diff --git a/src/index.js b/src/index.js
index a628fea..af9eb78 100644
--- a/src/index.js
+++ b/src/index.js
@@ -29,8 +29,8 @@ export default function loader(content) {
 
   if (options.useRelativePath) {
     const filePath = this.resourcePath;
-    const issuerContext = (this._module && this._module.issuer
-      && this._module.issuer.context) || context;
+    const issuerContext = context || (this._module && this._module.issuer
+      && this._module.issuer.context);
 
     const relativeUrl = issuerContext && path.relative(issuerContext, filePath).split(path.sep).join('/');
 
diff --git a/test/options/__snapshots__/useRelativePath.test.js.snap b/test/options/__snapshots__/useRelativePath.test.js.snap
index 6dd64c2..bd70c4f 100644
--- a/test/options/__snapshots__/useRelativePath.test.js.snap
+++ b/test/options/__snapshots__/useRelativePath.test.js.snap
@@ -1,5 +1,37 @@
 // Jest Snapshot v1, https://goo.gl/fbAQLP
 
-exports[`Options useRelativePath options.context 1`] = `"module.exports = __webpack_public_path__ + \\"./9c87cbf3ba33126ffd25ae7f2f6bbafb.png\\";"`;
+exports[`Options useRelativePath \`false\` 1`] = `
+Object {
+  "assets": Array [
+    "9c87cbf3ba33126ffd25ae7f2f6bbafb.png",
+  ],
+  "source": "module.exports = __webpack_public_path__ + \\"9c87cbf3ba33126ffd25ae7f2f6bbafb.png\\";",
+}
+`;
 
-exports[`Options useRelativePath this.options.context 1`] = `"module.exports = __webpack_public_path__ + \\"./9c87cbf3ba33126ffd25ae7f2f6bbafb.png\\";"`;
+exports[`Options useRelativePath \`true\` 1`] = `
+Object {
+  "assets": Array [
+    "nested/9c87cbf3ba33126ffd25ae7f2f6bbafb.png",
+  ],
+  "source": "module.exports = __webpack_public_path__ + \\"nested/9c87cbf3ba33126ffd25ae7f2f6bbafb.png\\";",
+}
+`;
+
+exports[`Options useRelativePath \`true\` with absolute \`context\` 1`] = `
+Object {
+  "assets": Array [
+    "../file-loader/test/fixtures/nested/9c87cbf3ba33126ffd25ae7f2f6bbafb.png",
+  ],
+  "source": "module.exports = __webpack_public_path__ + \\"../file-loader/test/fixtures/nested/9c87cbf3ba33126ffd25ae7f2f6bbafb.png\\";",
+}
+`;
+
+exports[`Options useRelativePath \`true\` with relative \`context\` 1`] = `
+Object {
+  "assets": Array [
+    "./9c87cbf3ba33126ffd25ae7f2f6bbafb.png",
+  ],
+  "source": "module.exports = __webpack_public_path__ + \\"./9c87cbf3ba33126ffd25ae7f2f6bbafb.png\\";",
+}
+`;
diff --git a/test/options/useRelativePath.test.js b/test/options/useRelativePath.test.js
index 7858f29..83633a6 100644
--- a/test/options/useRelativePath.test.js
+++ b/test/options/useRelativePath.test.js
@@ -5,37 +5,70 @@ import webpack from '../helpers/compiler';
 
 describe('Options', () => {
   describe('useRelativePath', () => {
-    test('this.options.context', async () => {
+    test('`false`', async () => {
       const config = {
         loader: {
           test: /(png|jpg|svg)/,
           options: {
+            useRelativePath: false,
+          },
+        },
+      };
+
+      const stats = await webpack('fixture-nested.js', config);
+      const { assets, source } = stats.toJson().modules[1];
+
+      expect({ assets, source }).toMatchSnapshot();
+    });
+
+    test('`true`', async () => {
+      const config = {
+        loader: {
+          test: /(png|jpg|svg)/,
+          options: {
+            useRelativePath: true,
+          },
+        },
+      };
+
+      const stats = await webpack('fixture-nested.js', config);
+      const { assets, source } = stats.toJson().modules[1];
+
+      expect({ assets, source }).toMatchSnapshot();
+    });
+
+    test('`true` with relative `context`', async () => {
+      const config = {
+        loader: {
+          test: /(png|jpg|svg)/,
+          options: {
+            context: './test/fixtures/nested/',
             useRelativePath: true,
           },
         },
       };
 
-      const stats = await webpack('fixture.js', config);
-      const { source } = stats.toJson().modules[1];
+      const stats = await webpack('fixture-nested.js', config);
+      const { assets, source } = stats.toJson().modules[1];
 
-      expect(source).toMatchSnapshot();
+      expect({ assets, source }).toMatchSnapshot();
     });
 
-    test('options.context', async () => {
+    test('`true` with absolute `context`', async () => {
       const config = {
         loader: {
           test: /(png|jpg|svg)/,
           options: {
-            context: '/relative/',
+            context: '../nested/',
             useRelativePath: true,
           },
         },
       };
 
-      const stats = await webpack('fixture.js', config);
-      const { source } = stats.toJson().modules[1];
+      const stats = await webpack('fixture-nested.js', config);
+      const { assets, source } = stats.toJson().modules[1];
 
-      expect(source).toMatchSnapshot();
+      expect({ assets, source }).toMatchSnapshot();
     });
   });
 });