diff --git a/hgext3rd/sparse.py b/hgext3rd/sparse.py
--- a/hgext3rd/sparse.py
+++ b/hgext3rd/sparse.py
@@ -9,7 +9,7 @@
 """
 
 from mercurial import util, cmdutil, extensions, context, dirstate, commands
-from mercurial import localrepo, error, hg, registrar
+from mercurial import localrepo, error, hg, registrar, scmutil
 from mercurial import match as matchmod
 from mercurial import merge as mergemod
 from mercurial.node import nullid
@@ -657,6 +657,12 @@
     --clear-rules removes all local include and exclude rules, while leaving
     any enabled profiles in place.
 
+    The following config option defines whether sparse treats supplied
+    paths as relative to repo root or to the current working dir:
+
+        [sparse]
+        reporootpaths = on
+
     Returns 0 if editing the sparse checkout succeeds.
     """
     include = opts.get('include')
@@ -736,6 +742,10 @@
                 newprofiles = set(oldprofiles)
 
             oldstatus = repo.status()
+            if not ui.configbool('sparse', 'reporootpaths', True):
+                # supplied file patterns should be treated as relative
+                # to current working dir, so we need to convert them first
+                pats = scmutil.match(repo['.'], pats).files()
 
             if any(pat.startswith('/') for pat in pats):
                 err = _('paths cannot start with /')
diff --git a/tests/test-sparse.t b/tests/test-sparse.t
--- a/tests/test-sparse.t
+++ b/tests/test-sparse.t
@@ -38,6 +38,23 @@
   (do not use absolute paths)
   [255]
 
+Repo root-relaive vs. cwd-relative includes
+  $ mkdir subdir
+  $ cd subdir
+  $ hg sparse --config sparse.reporootpaths=on --include reporoot/path
+  $ hg sparse --config sparse.reporootpaths=off --include cwd/path
+  $ hg sparse
+  [include]
+  $TESTTMP/myrepo/hide
+  hide
+  reporoot/path
+  subdir/cwd/path
+  [exclude]
+  
+  
+  $ cd ..
+  $ rm -rf subdir
+
 Verify commiting while sparse includes other files
 
   $ echo z > hide