test_genutils.py
index 9072ec1..7e4bb78 100644
--- a/IPython/tests/test_genutils.py
+++ b/IPython/tests/test_genutils.py
@@ -16,12 +16,26 @@ __docformat__ = "restructuredtext en"
 #-----------------------------------------------------------------------------
 
 from IPython import genutils
+import os
+env = os.environ
 
 
-def test_get_home_dir():
+def test_get_home_dir_1():
     """Make sure we can get the home directory."""
     home_dir = genutils.get_home_dir()
 
+def test_get_home_dir_2():
+    """Make sure we can get the home directory."""
+    old=env["HOME"]
+    env["HOME"]=os.path.join(".","home_test_dir")
+    home_dir = genutils.get_home_dir()
+    assert home_dir==env["HOME"]
+    env["HOME"]=old
+    
+
+
+
+
 def test_get_ipython_dir():
     """Make sure we can get the ipython directory."""
     ipdir = genutils.get_ipython_dir()