diff --git a/pkg/loader/compose/v3.go b/pkg/loader/compose/v3.go
index 962cd569..a7f7907c 100644
--- a/pkg/loader/compose/v3.go
+++ b/pkg/loader/compose/v3.go
@@ -17,6 +17,9 @@ limitations under the License.
 package compose
 
 import (
+	"fmt"
+	"os"
+	"path"
 	"strconv"
 	"strings"
 	"time"
@@ -30,10 +33,6 @@ import (
 	"github.com/docker/cli/cli/compose/loader"
 	"github.com/docker/cli/cli/compose/types"
 
-	"os"
-
-	"fmt"
-
 	shlex "github.com/google/shlex"
 	"github.com/kubernetes/kompose/pkg/kobject"
 	"github.com/pkg/errors"
@@ -444,7 +443,7 @@ func dockerComposeToKomposeMapping(composeObject *types.Config) (kobject.Kompose
 		// TODO: Build is not yet supported, see:
 		// https://github.com/docker/cli/blob/master/cli/compose/types/types.go#L9
 		// We will have to *manually* add this / parse.
-		serviceConfig.Build = composeServiceConfig.Build.Context
+		serviceConfig.Build = resolveV3Context(composeObject.Filename, composeServiceConfig.Build.Context)
 		serviceConfig.Dockerfile = composeServiceConfig.Build.Dockerfile
 		serviceConfig.BuildArgs = composeServiceConfig.Build.Args
 		serviceConfig.BuildLabels = composeServiceConfig.Build.Labels
@@ -490,6 +489,21 @@ func dockerComposeToKomposeMapping(composeObject *types.Config) (kobject.Kompose
 	return komposeObject, nil
 }
 
+// resolveV3Context resolves build context like v2 does, see:
+// https://github.com/docker/libcompose/blob/master/config/merge_v2.go#L155
+func resolveV3Context(inFile string, context string) string {
+	if context == "" {
+		return ""
+	}
+
+	current := path.Dir(inFile)
+	if context != "." {
+		current = path.Join(current, context)
+	}
+
+	return current
+}
+
 func parseV3Network(composeServiceConfig *types.ServiceConfig, serviceConfig *kobject.ServiceConfig, composeObject *types.Config) {
 	if len(composeServiceConfig.Networks) == 0 {
 		if defaultNetwork, ok := composeObject.Networks["default"]; ok {
diff --git a/pkg/transformer/utils.go b/pkg/transformer/utils.go
index 65e43309..6627c480 100644
--- a/pkg/transformer/utils.go
+++ b/pkg/transformer/utils.go
@@ -262,8 +262,9 @@ func BuildDockerImage(service kobject.ServiceConfig, name string) error {
 
 	log.Debug("Build image working dir is: ", wd)
 
+	log.Debug("Build image service build is: ", service.Build)
 	// Get the appropriate image source and name
-	imagePath := path.Join(wd, path.Base(service.Build))
+	imagePath := service.Build
 	if !path.IsAbs(service.Build) {
 		imagePath = path.Join(wd, service.Build)
 	}
diff --git a/script/test/cmd/tests_new.sh b/script/test/cmd/tests_new.sh
index a96a032f..53eb2fc3 100755
--- a/script/test/cmd/tests_new.sh
+++ b/script/test/cmd/tests_new.sh
@@ -82,3 +82,16 @@ convert::check_artifacts_generated "kompose -f $KOMPOSE_ROOT/script/test/fixture
 #TEST the pvc-request-size command parameter
 convert::check_artifacts_generated "kompose -f $KOMPOSE_ROOT/script/test/fixtures/pvc-request-size/docker-compose.yml convert -o $TEMP_DIR/output_dir2/output-k8s.json -j --pvc-request-size=300Mi" "$TEMP_DIR/output_dir2/output-k8s.json"
 convert::check_artifacts_generated "kompose --provider=openshift -f $KOMPOSE_ROOT/script/test/fixtures/pvc-request-size/docker-compose.yml convert -o $TEMP_DIR/output_dir2/output-os.json -j --pvc-request-size=300Mi" "$TEMP_DIR/output_dir2/output-os.json"
+
+######
+# Test the path of build image
+# Test build v2 absolute compose file
+convert::check_artifacts_generated "kompose --build local -f $KOMPOSE_ROOT/script/test/fixtures/buildconfig/docker-compose.yml convert -o $TEMP_DIR/output_file" "$TEMP_DIR/output_file"
+# Test build v2 relative compose file
+relative_path=$(realpath --relative-to="$PWD" "$KOMPOSE_ROOT/script/test/fixtures/buildconfig/docker-compose.yml")
+convert::check_artifacts_generated "kompose --build local -f $relative_path convert -o $TEMP_DIR/output_file" "$TEMP_DIR/output_file"
+# Test build v3 absolute compose file with context
+convert::check_artifacts_generated "kompose --build local -f $KOMPOSE_ROOT/script/test/fixtures/buildconfig/docker-compose-v3.yml convert -o $TEMP_DIR/output_file" "$TEMP_DIR/output_file"
+# Test build v3 relative compose file with context
+relative_path=$(realpath --relative-to="$PWD" "$KOMPOSE_ROOT/script/test/fixtures/buildconfig/docker-compose-v3.yml")
+convert::check_artifacts_generated "kompose --build local -f $relative_path convert -o $TEMP_DIR/output_file" "$TEMP_DIR/output_file"
diff --git a/script/test/fixtures/buildconfig/docker-compose-v3.yml b/script/test/fixtures/buildconfig/docker-compose-v3.yml
new file mode 100644
index 00000000..b19c2eee
--- /dev/null
+++ b/script/test/fixtures/buildconfig/docker-compose-v3.yml
@@ -0,0 +1,7 @@
+version: "3"
+
+services:
+    foo:
+        build:
+            context: ./build
+            dockerfile: Dockerfile