diff --git a/rebar.config.script b/rebar.config.script
index 07feb95d..fb7cfb00 100644
--- a/rebar.config.script
+++ b/rebar.config.script
@@ -2,9 +2,8 @@
 %% ex: ts=4 sw=4 ft=erlang et
 
 %% TODO: Change temporary retest fork back to dizzyd/retest after merge
-%% ExtraDeps = [{retest, ".*", {git, "git://github.com/dizzyd/retest.git"}}],
-ExtraDeps = [{retest, ".*",
-              {git, "git://github.com/tuncer/retest.git", "next"}}],
+%% ExtraDeps = [{retest, ".*", {git, "git://github.com/tuncer/retest.git", "next"}}],
+ExtraDeps = [{retest, ".*", {git, "git://github.com/dizzyd/retest.git"}}],
 
 case os:getenv("REBAR_EXTRA_DEPS") of
     false ->
diff --git a/src/rebar_deps.erl b/src/rebar_deps.erl
index 5e697094..5208578c 100644
--- a/src/rebar_deps.erl
+++ b/src/rebar_deps.erl
@@ -478,13 +478,74 @@ use_source(Config, Dep, Count) ->
                            "with reason:~n~p.\n", [Dep#dep.dir, Reason])
             end;
         false ->
-            ?CONSOLE("Pulling ~p from ~p\n", [Dep#dep.app, Dep#dep.source]),
-            require_source_engine(Dep#dep.source),
-            {true, TargetDir} = get_deps_dir(Config, Dep#dep.app),
-            download_source(TargetDir, Dep#dep.source),
-            use_source(Config, Dep#dep { dir = TargetDir }, Count-1)
+            DepDir = case is_local_source(Dep) of
+                true  ->
+                    %% Repo source is a local directory, skip local cache
+                    ?CONSOLE("Pulling ~p from ~p\n", [Dep#dep.app, Dep#dep.source]),
+                    require_source_engine(Dep#dep.source),
+                    {true, TargetDir} = get_deps_dir(Config, Dep#dep.app),
+                    download_source(TargetDir, Dep#dep.source),
+                    TargetDir;
+                false ->
+                    CacheTargetDir = ensure_local_cache(Config, Dep),
+                    {true, TargetDir} = get_deps_dir(Config, Dep#dep.app),
+                    ok = filelib:ensure_dir(TargetDir),
+                    rebar_file_utils:cp_r([CacheTargetDir], TargetDir),
+                    TargetDir
+            end,
+            use_source(Config, Dep#dep { dir = DepDir }, Count-1)
+    end.
+
+local_cache_base_dir(Dep) ->
+    {ok, [[Home]]} = init:get_argument(home),
+    CacheBaseDir = filename:join([Home, ".rebar", "cache", Dep#dep.app]),
+    filelib:ensure_dir(CacheBaseDir++"/"),
+    CacheBaseDir.
+
+local_cache_target_dir(Dep) ->
+    CacheBaseDir = local_cache_base_dir(Dep),
+    VersionDirs = case Dep#dep.source of
+        {_,_,{B,Version}} when is_atom(B) -> [atom_to_list(B), Version];
+        {_,_,{B,Version}} -> [B, Version];
+        {_,_,Version} -> [Version];
+        {_,_} -> ["master"]
+    end,
+    filename:join([CacheBaseDir]++VersionDirs).
+
+%% the hallmarks of a local file
+maybe_local_dir(".")  -> true;
+maybe_local_dir("/")  -> true;
+maybe_local_dir("\\") -> true;
+maybe_local_dir(_)    -> false.
+
+is_local_source(Dep) ->
+    case Dep#dep.source of
+        {_,Local,_} when is_list(Local) ->
+            maybe_local_dir(string:substr(Local, 1, 1));
+        {_,Local} when is_list(Local) ->
+            maybe_local_dir(string:substr(Local, 1, 1));
+        _ -> false
     end.
 
+ensure_local_cache(Config, Dep) ->
+    ?CONSOLE("Checking local cache for ~p from ~p\n", [Dep#dep.app, Dep#dep.source]),
+    CacheTargetDir = local_cache_target_dir(Dep),
+    case filelib:is_dir(CacheTargetDir) of
+        true ->
+            %% Attempting to update always, and catch timeouts. After N
+            %% timeouts, set source as 'unreachable' and just carry on
+            %% In the future, version branches by most recent commit,
+            %% and compare against remote HEAD
+            require_source_engine(Dep#dep.source),
+            update_source(Config, Dep, CacheTargetDir);
+        false ->
+            ?CONSOLE("Pulling ~p from ~p into local cache\n", [Dep#dep.app, Dep#dep.source]),
+            require_source_engine(Dep#dep.source),
+            ?CONSOLE("CacheTargetDir: ~p\n", [CacheTargetDir]),
+            download_source(CacheTargetDir, Dep#dep.source)
+    end,
+    CacheTargetDir.
+
 download_source(AppDir, {hg, Url, Rev}) ->
     ok = filelib:ensure_dir(AppDir),
     rebar_utils:sh(?FMT("hg clone -U ~s ~s", [Url, filename:basename(AppDir)]),
@@ -536,11 +597,14 @@ download_source(AppDir, {fossil, Url, Version}) ->
                    []).
 
 update_source(Config, Dep) ->
+    {true, AppDir} = get_deps_dir(Config, Dep#dep.app),
+    update_source(Config, Dep, AppDir).
+
+update_source(_Config, Dep, AppDir) ->
     %% It's possible when updating a source, that a given dep does not have a
     %% VCS directory, such as when a source archive is built of a project, with
     %% all deps already downloaded/included. So, verify that the necessary VCS
     %% directory exists before attempting to do the update.
-    {true, AppDir} = get_deps_dir(Config, Dep#dep.app),
     case has_vcs_dir(element(1, Dep#dep.source), AppDir) of
         true ->
             ?CONSOLE("Updating ~p from ~p\n", [Dep#dep.app, Dep#dep.source]),