-      res = XMALLOC (char, strlen (cp) + strlen (skeleton) + 2);
-      sprintf (res, "%s%c%s", cp, '/', skeleton);
+      /* Skeleton file name without path */
+      const char *skel_name = strrchr(skeleton_name, '/');
+      if (!skel_name)
+        skel_name = strrchr(skeleton_name, '\\');
+      if (!skel_name)
+        skel_name = skeleton_name;
+      else
+        ++skel_name;
+
+      /* File doesn't exist in current directory; try in INIT directory.  */
+      const char *cp = getenv ("INIT");
+      if (cp)
+       {
+         res = XMALLOC (char, strlen (cp) + strlen (skel_name) + 2);
+         sprintf (res, "%s%c%s", cp, '\\', skel_name);
+       }
+      else if (access (skel_name, 4) == 0) /* Look in current dir. */
+        res = skel_name;
+      else
+       {
+         /* Look in program locations dir. */
+         extern char *program_name;
+         cp = strrchr(program_name, '\\');
+         if (!cp)
+           return skeleton_name;
+         else
+           ++cp;
+         res = XMALLOC (char, cp - program_name + strlen (skel_name) + 1);
+         strncpy (res, program_name, cp - program_name);
+         strcpy (res + (cp - program_name), skel_name);
+       }