diff --git a/libguac/Makefile.am b/libguac/Makefile.am
index ae919670..2f9546f1 100644
--- a/libguac/Makefile.am
+++ b/libguac/Makefile.am
@@ -37,18 +37,8 @@
 AUTOMAKE_OPTIONS = foreign 
 
 ACLOCAL_AMFLAGS = -I m4
-AM_CFLAGS = -Werror -Wall -pedantic -Iinclude
 
-libguacincdir = $(includedir)/guacamole
-libguacinc_HEADERS = include/client.h include/socket.h include/protocol.h include/error.h
-
-lib_LTLIBRARIES = libguac.la
-
-libguac_la_SOURCES = src/client.c src/socket.c src/protocol.c src/client-handlers.c src/error.c src/palette.c src/unicode.c
-
-libguac_la_LDFLAGS = -version-info 3:1:0
-
-noinst_HEADERS = include/palette.h include/client-handlers.h include/unicode.h
+SUBDIRS = src
 
 EXTRA_DIST = LICENSE doc/Doxyfile
 
diff --git a/libguac/configure.in b/libguac/configure.in
index a9c0644b..f7cb711f 100644
--- a/libguac/configure.in
+++ b/libguac/configure.in
@@ -68,5 +68,7 @@ AC_FUNC_MALLOC
 AC_FUNC_REALLOC
 AC_CHECK_FUNCS([clock_gettime gettimeofday memmove memset select strdup png_get_io_ptr nanosleep])
 
-AC_CONFIG_FILES([Makefile])
+AC_CONFIG_FILES([Makefile
+                 src/Makefile])
+
 AC_OUTPUT
diff --git a/libguac/src/Makefile.am b/libguac/src/Makefile.am
new file mode 100644
index 00000000..bafff8b9
--- /dev/null
+++ b/libguac/src/Makefile.am
@@ -0,0 +1,51 @@
+# ***** BEGIN LICENSE BLOCK *****
+# Version: MPL 1.1/GPL 2.0/LGPL 2.1
+#
+# The contents of this file are subject to the Mozilla Public License Version
+# 1.1 (the "License"); you may not use this file except in compliance with
+# the License. You may obtain a copy of the License at
+# http://www.mozilla.org/MPL/
+#
+# Software distributed under the License is distributed on an "AS IS" basis,
+# WITHOUT WARRANTY OF ANY KIND, either express or implied. See the License
+# for the specific language governing rights and limitations under the
+# License.
+#
+# The Original Code is libguac.
+#
+# The Initial Developer of the Original Code is
+# Michael Jumper.
+# Portions created by the Initial Developer are Copyright (C) 2010
+# the Initial Developer. All Rights Reserved.
+#
+# Contributor(s):
+#
+# Alternatively, the contents of this file may be used under the terms of
+# either the GNU General Public License Version 2 or later (the "GPL"), or
+# the GNU Lesser General Public License Version 2.1 or later (the "LGPL"),
+# in which case the provisions of the GPL or the LGPL are applicable instead
+# of those above. If you wish to allow use of your version of this file only
+# under the terms of either the GPL or the LGPL, and not to allow others to
+# use your version of this file under the terms of the MPL, indicate your
+# decision by deleting the provisions above and replace them with the notice
+# and other provisions required by the GPL or the LGPL. If you do not delete
+# the provisions above, a recipient may use your version of this file under
+# the terms of any one of the MPL, the GPL or the LGPL.
+#
+# ***** END LICENSE BLOCK *****
+
+AUTOMAKE_OPTIONS = foreign 
+ACLOCAL_AMFLAGS = -I m4
+AM_CFLAGS = -Werror -Wall -pedantic -I../include
+
+libguacincdir = $(includedir)/guacamole
+libguacinc_HEADERS = ../include/client.h ../include/socket.h ../include/protocol.h ../include/error.h
+
+lib_LTLIBRARIES = libguac.la
+
+libguac_la_SOURCES = client.c socket.c protocol.c client-handlers.c error.c palette.c unicode.c
+
+libguac_la_LDFLAGS = -version-info 3:1:0
+
+noinst_HEADERS = ../include/palette.h ../include/client-handlers.h ../include/unicode.h
+